Will the next crypto bull run be dominated by L1s, L2s or something else?

The long-awaited “crypto spring” may be upon us as Bitcoin (BTC) and other crypto markets take off in anticipation of a full-blown bull market.

In the recent crypto winter, many different projects are growing, gaining users and building new networks. Some of these, like Polygon, are layer-2 (L2) solutions that help scale the underlying protocol, Ethereum. But what are the implications of L2s? Are they the best protocols to build or invest in? Are other Layer 1s (L1s) doing anything to stay competitive?

These and more are the focus of a new report from Cointelegraph Research Terminal. The report looks at up and coming projects in the cryptoverse as well as case studies for L1s like Avalanche and Hedera and how they compare to emerging new technology.

Download the report on the Cointelegraph Research Terminal.

Cointelegraph's “L1 vs. L2: The Blockchain Scalability Showdown” report is a starting point to point out why scaling solutions to L1s weaknesses are important. The report provides explanations of what is currently happening in the world of scalability solutions for bridges and projects focused on interoperability.

Layer-1 blockchains, such as Bitcoin and Ethereum, are the underlying protocols that can be used in conjunction with third-party layer-2 protocols, known as mainnets or main chains.

The Layer-0 (L0) protocol allows developers to build their own ecosystems from different L1 and L2 protocols and add interoperability.

L2 protocols allow thousands of low-cost transactions to be executed on parallel blockchains after verification, which then ensures that records are immutably committed to the main blockchain or network. This report will help prepare the reader for “crypto summer” with all the information and insights to make better informed decisions.

Gas bills are just the beginning.

As veterans in the blockchain space know, Ethereum's gas fees have been a critical issue, sometimes costing users more for the transaction value of Ether (ETH) (measured in GV) than the value of the underlying asset. As the table below shows, the price of transactions on Ethereum can fluctuate significantly, leaving users with an unpredictable experience that can affect further adoption.

This includes creating solutions to combat this issue as well as increasing scalability, transactions per second (TPS), interoperability and ease of user experiences for developers and users alike.

Protocol comparison, more than speed

TPS is one important thing that differentiates new protocols from previous generations like Bitcoin and Ethereum. Bitcoin and Ethereum operate as their own L1s but lack internal solutions to operate at speeds comparable to newer networks, as shown in the table below.

Today, there are layer-0 protocols that serve as the base layer on which different protocols can work with each other. Layer-2 protocols are built on top of Layer 1s to fill and overcome gaps that may arise at Layer 1.

For example, if a protocol has a low TPS, L2 can still provide a cheap and efficient way to use the same programming language and infrastructure of L1 for security.

Top trends for the future

The report offers a number of insights, including top new trends that are driving the narrative of protocols such as asset tokenization and account abstraction away from traditional L1s.

Asset tokenization, the digital representation of real-world assets (RWA), including decentralized ledger protocols, will play an important role in the expansion of next-generation protocols.

As adoption rates increase, the migration of assets to these protocols will increase transaction congestion. This also has the effect of increased adoption, including making tutoring easier for average users. This is where the next trend, label abstraction, comes in.

Account abstraction helps user experiences by eliminating requirements such as saving seed phrases for account retrieval. It also allows for simplifying smart contract execution, such as complex payment structures. By simplifying user experiences, L0s and L2s can help drive the next leg of mass adoption.

A recent report from Cointelegraph Research is a starting point for analyzing these new protocols. The report includes insights from industry experts at the cutting edge of various technologies in the decentralized ledger space.

Cointelegraph Research Group

Cointelegraph's research department includes some of the best talent in the blockchain industry. By combining academic strength and refining it with practical and hard-won experience, the team's researchers are committed to bringing the most accurate and insightful content on the market.

The research team includes subject matter experts from across finance, economics and technology to bring industry reports and insightful analysis to market. The team leverages APIs from a variety of sources to provide accurate, useful data and analytics.

With decades of combined experience in traditional finance, business, engineering, technology and research, Cointelegraph's research team is perfectly positioned to put its combined skills to good use with the “L1 vs. L2: The Blockchain Scalability Showdown” report.

The opinions expressed in this article are for general information purposes only and are not intended to provide specific advice or recommendations for any individual or any security or investment product.