In 2021, numerous new Layer 1s (L1s) claiming to be Ethereum’s competitors emerged due to their superior scalability. These Layer 1s were known as “Ethereum Killers”. Some of these chains failed to gain a spot in DeFi, while others rose to prominence. One of those prosperous chains is Solana.
SOL (Solana’s native token) saw a staggering 160X in return in 2021 and entered the top 10 cryptocurrencies by market cap (Mcap). Offering an alternative to Ethereum’s high gas costs, Solana provided users with a cheap and quick means of transacting – there were other technical & fundamental aspects that led to this growth of course.
However, Solana experienced outages and congestion right away in 2022. There were periods when the Solana network was down or unavailable. Users experienced delays and transaction failures even on top exchanges like Binance. Even the Solana network itself couldn’t deal with the congestion.
The Killer trend continues in 2022, but this time with new chains that claim to be “Solana Killers”.
These Solana Killers claim to be faster than Solana and aim to open the door for a new wave of decentralized apps (dApps) designed to provide users with an even better user experience (UX).
By delving into these projects and evaluating their models, it will become clear whether these new Layer 1s have a chance of competing with the likes of Solana, or whether they are destined to fail.
Let’s find out!
Disclaimer: Not financial nor investment advice. Any capital-related decisions you make are your full responsibility.
Layer 1s saw immense growth in 2021 – over 100X in return!
One of the top performers in 2021 was Solana (SOL).
In 2022, the Solana network frequently experienced congestion issues that are still being resolved.
New cutting-edge Layer 1s are being developed that are marketed as “Solana Killers.”
Aptos, Sui & Sei are new contenders to the L1 ecosystem with the potential to compete with other L1s.
Terms you need to know while reading:
Move programming language: a smart contract language that guarantees digital resources can only have one owner at a time and can only be spent once. Move ensures assets cannot be copied.
Byzantine fault tolerance (BFT): a BFT system is able to continue operating even if some of the nodes fail or act maliciously.
Directed acyclic graph (DAG): unlike a blockchain, which consists of blocks, directed acyclic graphs have vertices and edges. Transactions are recorded as vertices. These transactions are then recorded on top of one another.
Denial of service attacks (DoS): DoS attacks can be executed against a blockchain to slow its operations and even shut it down.
Oracles: decentralised oracles provide data feed to blockchains and smart contracts outside of the network.
Latency: the time between submitting a transaction to a network and the first confirmation of acceptance by the network.
Aptos & Sui
The Aptos & Sui blockchains are built by ex-employees of Meta (formerly Facebook). Aptos and Sui claim to be faster than Solana with low latency. Aptos utilises a new smart contract programming language called Move, which is inspired by the Rust programming language of Solana. Sui, however, uses its own modified version of Move.
The Move programming language is designed to maximize security without adding complications to transactions, which reduces gas fees.
Similarly to Solana, the key to Aptos & Sui’s scalability is in their parallel execution design. Instead of ordered transactions and sequential block execution in previous L1 architectures, transactions can be processed concurrently and are all validated post-execution.
This design won’t allow the chain to be halted by a single failed transaction, which allows things to move much more quickly.
Solana validators forward transactions to a specific block producer ahead of time. This allows transactions to be processed faster but is more resilient to malicious actors or DoS attacks. Aptos & Sui however, rely on the entire network of block producers to come to a consensus to agree on the next block.
Aptos & Sui aim to make the entire process of engaging with dApps more user-friendly and beginner-friendly for non-technical users by making it similar to Web2 user interfaces (UI) by providing options such as changing your private key or private key recovery in case of a hack.
Aptos vs Sui
While both Aptos and Sui are very similar, there are some differences that make them stand out from each other.
Both blockchains have a long way to go before they can declare themselves to be Solana Killers. Both are still in the development stage with Aptos leading the way. Aptos’ mainnet will launch next quarter, while Sui recently launched its testnet.
In contrast to Aptos, Sui’s implementation of Move makes it clear whether an address/transaction is owned, shared, mutable, or immutable. This indicates that the majority of information on the blockchain is visible.
Some of the top venture capitalists (VCs) are supporting both initiatives. They are backed by Multicoin, FTX, Coinbase, Jump Crypto, a16z, and Standard Crypto, among others. Such renowned VCs won’t invest in ventures unless they think the project’s token will have a significant return.
Both projects are already valued in billions, even though neither has a complete product or a guarantee of success. Is this a sign of what they could be worth?
This could show their potential, but until we see them actually capture market share from other L1s, this makes their investability low.
In return on investment (ROI), valuation does matter. Take SOL, for example, it was worth millions instead of billions when it first went launched alongside a great potential for a product. The lower the Mcap, the higher the return and the higher the risk.
Both projects are yet to release their native tokens but are confirmed through news and incentivised testnets. A native Aptos & Sui token will be used for transaction and network fees, governance voting on protocol upgrades and on-chain/off-chain processes, and securing the blockchain via a proof-of-stake (PoS) model.
The SUI token’s monetary rule is that supply is non-decreasing over time – SUI tokens are never burnt. The long-run SUI supply is capped at 10 billion tokens. Neither project has released enough information about their tokenomics, particularly Aptos.
