Ethereum As the Market Leader
Ethereum has established itself as a leading platform in the smart contract blockchain space, thanks to several key factors that set it apart from competitors. At the core of Ethereum's success are its strong network effects, which manifest in various significant ways. Ethereum is home to the most developers, dApps, TVL, liquidity, fees, revenue, and more compared to its peers.
One major advantage for Ethereum is the widespread adoption of the Ethereum Virtual Machine (EVM) and Solidity, the primary language used for creating smart contracts on the platform. The EVM's compatibility has become a benchmark in the industry, prompting many other blockchain platforms to ensure they are EVM-compatible to facilitate interoperability with Ethereum. This move aims to leverage Ethereum's substantial user base and developer ecosystem.
Regarding usage, around 94% of the total value locked (TVL) in smart contracts is in those written in Solidity, with Vyper, another language designed for the EVM, accounting for an additional 2.5%. This indicates that a significant majority of smart contract value is held on Ethereum, underscoring the platform's dominance in the space.
Additionally, Ethereum's developer community is notably larger than that of any other smart contract platform. As of 2024, it boasts around 75,000 open-source developers. This large pool of developers is crucial because it drives the platform's innovation and growth, leading to a continuous increase in the number and complexity of smart contracts on the network.
Another metric to gauge an ecosystem’s developer community, rather than simply counting the number of devs, involves focusing on two specific on-chain metrics: the count of unique addresses that deploy contracts and subsequently interact with them, and the share of total gas used by these deployments. This innovative on-chain metric provides a clearer and more objective gauge of developer activity, offering insight into actual usage and engagement rather than just code changes. It reflects the real-world application of projects on the blockchain, emphasizing the deployment and interaction of contracts within the network's operational context. Ethereum exemplifies the strength of this on-chain activity metric, with over 500 unique addresses deploying contracts and interacting with them daily, accounting for roughly 1.5% of the total gas usage.
Ethereum Suffering Under Its Own Success?
From its inception, it was acknowledged that the Ethereum Layer 1 (L1) blockchain alone could not scale sufficiently to support the entire global economy. Recognizing this limitation, Ethereum's co-founder, Vitalik Buterin, introduced a roadmap emphasizing an L2-centric approach for scalability. This plan envisioned the expansion of Ethereum through thousands of L2 chains, all connected in some manner to the foundational L1 chain, either technically or through branding. Once simply a theory, this plan has now materialized into reality, with Ethereum’s L2 ecosystems boasting more monthly active users (MAUs) and transactions than the mainnet.
Ethereum's daily transaction volume on the mainnet hovers around the 1 million mark, a figure that represents the current throughput ceiling given the Ethereum Virtual Machine's (EVM) configuration. Despite this, the demand for transactions on EVM-compatible chains continues to rise, with Ethereum's rollups absorbing a significant portion of this increased demand. Notably, these rollups are now processing approximately two to three times more transactions daily than the Ethereum mainnet itself.
The introduction of rollups marks a pivotal evolution in Ethereum's ecosystem. These solutions not only make launching a new, highly secure chain with lower transaction fees easier but also unlock new use cases, thereby attracting a broader user base than the original L1 chain could.
Rollup Constraints
While rollups have inarguably seen impressive adoption, as these solutions gain traction, they bring forth a set of challenges that underscore the complexities inherent in blockchains.
While rollups can and have helped scale the Ethereum base layer, scalability constraints and operational complexities around the reliance on a single sequencer for transaction processing remain issues for some use cases and builders. Rollups that build upon the EVM inherit these challenges, limiting their ability to offer radically improved performance and cost efficiency. Ethereum's throughput remains a bottleneck, with the network handling ~15-20 transactions per second (TPS) under average conditions. In comparison, scaling solutions like Arbitrum can average ~20-50 TPS, while other blockchains like Solana can process ~300-600 TPS (non-vote). Because Ethereum’s targeted block size is (currently) ~15 million gas, this puts a ceiling on the scalability of rollups. Given that it requires 16 gas to verify a single byte of data, Ethereum's throughput for data processing and verification is confined to around 937,500 bytes per block. When considering rollup transactions, which are compacted and submitted to Ethereum in batches, the platform's capacity to process rollup transactions per block is further limited. Assuming an average rollup transaction size of 12 bytes, Ethereum can theoretically accommodate ~78,000 rollup transactions per block. With an average block time of 12 seconds, this translates into a theoretical throughput ranging from approximately 5,200 to 6,000 transactions per second (TPS). However, even though these numbers are generous, this calculation assumes that in this scenario, the entirety of Ethereum's block space would be used for rollups. This is obviously an unrealistic scenario, given the presence of native applications like Uniswap, Opensea, token transfers, and others on the Ethereum base layer. The competition for block space between rollups and native Ethereum applications inevitably reduces the practical TPS limit for rollups to below 5,000 TPS.
