Celestia, Manta, Mantle… These names may not mean anything to you, but they still occupy a solid place in the ranking of the most valuable blockchains. A ranking that has never stopped evolving over the last ten years, if we ignore the first two places, which are firmly dominated by Bitcoin and Ethereum. There are now hundreds of blockchains and secondary networks, the vast majority of which have been virtually abandoned during bear cycles.
Who else remembers Vertcoin, the bitcoin fork, or Navcoin, the blockchain that promoted transaction confidentiality and has since become confidential itself? However, the two networks had their moment of glory at the end of 2017 with a capitalization of several hundred million dollars. Two examples that are far from the only ones: the list would unfortunately be too long to cite all these blockchains full of hopes for a technological revolution that have gone up in smoke.
However, this graveyard full of crypto-elephants has not calmed the market’s enthusiasm: the rollout of new networks continues at a frenetic pace, as illustrated by the launches of layer 2 Mantle and Base in August 2023, Celestia in October 2023 and Manta in January. Not all have the same structure: some are layer 1 or 0, i.e. the base network on which applications can be built or from which we can deploy other chains; others are Layer 2, created to alleviate congestion or make the core network more efficient.
At the center of attention is the desire to respond to the main problem of blockchains like Bitcoin or Ethereum: to reconcile decentralization, security and scalability, a trilemma that until now has been intractable without compromising one of these premises. “Litecoin was created because Bitcoin was too slow, recalls Manuel Valente, director of research at Coinhouse. Ethereum was implemented to respond to the absence of smart contracts on Bitcoin, but Ethereum did not solve everything, because nodes have to make all calls to smart contracts, which is very cumbersome when there are many of them.
Many models, none perfect
To accommodate Bitcoin’s scaling needs, a secondary network was born: the Lightning Network, still in beta. On the Ethereum side, several solutions such as sharding (which consists of dividing the network into several fragments) are being developed, but this takes time. Since then, work has also focused on creating secondary or parallel networks, such as Polygon, Arbitrum One, Optimism or ImmutableX, compatible with Ethereum.
Still others preferred the possibility of developing their own ecosystem: this was the case with Tezos or Eos in 2017, Solana in 2020, Aptos in 2022, Sui and Sei in 2023, etc. However, today it is difficult to determine what their real added value is, all they offer faster execution with greater user capacity. “These are projects that offer different models, explains Charles Guillemet, CTO at Ledger. The Cosmos one is interesting because from the ground up you have different chains that share the same security while maintaining their autonomy and composability. However, it is difficult to understand the value of the native ATOM token, which is less important than other chains.” The token is also often the target of its dilution in the Cosmos economic model, which is a barrier for investors. “I’ve changed my mind about Solano, adds Charles Guillemet, whose purpose is to be a decentralized computer. This requires a lot of resources and we have seen the channel completely paralyzed in the past, but they are gradually solving their technical problems. Regarding the Ethereum model and its layer-2, Charles Guillemet points this out “secondary networks are inherently more centralized”especially since these also represent some diversity between Optimistic Digest technology – which moves the execution of transactions off-chain but requires a bona fide validator to seal them – and ZK Digest technology – which offers better confidentiality and more immediate transaction finality but requires more resources . “Furthermore, it includes bridging issues (transfer of assets from one chain to another) : it is difficult to ensure the reliability and safety of bridges”, notes Charles Guillemet.
In short, like their predecessors, none of these networks solve all the problems associated with historical blockchains. It is also reasonable to doubt their actual use: if 150,000 transactions were recorded on Tezos on January 31, the vast majority are probably related to the distribution of rewards associated with staking (page tzstats it lists barely 5,600 active wallets that day); regarding Eos, an analytics platform Messari saw an increase in activity in the last quarter of 2023 due to the arrival of the Registrations protocol, but the revenue generated by the channel during those three months only reached $60,000. Understandable lack of interest in these two blockchains, which are, after all, already seven years old. However, even new blockchains are facing rapid churn, with most of them using the same strategy to acquire users by distributing rewards at launch: Messari notes that Manta saw the number of users holding assets on the channel drop from 5,000 to less than 500 after the bounty program closed on January 18. “Airdrops (distribution of rewards) completely distorts the perception of usage, acknowledges Manuel Valente. However, I don’t think this is just a selfish strategy on the part of these developers: we are in a time where if they don’t play this little game, their project is quickly forgotten.
Decorated appreciation of use
However, if these new networks only provide a limited range of solutions and if their use itself is confidential, how can we explain capitalizations like Cardano ($17 billion), Tron ($10 billion), Aptos ($3 billion), etc.? “Today, the crypto market is still driven mainly by speculation. In previous cycles, the market was cleared. I feel like there wasn’t enough cleanup in the last bear market. believes Manuel Valente. “Obviously, if we compare these token capitalizations to the valuation of a listed company, it doesn’t make sense, agrees Charles Guillemet. It’s based on their potential, but objectively, the value creation of all these projects that make a lot of money is very low right now. These are bets on infrastructure problems, and whoever solves them will have a great chance to create something worth billions in the future.”
Furthermore, Coinhouse, like Ledger, does not invest its resources in the first project that comes along: Manuel Valente thus ensures that before launching a project, “Coinhouse closely monitors metrics such as age, usage, value passing through the network, and number of tokens in the market” prone to suspicion “projects that come out of nowhere and whose valuations explode” while Ledger, naturally more neutral because it makes its development kits freely available, still evaluates projects based on similar metrics before providing maintenance support.
And if no one knows which blockchain will win, one thing is certain: in 2024, the rise of new networks will continue: Monda, Nibiru, LayerZero, etc. Given the recent fundraising by Manta ($31 million) or Celestia ($56 million), the movement would shouldn’t have stopped…