On Tuesday, CoinDesk Research publishes its quarterly report for the third quarter with 60 slides full of insights, analysis and data. For me, one of the realizations is that we live in a world with multiple chains, whether you like it or not.
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For example, the report notes that in September, Bitcoin dominance – that is, the share of the original cryptocurrency in the total crypto market capitalization – was 42%. This is the lowest level at this point in the year in the past four years.
The report’s authors, CoinDesk Research analysts George Kaloudis and Teddy Oosterbaan, point out that this is due to a growth explosion in other networks rather than a decrease in the power of Bitcoin.
“Losing the dominance of BTC does not mean that it is losing, especially as it continues to cement itself as a solid monetary and global currency network,” they write. “A declining dominance of Bitcoin indicates more precisely that money is flowing into other projects with different use cases, as is typically the case with digital assets in times of optimism.”
And Flow has it. Note that while Ethereum’s stake was higher last September than any other point in the series since 2017 – the heyday of Initial Coin Offerings and CryptoKitties – the stake for all other blockchains was the highest in the last five September.
As Kaloudis and Oosterbaan note throughout the report, alternative “Layer 1” (L1) blockchains gained popularity as Ethereum’s congestion and high fees fueled demand for networks with similar smart contract capabilities but faster throughput. At least faster for now. I remember a quote from baseball legend Yogi Berra: “Nobody goes there anymore. It’s too crowded. “
This demand is reflected in the market capitalization of the native currencies of these L1 networks and the Total Value Locked (TVL) or money invested in their Decentralized Financial Protocols (DeFi). Cardanos ADA, Binance Smart Chains BNB, Solanas SOL, Avalanches AVAX and Terras LUNA are now among the top 12 coins by market capitalization.
While Ethereum continues to be king among DeFi host networks, check out how diverse these bars have become for measuring TVL:
Here, too, Bitcoin remains the guiding star of the crypto market, the coin with the greatest institutional acceptance and network effect, with an unprecedented level of security that is hard-won through the politically incorrect energy consumption of miners. (Disclosure: It’s the only coin I own.) That doesn’t seem to be changing much.
But the Bitcoin network’s scaling restrictions, along with those of its biggest competitor, Ethereum, mean that none can be expected to become the only game in town anytime soon.
The CoinDesk Quarterly Review for Q3 also covers NFTs, stablecoins, the performance of BTC versus gold and stocks, and more. Mark your calendar for October 5th and make sure to bookmark the CoinDesk Research page.