Bloomberg’s crypto market analyst, Jamie Coutts, suggests that alternative layer-1 blockchains aiming to challenge Ethereum (ETH) might face a dwindling timeframe. Coutts, in a post on the social media platform X, points out that the ascendance of Ethereum layer-2 solutions (L2s) is redirecting revenue away from Ethereum’s competitors.
He notes, “The emergence of L2s has resulted in Ethereum’s network recapturing market share from its alternative layer-1 peers. Over the past year, the growth in active addresses on L2s has outpaced that of alternative layer-1s by a factor of 2, albeit starting from a lower base.”
Coutts points out that alternative platforms for smart contracts are grappling with several challenges that jeopardize their sustainability. These include inflationary tokenomics, an overabundance of block space, and the rapidly expanding network effects of Ethereum.
Despite the fact that these blockchains have seen a continuous increase in the total fees generated over the long term, the analyst suggests that many of them could easily fade into obscurity in the coming years.
He remarks, “Despite the ongoing bear market, the demand for block space continues to follow a structural upward trend. Nonetheless, the cryptocurrency industry is plagued by significant issues largely of its own making. It’s conceivable that only a small subset will remain relevant in the coming years.”
Coutts also notes that numerous alternative layer-one blockchains are likely failing to generate sufficient fees to guarantee the future security of their networks due to limited activity.
The analyst states, “While a declining treasury market could challenge our earlier belief that the capitulation in 2022 marked the cycle’s low point for ETH, our outlook for this asset remains optimistic. However, our perspective on many Alt-L1s (though not all) remains pessimistic due to insufficient demand and suboptimal tokenomics.”