The rising costs on Ethereum's network have created opportunities for Layer 1 projects such as Avalanche and Cardano to attract new users and gain market share.
The Foundation of Blockchain: Layer 1 Networks
The growth of DeFi (Decentralized Finance) and NFTs (Non-Fungible Tokens) has transformed the blockchain ecosystem, generating unprecedented wealth for investors. However, none of this would be possible without the robust infrastructure provided by Layer 1 blockchains like Bitcoin and Ethereum.
Smart Contracts & Layer 2 Solutions
While smart contracts and Layer 2 protocols promise to revolutionize finance and logistics, they rely on secure, decentralized networks to ensure immutability and efficiency.
Currently, most top-tier Layer 2 projects operate on Ethereum, leading to:
- Higher transaction fees
- Slower confirmation times due to network congestion
Despite Ethereum’s London Hard Fork introducing a fee-burning mechanism (potentially making ETH deflationary), it hasn’t resolved high gas costs—average fees have actually increased since implementation.
The Rise of Competing Layer 1 Protocols
High fees and scalability constraints have driven users toward alternative Layer 1 blockchains:
1. Avalanche (AVAX) – Speed and Low-Cost Transactions
- AVAX, Avalanche’s native token, surged in August following the Avalanche Bridge (AB) launch (July 29).
- AB enables seamless cross-chain transfers between Ethereum and Avalanche, handling $1B+ in transactions by August 24.
Avalanche Rush Program
- A $180M liquidity mining initiative with Aave, Curve, and SushiSwap.
- Rewards users with AVAX for providing liquidity.
DeFi Growth on Avalanche
- Pangolin: $379.4M TVL
- Benqi: Surpassed $1B TVL
- 182,000+ AVAX burned via transaction fees.
2. Terra (LUNA) – Stablecoin-Focused Ecosystem
LUNA skyrocketed 530% (July 20 – August 24) due to:
- Token burns
- Columbus-5 upgrade (passed via community vote, launching September 9).
Anchor Protocol
- Offers UST holders stable yield on deposits.
- ETH collateral integration boosted TVL to $6B+.
Terra’s Position in DeFi
- 3rd-largest blockchain by TVL, trailing only Ethereum and Binance Smart Chain.
3. Cardano (ADA) – Smart Contract Anticipation
- ADA rose 190% ahead of smart contract rollout (enabling DeFi & NFTs).
- 70.98% of ADA supply staked—highest participation rate among PoS chains.
Native Tokens & NFTs
- Cardano’s NFT creator allows minting without smart contracts.
FAQs
Q: Why are Layer 1 protocols gaining traction?
A: High Ethereum fees and scalability issues push users toward faster, cheaper alternatives like Avalanche and Cardano.
Q: What makes Terra unique?
A: Its focus on stablecoins (UST) and integration with DeFi giants (Curve, Yearn) sets it apart.
Q: When will Cardano support DeFi?
A: Post-smart contract launch, expected in 2025, enabling DeFi and NFT applications.
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Conclusion
Ethereum remains the dominant Layer 1 network, but competitors like Avalanche, Terra, and Cardano are rapidly capturing market share.
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The future of blockchain hinges on scalability, low costs, and innovation—traits these rising Layer 1 protocols deliver.