It has become increasingly evident that the future of blockchain is multi-chain. Over the past two years, we've witnessed a significant rise in the number of alternative Layer 1 (L1) blockchains. While many of these alt L1s have been labeled as "Ethereum killers," reports of Ethereum’s demise have been greatly exaggerated. Ethereum remains the leading smart contract platform, hosting the majority of innovation and non-Bitcoin capital—a status that is unlikely to change soon.
That said, Ethereum has ceded some market share to competitors, particularly Solana, Terra, and Avalanche.
The Precedent: Binance Smart Chain (BSC)
Let’s take a step back to the era of Binance Smart Chain. BSC offered new crypto users a platform for fast, low-cost transactions. It introduced many to the possibilities of decentralized finance—lending, yield farming, and using decentralized exchanges (DEXs). However, the BSC season eventually waned, partly due to the market crash in May of last year but also because of its limited innovation. Many projects were mere clones of Ethereum protocols, and the ecosystem was flooded with low-quality tokens.
At its peak, BSC’s Total Value Locked (TVL) reached $31 billion before dropping to $12 billion and recovering to $16 billion. Given how other markets have rebounded, it seems unlikely that BSC will reclaim its peak 21% share of the total TVL across all chains. That was an astonishing figure.
For context, Solana, Terra, and Avalanche currently hold a smaller market share than BSC did at its height. Moreover, BSC faced technical challenges—nodes had synchronization issues, and its block production mechanism occasionally faltered. Ultimately, creating a faster version of Ethereum proved more difficult than anticipated.
Yet, the rise of BSC underscored a core principle: users want smart contract platforms that are affordable and functional. As Vitalik Buterin once stated, "The internet of money should not cost 5 cents per transaction." BSC demonstrated that chains with low fees and decent products—even if largely imitative—could achieve significant adoption.
The Current Landscape: Avalanche, Terra, and Solana
Today, Avalanche can be seen as a spiritual successor to BSC—an Ethereum Virtual Machine (EVM)-compatible blockchain with low fees and a growing suite of quality applications. It also hosts a vibrant ecosystem of alternative tokens, including projects like Snowbank and various game clones. While these may be considered speculative, they often indicate active development and user engagement.
Terra, on the other hand, was built with a unique focus on its native stablecoin, UST. Rather than being a blockchain with a stablecoin, it functions as a stablecoin with a blockchain. This design has enabled novel use cases in decentralized finance.
Solana stands out for its performance. It is exceptionally fast and cost-effective, relying on Moore’s Law for scaling—as hardware improves, so does Solana. Although its ecosystem is still developing, it holds promise for applications requiring high throughput, such as centralized limit order books (CLOBs) and gaming. Partnerships, like the one between FTX and TSM, signal growing interest in Solana’s potential for gaming.
Incentive programs have also played a crucial role in attracting users and developers to these alternative chains, further diversifying the multi-chain landscape.
Investing in a Multi-Chain Future
With so many blockchains offering unique value propositions, how can investors best position themselves for a multi-chain future? One approach is to buy the native tokens of these chains and hope for long-term success. However, a more strategic method is to focus on infrastructure that enables interoperability.
The Role of Cross-Chain Bridges
To connect these diverse ecosystems, we need reliable cross-chain bridges. These protocols allow assets to move seamlessly between blockchains. One innovative example is Synapse, which operates a cross-chain automated market maker (AMM). When evaluating bridges, consider factors such as market capitalization, fully diluted valuation (FDV), tokenomics, and usage statistics like bridge volume and supported chains.
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The Promise of Inter-Blockchain Communication (IBC)
Another critical development is Inter-Blockchain Communication (IBC), which enables direct interaction between blockchains. Unlike bridges, which create point-to-point connections, IBC acts as a universal highway for blockchain communication.
The Cosmos network, built around IBC, envisions an "internet of blockchains" where specialized chains can interoperate efficiently. This approach contrasts with Ethereum’s current model, where every transaction is processed by all participants—a design that may become less sustainable as the ecosystem grows.
IBC allows for actions like transferring ERC-20 tokens from Ethereum to Cosmos, reducing the need for custom bridges. However, bridges and IBC serve complementary roles: bridges offer dedicated routes, while IBC provides a standardized framework for connectivity.
The Future of Bridges and Stablecoins
As Messari’s 2022 report predicted, the most popular bridge protocols could eventually surpass centralized exchanges in daily transaction volume. This evolution mirrors the expansion of railroads in the 19th century, where companies competed to build the most efficient transportation networks.
Today, bridge protocols are similarly racing to connect blockchains. The best ones will likely establish dominant brands and absorb competitors over time.
It’s also worth noting the technical challenges of building bridges. Much like blockchain’s scalability trilemma, bridge design often involves trade-offs between security, decentralization, and efficiency.
The Silent Enabler: Stablecoins
Stablecoins like USDC, UST, and USDT have played an underappreciated role in the growth of multi-chain ecosystems. With a combined market capitalization of approximately $130 billion, these assets provide liquidity and stability across chains.
They enable smoother user experiences by allowing participants to transact in a familiar unit of account rather than volatile native tokens. Deep liquidity pools—such as those on Avalanche, Solana, and Fantom—demonstrate how stablecoins facilitate economic activity within these networks.
While stablecoins are essential enablers of multi-chain interoperability, they are not direct investment vehicles for this theme. Instead, they serve as foundational infrastructure.
Frequently Asked Questions
What is a multi-chain ecosystem?
A multi-chain ecosystem refers to a network of interconnected blockchains, each designed for specific use cases. These chains can communicate and share assets, enabling greater scalability and specialization than a single monolithic blockchain.
Why are cross-chain bridges important?
Cross-chain bridges allow users to transfer assets and data between different blockchains. They are essential for interoperability, enabling ecosystems to leverage each other’s strengths and share liquidity.
How does IBC differ from traditional bridges?
IBC is a standardized protocol for blockchain communication, allowing any compatible chain to interact with others. Traditional bridges are custom-built point-to-point connections, which can be more efficient for specific pairs but less scalable.
What role do stablecoins play in multi-chain networks?
Stablecoins provide a common medium of exchange across chains, reducing volatility and simplifying transactions. They enhance liquidity and make it easier for users to participate in diverse ecosystems.
Which chains are leading the multi-chain trend?
Ethereum, Solana, Avalanche, and Terra are among the most prominent, each offering unique features. However, the landscape is rapidly evolving, with new chains emerging regularly.
How can investors benefit from multi-chain growth?
Investors can consider native tokens of promising chains, infrastructure projects like bridges, or protocols enabling interoperability. Diversification and focus on foundational technologies may offer exposure to this trend.
Conclusion
The rise of new public chains signals a broader shift toward a multi-chain future. While Ethereum remains dominant, alternatives like Solana, Avalanche, and Terra are carving out meaningful niches. Interoperability protocols—whether bridges or IBC—will be critical in connecting these ecosystems.
For those looking to navigate this evolving landscape, understanding both the technological and economic drivers behind multi-chain systems is essential. As the space matures, the protocols that offer the most seamless and secure connectivity will likely emerge as key infrastructural pillars.