Another critical drawback of rollups is the fragmentation of liquidity across multiple layers. This fragmentation not only complicates the landscape for users and developers but also poses significant hurdles for cross-rollup communication. Despite their ability to leverage Ethereum's liquidity, rollups essentially operate as independent entities, each with its own liquidity pool. This separation creates silos within the Ethereum ecosystem, impeding seamless interaction and exchange between different rollups. The absence of a universally accepted protocol for bridging and messaging exacerbates this challenge, as does the reliance on external bridges with varying degrees of security and trust assumptions.
Initial L2 offerings such as Optimism and Arbitrum maintained a close alignment with the Ethereum L1 chain. However, this closeness comes at a high cost, with both platforms incurring millions of dollars in expenses monthly, paid in ETH to Ethereum, for the privilege of settling transactions on the main chain. These costs can be substantial, affecting the overall efficiency and scalability of rollups.
These issues have prompted entrepreneurs to view the substantial costs of utilizing the Ethereum L1 as an opportunity for innovation. Emerging protocols like Celestia and EigenLayer are endeavoring to "unbundle the L2 stack" by offering services to L2s at significantly lower costs. While others, like Solana, Aptos, Sui, and others offer a completely different experience with faster, cheaper transactions, albeit with entirely new tradeoffs for users and developers.
Making the Leap: Leaving Ethereum for Alt-L1
Given that Ethereum, and even its rollups, do not possess limitless scalability and have their own issues around liquidity fragmentation, many users and developers are left to look at other blockchains to meet their needs. Presumably, many of these users would, all else being equal, prefer to remain in the Ethereum ecosystem due to its numerous benefits, but simply need higher throughput, lower latency, cheaper fees, etc. So, where do they go?
User Switching Cost and Frictions
While many new chains offer performance benefits, the journey from Ethereum to a non-EVM chain is fraught with switching costs and frictions. One of the first hurdles a user encounters is the need to bridge assets to the new blockchain, a process that is not only technically complex but also potentially expensive. Each bridge has its own set of fees, and the cost can vary widely depending on the network congestion and the specific assets being transferred. Furthermore, the security of bridges remains a concern, with several high-profile bridge exploits underscoring the risks involved in using these cross-chain conduits.
Another significant friction point is the necessity of obtaining the native gas token of the new chain. Gas tokens are essential for executing transactions, including smart contract interactions and token transfers. For someone entrenched in the Ethereum ecosystem, acquiring a new chain's gas token can be a convoluted process, often requiring them to engage with cryptocurrency exchanges or swap services, which introduces additional fees and steps in the transition process.
Additionally, the move to a non-EVM chain often means that familiar wallets, staking tools, and governance portals of the Ethereum ecosystem are no longer applicable. Users must find and learn to use new software tools compatible with the target blockchain. This learning curve is not trivial; each wallet or tool has its unique interface, features, and security practices. The time and effort invested in mastering these new platforms can be substantial, deterring less tech-savvy users and slowing down the migration process for those determined to make the switch.
Finally, for crypto users, venturing into a new blockchain ecosystem must confront the challenge of understanding and evaluating the risks associated with its dApps. While Ethereum's long history and extensive developer community offer a certain degree of reliability and security, newer or less-established blockchains may not provide the same level of assurance. Users must conduct thorough research to identify reputable dApps, understand the specific risks associated with them, and learn the nuances of the new ecosystem's security practices.
Developer Switching Costs
As for developers, one of the biggest obstacles to moving away from Ethereum and its EVM ecosystem is the need to, essentially, start completely over. This transition requires learning a new programming language, new developer tools, token standards, audits/QC procedures, etc. It is a considerable time investment and could ultimately impact the security and functionality of the code produced. Additionally, adapting to different Software Development Kits (SDKs) and less mature development tools presents a steep learning curve. Ethereum's rich ecosystem offers a plethora of tools and libraries that facilitate application development, testing, and deployment, a luxury often not available in newer blockchain environments.
