03 Jan 2022
The power of the network effectMany of the alternative layer-1 blockchains have led a ton of new users to DeFi in the past year, and the market has reflected that user growth directly in each project’s price appreciation.
Source: Etherscan, Snowtrace, Tradingview
Since August 2021, Fantom and Avalanche is up ~17x and 15x against Ethereum, respectively—20x if you measure from their lows in January of 2021.This is largely due to the growing popularity of both NFTs and DeFi, combined with the growing congestion and high transaction fees on Ethereum—the biggest blockchain for both activities.As illustrated on the charts, the greater the number of users of a particular protocol, the more value it tends to attain. In other words, the hypothesis that a multi-year bear market is lurking because altcoins have gone up too much requires some nuance.What remains to see is how these alternative layer-1s will continue to strengthen their newly formed networks. A passionate retail community may create parabolic price action in the short term, but continuous innovation is what will establish long-term support.