A Guide on Layer-0 Blockchains for Investors
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It is possible not to know what Layer-0 blockchain is, but one may know some of the top projects using this network. Examples of these projects are Avalanche, Cosmos, and Polkadot. This article will take a closer look at what the Layer-0 blockchain is and what it has to offer, as well as the challenges it is experiencing.
Layer-0 Blockchain Explained
Layer-0 blockchain is a proffered solution to inter-chain interoperability. Currently, there is scalping from the Ethereum blockchain to the Bitcoin blockchain. The Layer-0 blockchain has come as a solution to scalability problems. Blockchain deals with a lot of key functions, such as concessions, data availability, and transaction execution, while handling the growing demand of the user. This makes it quite challenging to scale, which necessitates trading off security and decentralization.
Investing in Layer-0 Blockchains
It is very crucial that one does enough research before venturing into any investment. The same goes for investors who are seeking to invest in Layer-0 blockchains. A nice starting point when trying to examine the Layer-0 blockchain chain is to consider these important features:
Daily Active Users: One can consider this as the number of customers an established business receives or services in a day. You’ll agree that this is a key indicator of how well such an establishment is faring. The same goes for blockchain projects; the daily users tell how well the project is performing.
Transactions Throughput: This reveals the volume of transactions that the project can handle in a specified time. A network with low throughput won’t be able to meet the needs of increasing users, confirmation times may be longer, and transaction charges will be high. Consequently, all these shortcomings will make the blockchain less attractive to both new users and investors. This type of protocol will experience slow growth.
Security: Here, one will have to consider the level of decentralization of the network and the record of the team behind the project. One will have to consider the size of the customer. This is because a good project will have a good number of active users and will be more secure.
Tokenomics: Tokenomics implies the economy of tokens, assists in maintaining the security of the network, and funds development. A good project will have carefully structured tokenomics with long-term considerations in mind.
Interoperability and Scalability: A project that can effectively support a huge number of users and apps while supporting interchain transactions will possess better opportunities at gathering faith users.
Examples of Some Layer-0 Projects
Polkadot
Launched in 2020, it has an average monthly usage of 4,570 and a market capitalization of $7.88 billion. This network has a main chain known as a “relay chain”, which is the running of various parallel chains to link and interact with one another. Polkadot possesses a formidable presence amongst projects by market capitalization. The report says that DOT’s parachain has recorded good growth despite being launched just recently.
Cosmos
Starting in 2014, Cosmo had a monthly active user count of 17,640 and a market capitalization of $3.30 billion. This project was designed to solve blockchain scalability problems. Also, this protocol has various features like the Cosmos SDK, which allows developers to develop blockchain-specific apps, and Inter Blockchain Communications (IBC) protocols. The IBC features permit the transfer of value between chains. This project has reported more than 270 applications on its blockchain, which consists of Binance Chain, Terra, and Crypto.org.
Avalanche
This is a smart contract project used for designing blockchain applications. Avalanche was launched in the year 2022 and has an average monthly user count of 257,000 and an approximately $6 billion market capitalization. This protocol consists of three chains, one of which is used for designing and launching blockchain applications. Meanwhile, the other two are used for creating and exchanging assets, coordinating validators, and enabling the creation of subnets. Avalanche is next to Polkadot when it comes to the Layer-0 project, with a market capitalization and a TVL of more than $850 million.
To Investors
The Layer-0 Blockchain has provided another means of scaling the blockchain without breaking the founding principles of the sector. They also try to link different ecosystems, making them interoperable. Also, they foster collaboration within the cryptocurrency sector instead of siloing projects from one another.
