Layer 1 vs. Layer 2: The Evolving Landscape of Blockchain Scalability

With increasing acceptance and generally bullish sentiment in the crypto and DeFi area, trading activity is on average at an all-time high. As a result, the popularity of Layer 2 solutions has led to the emergence of projects like Polygon due to their cheaper and faster nature.

However, regardless of Layer 2 solutions or Bitcoin’s Layer 1 networks, Ethereum continues to dominate, but there are also a number of projects that have left their mark.

In this article we take a look at the new Layer 1 projects that are currently growing in the market and whether they contribute to a more balanced balance between the platform network and the sidechain network.

How are users of NEAR and CELO today?

The performance growth of the NEAR and CELO networks is remarkable. In the past few weeks, NEAR’s ecosystem has completely exploded, growing 182% since the beginning of August.

The total number of addresses on the NEAR network has exceeded 1 million and is largely due to significant partnerships.

Source: Almost daily

NEAR has run a number of high quality project launches that have resulted in grants in Filecoin and ATH prices over the past month. Another strong development from NEAR is the development of the Rainbow Bridge.

NEAR’s TVL growth demonstrates the shared utility of the bridge for developers and users who are actively participating in the network.

Source: Celo.com

With CELO, TVL grew 139% in the third quarter of 2021 after a $ 100 million DeFi incentive program was approved. Impressively, Cello’s network has averaged nearly 457,000 daily transactions over the past 30 days, more than some of the top projects like Avalanche (AVAX) and Polkadot (DOT).

While AVAX and DOT are now in 17th and 8th place respectively, CELO is in 75th place in terms of market capitalization. These are essentially Layer-1s that don’t contain Layer-2 functionality, but their growing functionality suggests that Layer-2s don’t have a full bastion in the market yet.

Will Bitcoin Layer-2 bridge the gap to Layer-1?

In a surprising series of events over the past few weeks, Bitcoin’s Lightning Network has gained massive momentum, resulting in massive growth in the Layer 2 network.

Well, on a larger scale, this is a good sign that Bitcoin is being used as a medium of exchange, but then again, its monthly unique addresses on Layer-1 are affected.

Source: Coinmetrics

On July 1, the number of monthly active addresses for Bitcoin recovered to 17 million, but not as high as at the beginning of the year.

Hence, Bitcoin has taken a small step backwards as mainstream with several Layer 1 projects improving their performance. But overall, there is still more than enough evidence to suggest that Layer-1 and Layer-2 had dispersed activity rather than clear dominance.

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