Ethereum alternatives leave Ether behind in September gains

Key Takeaways:

• In a volatile Sep, L1 and L2-based tokens recorded massive gains on the back of incentive programs.
• Due to China’s renewed crackdown on cryptocurrencis and the Evergrande collapse, ETH struggled to keep up with other L1 tokens.

NEW DELHI (CoinChapter.com) — The previous week saw the famous crypto market volatility in full display. As the shockwave from Evergrande’s collapse shook the global market, China’s renewed zeal for a crypto ban further pummeled crypto prices.

The wider crypto market is currently experiencing some relief following last week’s sell-off, with the overall crypto market cap gaining 2.53% over the previous day. Meanwhile, the competition between Layer 1 smart contract platforms has intensified in the past few months with increased adoption by traders and developers.

Solutions implemented on the base protocol to improve its functionality are Layer 1 or L1 solutions. On the other hand, Layer 2 (L2) is a network solution that works on top of the underlying blockchain. As a result, Ethereum, an L1 blockchain, loses to other L1 alternatives that offer better transaction times and lower fees.

Ethereum Falls Behind

According to a report from Delphi Digital, a digital asset research and investment firm, Ether (ETH) prices have struggled to match the growth of other L1 tokens. In the last couple of months, Ethereum competitors, including Avalanche, Solana, recorded massive gains.

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For example, Solana (SOL) jumped 612.9% from Aug’s low ($31) to Sept’s high ($221).ETH gained 70.2% in the same timeframe, highlighting the nearly stagnant movement of the second-largest cryptocurrency by market volume.

Delphi’s report highlighted Avalanche’s $280 million investment round led by Polychain capital. The report also noted the growth of Avalanche Foundation’s liquidity fund from $180 million to nearly $600 million.

Fantom, a project that provides a platform to build Decentralized Apps and NFTs, has the best relative performance. Apart from Avalanche, Terra (LUNA), Solana (SOL), and Fantom (FTM) attracted massive funding, which in turn would attract investors and developers.

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The TVL (Total Value Locked) for Solana, Terra, Avalanche, and Fantom has surged. TVL, the total amount of staked assets in a particular protocol, is a metric that measures the growth of the DeFi industry. Unfortunately, Polygon’s TVL between July to Sept remained nearly constant.

Among the five DeFi projects compared, Avalanche showed the most consistent upwards growth, unfettered by market movements. Meanwhile, Solana gained the most in terms of TVL. The rise in TVL also highlights the growing investor and developer interest in Ethereum alternatives as developers move projects from Ethereum.

Level 2 Gas Consumption Increases

Gas refers to the fee that a successful Ethereum transaction requires. In 2021, Layer 2 projects saw an uptick in activity as well. The launch of new L2 projects resulted in Layer 2 projects accounting for 1% of total Gas spent. Moreover, the Gas used by the L2 solutions had spiked to 2% in early Sept.

Delphi’s data further highlights Arbitrum and Optimism’s explosive growth since July. Both L2 solutions now account for nearly half of the total Gas consumption. However, the report cautioned not to mistake the growth as an indicator for success.

The research firm further noted that though dYdX, a crypto derivatives exchange, registered ‘incredible growth in terms of trading activity,’ the L2 solution only accounts for roughly 6% of the total Gas consumption.

dYdX led the industry in L2 technology adoption and recently released a governance token, airdropping its early users.