Over the course of its ~8-year existence, Ethereum and its developer community have created a diverse and comprehensive ecosystem, positioning itself as the gold standard within the smart contract industry. The platform's evolutionary journey into a mature and robust environment for dApp development has been a long one, filled with numerous instances of “learning from your mistakes.” Yet, the Ethereum developer ecosystem remains the largest, most active, and arguably, most innovative in the space to this day.
The Ethereum platform's hallmark lies in its establishment of benchmark standards, such as ERC20 and ERC721, which have revolutionized token standardization. These standards have served as the foundation for thousands of new projects, helping to proliferate cutting-edge dApps and infrastructure not seen in other ecosystems. Furthermore, Ethereum's commitment to fostering seamless communication within its network through the Ethereum JSON-RPC Client API, alongside foundational web libraries like Ethers.js, exemplifies its leadership in promoting developer efficiency and enhancing user experiences. The adoption of composability and the open-source ethos enables anyone to easily build upon the work of others, either by forking the code or utilizing immense developer resources like WAGMI to build their own app easily.
This approach to development empowers developers to harness a plethora of EVM tools, ranging from shared metadata facilitated by Ethereum's Social Graph to development environments like Remix and frameworks such as Truffle. The integration of toolkits such as OpenZeppelin, Hardhat, and Foundry, alongside infrastructure staples like Gnosis Safe and Metamask, underscores Ethereum's unprecedented influence over the crypto ecosystem.
The scarcity of development tools and resources in emerging blockchains (when compared to Ethereum) can be discouraging to developers looking to build and build fast. The necessity to navigate these differences not only complicates the development process but also may deter developers from exploring innovative opportunities in new blockchain spaces. If a blockchain’s developer community and tooling are underdeveloped, it can prolong development cycles and increase security risks due to the lack of well-tested frameworks.
As the blockchain industry evolves, enhancing cross-ecosystem tool compatibility and expanding developer resources will be key to reducing these barriers and encouraging a more diverse and vibrant Web3 development landscape.
Solana has emerged as a formidable contender in the L1 landscape, distinguished by its high-speed, low-cost transactions and a unique, non-EVM design philosophy centered on a monolithic and integrated design structure. This approach aims to enhance composability and optimize user experience through simplified transactions and a unified Token Program. However, for all Solana’s benefits, its developer tooling and overall developer experience (DX) remain very limited and incompatible with the EVM. On top of that, Solana's Rust programming language and account-based architecture present challenges similar to the EVM, such as the risk of blindly signed transactions and wallet drains. As a low-level language, Rust presents a challenging learning process due to its complex nature. When working on extensive projects, the compilation of the program could extend to as long as ten minutes. Currently, only a few blockchain platforms, including Solana and Near, have adopted Rust for development.
Move-based chains like Aptos and Sui, while sharing overarching objectives with Solana, diverge significantly in their implementation, thanks in large part to the Move programming language and MoveVM. This object-based approach to asset management offers a stark contrast to the account-based models employed by Ethereum and Solana, meaning almost nothing translates from the EVM world to the MoveVM.
The One Non-EVM Feature Most Chains Agree On
There has been no shortage of alt-L1s or “Ethereum killers” over the years, all offering improvements over the Ethereum experience via numerous design changes. In this competitive space, several platforms stand out, each bringing unique capabilities and facing distinct challenges. Among these, Aptos, Sui, Solana, and Sei emerge as noteworthy contenders, each carving out its niche in the ecosystem. Thanks to the success of the Solana network and its parallel execution environment since 2021, one of the most popular themes in alt-L1s currently is virtual machines with parallel execution capabilities.
Parallel execution allows for the simultaneous processing of multiple transactions, a stark contrast to the traditional sequential execution model followed by pioneers such as Bitcoin and Ethereum. Sequential processing ensures transaction integrity by executing operations one after the other, thereby preventing any potential conflicts between transactions. However, this method poses limitations on the network's scalability and performance, often resulting in increased latency.
The implementation of parallel execution mechanisms within a cryptocurrency network marks a leap toward addressing these scalability challenges. By grouping transactions and processing them concurrently across various validators, networks can significantly enhance their transactions per second (TPS) rate. This improvement not only boosts network throughput but also facilitates greater scalability. Ensuring the orderly processing of transactions in a parallel execution environment necessitates sophisticated consensus algorithms and protocols. These systems are designed to establish a coherent transaction order and achieve consensus among all validators, thereby maintaining the integrity and security of the blockchain.