SUI’s design operates similarly to other L1s. SUI’s economic model is staking. Staking achieves two simultaneous goals: network security, and out-of-circulation supply. Through the process of staking, SUI token holders can take their tokens off the market. This reduces the supply and adds upside pressure on the price.
However, in a perfect world, we would prefer the token to accrue more value over time through revenue sharing or a burning mechanism. We will wait for more information before passing judgment on SUI’s tokenomics.
Sui offers lower entry barriers for operating validators than its rivals, which may give it an advantage in getting more decentralized participants to secure the network.
On paper, Sui appears to be in the lead, while Aptos is ahead in marketing and development thanks to its upcoming mainnet and a growing number of protocols. Additionally, Aptos will soon fund developers through its grants program to incentivise building.
Since both are essentially identical and have only the tiniest distinctions, Aptos could reach more people with 50% more Twitter followers and more Medium articles.
Over time, Aptos & Sui could attract developers from Solana & Near through incentives as they both utilise Rust.
Multicoin and FTX were also clearly heavy investors in Solana, and are now also invested in Aptos. Coincidence?
Sei comes with an on-chain order book-focused infrastructure at its core. This allows Sei to not only integrate with dApps on its own sovereign blockchain, but it also allows for the entire Cosmos ecosystem to leverage its liquidity as well as create markets for its assets on Sei.
Sei is building something similar to Serum. Serum is a vital component of the Solana ecosystem where many protocols utilise Serum’s orderbook such as Raydium. Sei’s idea has more room for innovation upon existing on-chain order books and will be the key to its success.
Sei is the fastest chain at 600ms finality. Sei is built by ex-employees who worked at Robinhood, Goldman Sachs and Cosmos OG developers.
DYdX is trying to achieve an on-chain order book style, while Sei’s order book matching engine is completely on-chain. This ensures security and decentralization while being able to achieve both speed and efficiency.
Multiple orders are placed in a single transaction with Sei, and all orders for a particular market (such as ATOM) may be combined into a single smart contract execution. A parallel matching system used by Sei enables the operation of multiple markets at once.
Sei aggregates orders rather than processing them one at a time at the end of each block. Instead of using an off-chain pricing oracle that may experience delays or pricing errors, Sei has built-in price oracles for dependable data feeds.
This new development optimizes trading for DeFi protocols since orders will move through the network more quickly and cheaply. Imagine trading with a 50X leverage, in which case even a small error could have a significant negative impact on your position. This is what Sei is attempting to address.
50+ teams from Solana, Terra, Polkadot, NEAR and many more ecosystems are building on Sei ahead of mainnet!
Sei is building Nitro, a Solana Virtual Machine (SVM)-compatible blockchain. This will allow developers to deploy existing dApps on Solana to Cosmos which allows users to interact with these dApps through Phantom or other Solana wallets. This is really big news for both chains because it has never been done before. This development is expected to roll out in 2023.
Sei announced its first $5 million funding round led by Multicoin Capital with participation from Coinbase Ventures, Delphi Digital, Frax, and others. The new capital will be used to support the network as it approaches mainnet launch and further accelerates the growth of over 20 dApps already building in the Sei ecosystem. Sei’s valuation is private.
Sei seeks to solve the issue of liquidity fragmentation by enabling cross-chain access to liquidity across Cosmos and EVM chains. This is being implemented by Axelar, Sei’s cross-chain infrastructure provider partner.
Sei reports that they are currently achieving block times of less than 1 second, which makes it the fastest Cosmos SDK chain to date should this carry on into mainnet.
Sei is a permissioned blockchain, which means that developers need to submit a proposal and see it passed via governance before they are able to deploy a dApp.
Its permissioned nature also allows Sei to carefully curate protocols launching on its network to ensure maximum compatibility and avoid ones that may be detrimental to the performance of its core protocol. However, this goes against fundamental crypto beliefs because permissioned blockchains are more vulnerable to censorship.
In the novel world of crypto, we like seeing products released before a token. And that’s what all 3 projects are doing. Whenever possible, we prefer projects that present something new and unique.
Aptos & Sui are mainly bringing the Move smart contract language as a fundamental innovation, while Sei is bringing a new type of on-chain order book.
We find it intriguing that the entire Cosmos ecosystem can benefit from one on-chain orderbook. Because Sei’s orderbook model is so quick and unique, Sei opens the door for DeFi derivatives protocols to be developed in the ecosystem, which will improve the whole experience of trading using DeFi.
Additionally, you are aware of our enthusiasm for cross-chain communications and derivatives. Sei is working on two big sectors in crypto with high potential for growth, which gives the Cosmos ecosystem more room to gain liquidity.
Sei’s tokenomics are unknown to us, but whenever they are published, they will undoubtedly be important. Sei is also valued lower than Aptos and Sui (estimate $50 million-$100 million because they just did their first fundraiser), which obviously has room for greater ROI if the product and tokenomics are great.
Our winner is Sei!
Which of the three projects will be successful remains to be seen, as it is still extremely early. There won’t necessarily be one winner, but we see the most potential in Sei.
We love crypto for the chances it consistently offers us. We believe that all three of these projects have a strong possibility of growth. The first step was to identify them at an early stage. Monitoring their progress and keeping an eye out for projects emerging in their ecosystems is a crucial next step.
We are one week away from the series finale! With that being said, we will finally go over the assets that will dominate the Layer 1 sector in the upcoming bull market.