Crypto Platform Competition Heats Up
Happy Monday!
The crypto ecosystem is always moving very fast, but some weeks certainly seem faster than others. This past week was one of those.
Some highlights from the past week? Two major athletes, Tom Brady and Steph Curry, signed long-term partnership deals with crypto platform FTX, and came out with their debut ad. El Salvador made their first official Bitcoin purchase, Coinbase publicly took on the SEC, and new crypto platforms Solana, Avalanche, and Arbitrum saw impressive growth.
I’d like to spend some time today on that last point. I spend most of the time on this newsletter discussing Bitcoin and Ethereum, what are these other networks and why are they starting to see more traction recently?
One big reason is gas prices on Ethereum. Months ago I reported about how Ethereum was scaling. We discussed how various upgrades and alternative options had made transactions on Ethereum more efficient and cheaper for users. (As a quick refresher, “gas prices” indicate how expensive it is to use compute power on the Ethereum network, which determines how much ETH needs to be paid by users to make any sort of transaction). Network fees did indeed improve and remain low… for a time. Then NFTs hit the mainstream… platforms such as OpenSea saw trading volumes explode, and the proliferation of new NFT “drops” (aka, releases) has created a sustained spike in activity on Ethereum.
Ethereum transaction fees saw a sharp uptick in August - they have since cooled down somewhat with the recent launch and adoption of alternative networks
At the same time, the price of Ethereum has seen a dramatic increase this year from $1500 to well over $3000. Since network fees must be paid in ETH, even if gas prices remain stable, the price appreciation of ETH translates to more expensive network fees as denominated in USD (which is what most users pay attention to).
Then increase in fees has led users to look for alternatives. Many of these alternatives have been in development for years… but in the recent weeks and months they have finally launched and began to gain real adoption as price-sensitive crypto users look for alternatives to Ethereum that can still offer adequate levels of security and decentralization.
Today, a few of these alternatives have found significant traction in the market and among crypto users. Solana – a network that emphasizes speed and usability – has grown to over $12 billion in total value locked (TVL) from just two weeks ago. A similar platform called Avalanche has seen its TVL grow to over $2.5B from just $250M in mid-August. Then, just this weekend, the long-anticipated launch of Ethereum Layer-2 network Arbitrum went live, immediately attracting well over $1.5B TVL in just a few days.
Solana (above) and Avalanche (below) are two networks that have experienced incredible growth in Total Value Locked (TVL)
The launch of these new networks and the applications that come with them presents some intriguing opportunities for adventurous yield-seekers… Since these projects are very new, they incentivize users with extremely high APY yield rates. On Avalanche, I am currently staking on one project offering >98,000% APY. On Arbitrum (which just launched), there are staking pools offering over 1,000,000% APY (certainly sounds ridiculous). These pools can be fun to play around in but keep in mind that with great reward comes similarly significant risk. These tokens are all very knew, and they could wind up being worthless. 1,000,000% of zero is zero.
In the meantime, it will be interesting to see whether the rapid adoption of alternative networks maintains it’s pace, or slows down as we get into Q4. I’ll also be watching attentively to see what effect this adoption has on Ethereum’s main network – will the alternatives provide the fee relief Ethereum so desperately needs? Or will we have to wait for the launch of Ethereum 2 sometimes next year?
All around, exciting times lie ahead for crypto networks and new, more user-friendly applications.
Crypto News:
El Salvador Buys Its First 200 BTC a Day Before Its Bitcoin Law Becomes Effective (LEARN MORE)
SEC Sets November Deadline for Final Decision on VanEck Bitcoin ETF (LEARN MORE)
Rob Gronkowski Follows Tom Brady Into Crypto in Ambassador’s Role With Voyager Digital (LEARN MORE)
Blockchain IoT Market to Be Worth $5.8B by 2026: Study (LEARN MORE)
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Have a great week!
Shahar
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This newsletter is meant for informational purposes only. It is not meant to serve as financial advice. If you are interested in financial advice, please schedule a personal consultation with me, and be sure to read the accompanying disclaimer.
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