In bull and bear markets, sensible cryptocurrency traders know that the first focus needs to be on venture longevity quite than leaping on each short-term value motion. Because the crypto ecosystem expands and new sectors come up, protocols that supply essentially the most worth to the neighborhood stand the most effective likelihood at long-term survival and value appreciation.
The aim of this text is to take a extra thematic, macro view of area of interest sub-sectors throughout the cryptocurrency market and establish tasks whose sign they are going to be profitable throughout the area.
It isn’t in regards to the token value; it’s in regards to the tech, the basics of the venture, and the way every one should assist push the sector ahead to the following stage.
In a current dialog with Cointelegraph, Élie Le Relaxation, associate at digital asset administration agency ExoAlpha, mentioned: “Sector traits and crypto are large and are right here to remain, however idiosyncratic threat have to be taken under consideration whereas weighing portfolios.”
Based on Le Relaxation, the “crypto market tends to work on comparable rules,” which is a repeating pattern seen a number of instances in its historical past.
With that mentioned, let’s take a deeper dive into the present market cycle rotation happening within the wider crypto market to get a greater grasp on the place new cash and members coming into the market are starting to focus their consideration.
Layer-one tasks proceed to draw customers
Layer-one is a time period used to explain the principle underlying blockchain structure of a community, whereas layer-two options are protocols that function on high of the underlying L1 blockchain and can’t perform with out the framework that they supply.
Bitcoin is by far the dominant L1 answer when it comes to worth, whereas the Ethereum community has been basic in reshaping the crypto market panorama over the previous few years because of sensible contracts and the rise of sectors reminiscent of decentralized finance and nonfungible tokens.
Whereas Ethereum has obtained a majority of the eye with regards to discussions about sensible contract platforms, a number of tasks have been rising in prominence of late as excessive charges and a low transaction-per-second depend on the Ethereum community have enticed tasks to construct on up-and-coming networks.
Ethereum’s success has demonstrated to the world the capabilities of sensible contract platforms, however its continued struggles have opened the door for protocols like Polkadot, Solana and Cosmos, which provide the same worth proposition together with options to the underlying issues talked about, to develop when it comes to value and relevance over the previous yr.
Polkadot has change into probably the most well-known and profitable L1 tasks within the crypto area apart from Ethereum in 2021 thanks largely to the venture’s strategy of interoperability and cooperation versus the earlier “Ethereum killer” strategy taken by many.
Created partly by Gavin Wooden, who additionally performed an instrumental position within the creation of Ethereum, the Polkadot community has taken a extra complementary strategy as an open-source sharding multichain protocol that allows cross-chain bridges in order that tasks and builders can select the community that most accurately fits their wants and simply switch their protocols if needed.
Not restricted to simply tokens, Polkadot’s multi-chain performance allows the cross-chain switch of any information or asset sorts, serving to to determine a variety of interoperability between separate blockchain networks.
Polkadot’s ecosystem is among the largest and most lively within the area, with a quickly increasing record of tasks launching on the protocol and trying to get hold of one of many restricted parachain slots within the upcoming parachain auctions.
As seen within the graphic above, the Polkadot ecosystem has quickly expanded to include the key sectors of the cryptocurrency ecosystem, together with DeFi platforms, nonfungible token protocols, oracles and decentralized autonomous organizations.
The community additionally has a rising record of functions that facilitate interacting with the protocol, together with a variety of wallets that assist Polkadot’s DOT and Polkadot-based property, in addition to a number of community explorers, together with Polkascan.
Widespread tasks which might be at the moment working on the Polkadot testnet and are favored to win a parachain slot embody DeFi ecosystem Acala Community and the Polkaswap decentralized trade, that are each obtainable now for testing and may be accessed utilizing the Polkadot-js pockets browser extension.
As soon as the parachain auctions are completed and the tasks go reside on Polkadot, the community’s launch will formally be full. Whereas there may be no definitive date but set for when the parachain auctions will start, pleasure for DOT has continued to construct, which has translated into its value growing greater than 800% in 2021.
With the prospect of full community capabilities set to launch inside a interval of weeks to months and mainstream consideration starting to reach, many traders really feel that Polkadot is well-positioned to see additional development in value and adoption as a key participant in the way forward for interoperability throughout blockchain networks.
Solana is a quick, safe and censorship-resistant blockchain community that “offers the open infrastructure required for international adoption,” in accordance with the venture’s web site.
