Cardano and Ethereum will become sovereign “countries”? In one thread Twitter, founder of the Soundwise Audio app, Natasha Che, recently compared Layer 1 strings to “New Country”. With this novel idea, she explains that users like smart contracts “can have multiple passports without having to give up old passports”.

Strangely enough, strategic investor Raoul Pal seems to agree.

“All tokenized ecosystems are essentially sovereign digital nations that we can move freely to. Fascinating world … “.

Layer 1 country based on PoS

But she didn’t stop there and went on to explain how PoS in combination with these Layer 1 solutions can boost the “crypto nation economy”. So, Che place a bet the:

“Blockchain countries use PoS as their economic engine.”

In short, Layer 1 solutions consolidate many of the protocol changes in the base layer. Therefore, unlike a Layer 2 solution, no third-party protocols are required for extensions. However, PoS is also known as an energy-efficient solution and at the same time forms the basis for more nodes in the network.

Some of the top Layer 1 PoS chains include Cardano, Avalanche, and Algorand. After Ethereum has completed the “The Merge” transition, it will also become a Layer 1 PoS chain. However, in terms of current prices, ETH is the dominant coin in this category.

Source: TradingView

Overcome your opponent

In the context of this new financial system with competing chains, Che added:

“Although the competition is fierce and there are Layer 1 chains that can no longer function, it is clear that many Layer 1 PoS chains and their extension layers will co-exist in the future and will become the common base layer for the metaverse. ”

But which of these chains will exist and which will participate in this common background remains an unanswerable question at the moment. In terms of industry data, Che pointed out that around 40 of the 100+ crypto projects are Layer 1 solutions and concluded that without ETH 2.0, it would have a market capitalization of nearly $ 400 billion, or 15%.

Essentially, this means that you will need certain tokens to enter these “countries”.

“If you want to break into the land of Ethereum, you have to buy ETH. If you want to enter the country of Solana, buy SOL. ”

In a broader sense, it is also worth considering how regulators think that a Layer 1 platform “powers up the economy for financial speculation and real-world use”.

The source: Natasha Che

Therefore, as a foundation grows, it is essentially tied to the country’s economy. And the volatility of tokens is due to the “business cycle” of the real world.

Still, there is a big difference in the way the business cycle “bankruptcy” is approached between the traditional framework and the level 1 scenario: as opposed to monetary-driven liquidity, countries will reward “validators” who use the chain’s native token hold through stakes.

The operator concludes:

“This increases the stickiness of citizenship, improves the price stability of anything of value in Layer 1 tokens, and reduces transaction costs within that country.”

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