Layer-1 Tokens Outperforming Layer-2 and DeFi Tokens
In the current bull run, layer-1 coins like Solana (SOL), Avalanche (AVAX), and Cardano (ADA) are performing better than layer-2 tokens such as Arbitrum (ARB) and decentralized finance (DeFi) assets like Uniswap (UNI) and MakerDAO (MKR).
Data-driven decentralized finance researcher Thor Hartvigsen noted that layer-1 coins like AVAX and SOL have seen an average increase of 50% in the past month, while layer-2 coins like ARB and OP, as well as DeFi tokens like UNI and DYDX, have only added around 10% during the same period.
Possible Reasons for the Rally of Layer-1 Tokens
One explanation for the rally of layer-1 coins is that they are considered foundational assets that support the development of decentralized applications (dapps) and serve as the backbone of the broader blockchain ecosystem, including layer-2 solutions.
On the other hand, layer-2 tokens are seen as more specialized and focused on enhancing the scalability and throughput of layer-1 mainnets, particularly Ethereum. They address the limitations of layer-1s when there is a surge in on-chain activity.
The Role of DeFi Tokens
DeFi tokens represent governance or utility and their performance is tied to how their underlying protocols perform. They rely on market sentiment and the overall health of the DeFi ecosystem.
The Demand for Blockchain Infrastructure
Mainnet coins are outperforming due to the growing demand for blockchain infrastructure. As more users enter the space, robust and scalable blockchains become crucial. Layer-1 tokens provide the foundation for layer-2 and DeFi tokens to thrive.
Hot Take: Layer-1 Coins Leading the Way
In this bull run, layer-1 coins like Solana, Avalanche, and Cardano are leading the performance chart, outperforming layer-2 tokens and DeFi assets. This trend suggests that investors are recognizing the importance of foundational assets in the blockchain ecosystem. Layer-1 coins provide the infrastructure for decentralized applications and serve as the backbone of the broader blockchain industry. As demand for blockchain technology grows, these layer-1 tokens are positioned for further growth and adoption. Meanwhile, layer-2 tokens and DeFi assets rely on the performance of their underlying protocols and market sentiment. The divergence in performance highlights the different roles these tokens play in the crypto market.
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