The venture’s reference to the FTX cryptocurrency trade and its CEO, Sam Bankman-Fried, who additionally had a hand within the creation and operation of the Serum decentralized trade, which operates on the Solana community, has been useful for the protocol when it comes to monetary backing and media publicity.
Except for these constructive associations, the underlying expertise of the Solana community has attracted the eye of a variety of tasks all in favour of launching or bridging to its high-speed, low-cost atmosphere.
The fast growth of the Solana ecosystem over the previous yr started with a deal with decentralized finance and has been bolstered by the success of the Serum, which customers can interface with utilizing a number of wallets that assist Solana, together with Sollet, Ledger and Math Pockets.
Whereas a majority of the instruments and supporting infrastructure on the community have been geared towards DeFi, current additions to the community, such because the decentralized music-sharing and streaming protocol Audius, present that the protocol is starting to department out and appeal to the eye of different forms of tasks all in favour of its capabilities.
The Solana protocol makes use of an modern hybrid mannequin consisting of a proof-of-history consensus mixed with the underlying proof-of-stake consensus of the blockchain to extend the community’s general scalability.
Extra lately, the community has seen a variety of new projects launch which have employed a few of the identical techniques that drummed up exercise and enthusiasm on the Ethereum community in 2017, together with airdrops and copycat tasks.
Whereas some may even see this as a damaging, it demonstrates the elevated adoption and attract of a low-cost atmosphere in addition to displaying that Solana is a developer-friendly community.
These influences, mixed with a large number of different components, have helped enhance the value of Solana (SOL) by greater than 3,200% to date in 2021.
Provided that DeFi and different scorching sectors of the cryptocurrency sector nonetheless of their infancy, Solana is nicely geared up to see its ecosystem broaden and token worth enhance as international cryptocurrency adoption will increase.
Cosmos refers to itself as “the web of blockchains” consisting of “an ever-expanding ecosystem of interconnected apps and companies, constructed for a decentralized future.”
The community arose out of the Tendermint venture, which is taken into account “the gateway to the Cosmos ecosystem” and launched through a token sale in 2017. The protocol makes use of a PoS consensus algorithm that permits token holders to stake their cash to assist hold the venture’s flagship blockchain Cosmos Hub safe, whereas additionally incomes a yield that’s paid out in Cosmos (ATOM) tokens.
Momentum for the venture in 2021 was kicked up a notch in February following the Stargate replace, which included the Inter-Blockchain Communication protocol, an interoperability layer for Cosmos blockchains.
The IBC permits tasks constructed with the Cosmos software program improvement equipment, like Kava and Band Protocol, to simply interoperate and bridge tokens throughout different blockchains on the Cosmos community, which at the moment hosts greater than 240 apps and companies.
The capabilities of the IBC will ultimately join with different blockchain networks, such because the Binance Good Chain, serving to to extend interoperability throughout the cryptocurrency ecosystem.
With a transaction velocity of seven seconds and a median payment of $0.01, transacting on the Cosmos community is a welcome expertise for customers fleeing excessive charges on Ethereum.
The Might 10 completion of the Gravity decentralized trade testnet buying and selling competitors reveals the protocol is gearing as much as provide options much like Uniswap for a fraction of the charges, hinting at a promising future for this rising ecosystem.
Layer-one tasks are bullish, however there are a couple of hurdles to beat
Rising ecosystems and the deliberate improvement and integration of interoperability options are robust indicators of longevity for layer-one tasks within the quickly rising cryptocurrency area.
Potential threats to the success of L1 options embody tasks, reminiscent of Polygon and Fantom, which offer cross-chain bridges to different extra succesful networks and L2 options that get rid of the scaling points that plague the Ethereum community.
Whereas these threats are actual, every community or protocol will ultimately run into its personal distinctive set of challenges that hamper its capabilities and open the door for opponents to supply a greater answer.
Ethereum launched the world to sensible contracts and expanded the scope of what could possibly be executed on L1 options past what was beforehand achievable on Bitcoin.
Limitations within the unique and present design of the Ethereum community have opened the door for newer L1 options like Polkadot, Solana and Cosmos to determine themselves as viable contenders because of quicker transaction instances and an already-established proof-of-stake consensus mechanism.
The views and opinions expressed listed below are solely these of the creator and don’t essentially replicate the views of Cointelegraph.com. Each funding and buying and selling transfer entails threat, it’s best to conduct your personal analysis when making a call.