Soundwise Founder Natasha Che not too long ago in contrast Layer 1 chains to “new nation-states” on a Twitter thread. Within the context of this novel thought, she defined that it’s like sensible contract customers can “maintain a number of passports with out having to surrender the previous one.”
Curiously, funding Strategist Raoul Pal appeared to agree along with her. He commented,
“All tokenized ecosystems are primarily digital sovereign states that we’re free to maneuver round and from/to. Fascinating world…”
PoS-based Layer 1 nation
The aforementioned wasn’t all Che stated, nevertheless. She went on additional to clarify how proof of stake can drive “crypto nationwide economies” together with these Layer 1 options. Subsequently, Che’s surest crypto-bet is,
“Blockchain nations with proof of stake as their financial engine.”
Put briefly, Layer 1 options incorporate protocol modifications within the base layer. Subsequently, in contrast to Layer 2 options, no third-party protocol is required for enhancements. Having stated that, PoS can be identified to be an energy-efficient answer, whereas additionally providing a platform for extra nodes on the community.
A few of the high Layer 1 PoS chains embody names like Cardano, Avalanche, and Algorand. After Ethereum makes a swap with ‘The Merge,’ it’ll additionally come beneath the record of Layer 1 PoS chains. Nevertheless, at present, ETH is dominating the worth motion within the class.
Past the competitors
Within the context of a brand new monetary system with these competing chains, Che added,
“Whereas competitors is fierce and plenty of layer 1s will die, it’s clear that a number of PoS layer 1 chains and their scaling layers will coexist in future, and develop into the collective floorboard of the metaverse.”
However, which of those will survive and which of them will kind a collective is a relatively untimely dialogue. Alas, when it comes to business knowledge, Che identified that round 40 of over 100 crypto-projects are Layer 1 options. Excluding ETH 2.0, that is near $400 billion in market cap or 15% of the market, she concluded.
What this primarily means is that you just want particular tokens to enter these “nations.” Che went on to clarify,
“If you wish to get into the Ethereum nation, you should purchase ETH. If you wish to enter the Solana nation, purchase SOL.”
In broader phrases, it’s additionally value how the exec thinks a layer 1 platform “bootstraps its nationwide economic system to monetary hypothesis and real-world utilization.”
Subsequently, when a platform grows, it’s primarily tied to the nation’s economic system. And, the volatility of the tokens is defined within the context of the actual world’s “enterprise cycles.”
Even so, there’s a main distinction in how a “bust” enterprise cycle will probably be tackled in a conventional framework versus a Layer 1 state of affairs. Not like financial policy-led liquidity, nations will reward “validators” who maintain the chain’s native token by staking.
The exec concluded by claiming,
“This will increase stickiness of citizenship, boosts worth stability of all the pieces denominated within the L1 token and lowers transaction prices within the nation.”