Next-Generation Layer-One Blockchain Protocols Remove the Financial Barriers to DeFi and NFTs
Layer-one smart-contract platforms offer a practical alternative to the high fees and slow transaction-confirmation times of Ethereum, making blockchain technology and DeFi accessible to all.
Blockchain technology has emerged as a revolutionary force for change on the global stage over the past decade as Bitcoin has risen from being shadowy internet money used by criminals to an accepted form of legal tender by governments in countries such as El Salvador.
While the applications of distributed ledger technology (DLT) are vast and widespread, its potential to help reconfigure the global financial industry offers perhaps the most transformative opportunity in a world where more than 1.7 billion adults are classified as unbanked.
The creation of secure layer-one blockchain protocols capable of hosting smart contracts such as Ethereum has allowed for the emergence of decentralized finance (DeFi) and the explosion in popularity of non-fungible tokens (NFTs), but their rising popularity has been a double-edged sword as increased use of the top networks has led to skyrocketing transaction costs and slow processing times.
Many proponents of some of the first and second-generation protocols including Bitcoin and Ethereum often frequent reassurances that developers have made significant progress in addressing these recurrent issues, but the fact that the same problems continue to arise during each bull market suggests that newer generation blockchain protocols offer the best solution to these longstanding difficulties.
Some of the new blockchains like Fantom have been gaining a wider adoption in recent months as suitable alternatives to Ethereum because of their inclusivity and easy onboarding experience. Thanks to the layer-one solutions, users who are not familiar with the new technologies and users who can’t afford hundreds of dollars for every single transaction can now start using blockchain and DeFi.
Related: 5 Reasons to Get Started With DeFi
The rapidly expanding world of DeFi is singlehandedly reshaping the global financial infrastructure as all manner of stocks, securities and transferable assets are slowly but surely being tokenized and stored in digital wallets.
New protocols are arising daily that allow anyone with an internet connection or smartphone to access ecosystems that are equivalent to digital savings accounts but offer much more attractive yields than those found in the traditional banking sector.
Unfortunately, with most of the top DeFi protocols currently operating on the Ethereum blockchain, the high cost of conducting transactions on the network has priced out ordinary individuals living in countries where even a $5 transaction fee is a significant amount of money capable of feeding a family for a week.
This is where competing new blockchain platforms have the biggest opportunity for growth and adoption thanks to cross-chain bridges, a growing number of opportunities to earn a yield on new DeFi protocols and significantly smaller transaction cost.
Both Fantom and Avalanche have fully functioning cross-chain bridges that allow ERC-20 to be migrated to a corresponding token standard on their networks while Solana has created its "Wormhole" communication bridge that connects with other top DeFi networks including Ethereum, Terra and the Binance Smart Chain.
Non-fungible tokens (NFTs)
Anyone who hasn’t been living under a rock over the past two months knows that the NFT sector has skyrocketed in popularity along with prices as all manner of celebrities, sports stars and globally recognized brands have started offering one-of-a-kind digital collectibles.
Just as it was during the bull market of 2017-2018, digital collectibles from CryptoKitties to CryptoPunks have led to break records in terms of both prices paid as well as network congestion and fees generated.
Play-to-earn games have also become in-demand applications as NFT technology enables players to sell in-game items for real-world cash, but high transaction costs have once again priced out those who could benefit most from the access that these protocols provide.
This is yet another use case that has begun to see an explosion of interest spill over to Fantom, whose near-feeless transaction capabilities have enabled users from even the most economically disadvantaged areas of the world unrestricted access to protocols that can allow them to earn a daily living income.
Instead of having to pay more than $100 in Ethereum gas fees just to try and get in on the NFT action, users can instead put their money to use building their NFT portfolios and participating in the growing digital-collectibles metaverse.
Simple to navigate user interface
On top of their low-cost nature, the newer generation protocols and pure proof-of-stake networks also offer an easy-to-use user interface that even the most non-tech-savvy individuals can navigate.
While many networks out there require an advanced level of technical experience to operate wallets and conduct transactions, Fantom has removed the advanced training required to operate the first blockchain interfaces and has created a UI that any modern internet user can operate.
Algorand has amassed a vast network of developers and scientists that have helped create a user interface simple enough that even well-known crypto projects like the digital-wallet creator Exodus have chosen the network to host its recently launched EXIT digitized token representations of its common stock.
Like all technology, blockchain continues to evolve
For those who were around during the early days of the internet, few could probably have imagined the journey that has taken place from using programs like Netscape to explore some of the earliest message boards or chat with their friends to the current expansive digital universe that is social media and Google searches.
Just as many of those early programs that once dominated the digital landscape have now disappeared completely, so too will many of the popular first and second-generation blockchain protocols suffer a similar fate as newer networks with superior scaling capabilities and smart-contract functionality arise and gain the favor of the market.
These emerging projects, which offer lower-cost transactions at higher rates of scalability, are well-positioned to step forward and take a leadership role in helping to onboard the wider public and pave the way to a blockchain future.
The dawn of the blockchain era is now underway, and projects like Bitcoin and Ethereum have helped bust open the door and establish blockchain technology as a force for change on the planet.
Now, as more and more of the global population starts to make its way into the cryptocurrency ecosystem, it’s time for the next generation of blockchain platforms to arise and assume roles as leaders in this digital revolution as decentralized finance and non-fungible tokens begin to transform the global financial systems.
Entrepreneur Leadership Network Contributor