The advent of alt-L1 chains with parallel execution capabilities has redefined the boundaries of blockchain performance. This development is pivotal for the future of cryptocurrency, promising to accommodate the growing demand for faster, more efficient, and scalable blockchain networks.
Given all this, the natural question emerges, “Wouldn’t it be great if there were a blockchain that had all the benefits of the EVM but also the scalability enhancements offered by parallel execution?” Enter the parallel EVM.
By enabling transactions to be processed simultaneously across multiple cores, parallel EVMs harness the full computational potential of the network. Moreover, from a user experience perspective, the enhancements brought about by parallel EVMs are manifold. Faster transaction processing times mean that users can enjoy quicker confirmation times for their transactions, a crucial factor for dApps requiring real-time interaction. This improved performance directly impacts user satisfaction and can significantly increase the adoption rate of blockchain technology across various sectors.
Furthermore, the adoption of parallel processing opens new horizons for developers. With increased transaction throughput and reduced costs, developers are afforded a greater degree of flexibility in designing and deploying dApps. This fosters an environment ripe for innovation, where developers can experiment with novel blockchain applications without being constrained by the technical limitations of traditional processing methods.
Sei
Sei emerged as a formidable player in the alt-L1 space with the release of its v1 mainnet beta on August 15, 2023. V1 was designed around the idea of trading digital assets, not just in the realm of Decentralized Finance but also enhancing decentralized gaming, social applications, and the NFT landscape. Essentially, v1’s aim is to meet the widespread need for effective and secure trading of digital assets, serving as a key application of blockchain technology. With v1, Sei set new benchmarks in blockchain performance, achieving block finalization speeds of 390 milliseconds, making it one of the fastest blockchains currently available.
Sei v2
However, Sei v2 (launching in Q2 2024) is a significant upgrade over the original. Sei v2 will offer a compelling alternative for users and developers seeking refuge from Ethereum's limitations without forsaking the familiar comforts of its ecosystem. By ingeniously combining parallel execution with EVM compatibility, v2 offers a solution that addresses the core concerns of performance and usability in one fell swoop. This innovative approach ensures that transactions are processed more efficiently, significantly reducing bottlenecks that have plagued Ethereum during peak usage times, all while maintaining a seamless experience for those accustomed to the Ethereum environment.
For users, this means the transition to Sei does not require the abandonment of well-loved tools and applications. The compatibility with Ethereum allows for the continued use of popular wallets like Metamask, enabling a smooth transition with minimal friction. Developers, too, benefit from this synergy; they can continue to write smart contracts in Solidity, leveraging the vast array of development tools and libraries they have grown accustomed to. Furthermore, the familiarity of dApps ensures that users can navigate the Sei ecosystem with ease, enjoying improved performance without the need to learn new interfaces or workflows. Sei's architecture, therefore, represents a bridge between the old and the new, providing a pathway for both users and developers to explore the advantages of a more advanced blockchain infrastructure without sacrificing the ecosystem's comforts they have come to rely on.
Among the notable features of Sei V2 is its optimistic parallelization capability, which simplifies the development process by eliminating the need for explicit dependency definitions. This, along with improvements to the storage layer through SeiDB, aims to mitigate state bloat, enhance state read/write performance, and facilitate easier state synchronization for new nodes. Furthermore, Sei V2 is designed to ensure seamless interoperability with existing EVM chains, fostering an environment of unparalleled composability between EVM and other execution environments supported by Sei.
As of now, Sei's major upgrade is nearing completion, with the final stages of code development in progress. Following thorough audits, a public testnet release is scheduled for Q1 2024, with a mainnet deployment anticipated in the first half of 2024. This strategic roadmap underscores Sei's commitment to innovation and its role in shaping the future of blockchain technology, offering a glimpse into a more scalable, efficient, and user-friendly digital infrastructure.
EVM Backwards Compatibility
In the exploration of alt-L1 blockchains, one notable gap persists: the absence of backward compatibility with the EVM developers. Backward compatibility is crucial as it allows for the migration of audited contracts from EVM-compatible blockchains without requiring any modifications. This functionality stands out as a pivotal advancement, particularly for platforms like Sei, which enables the seamless redeployment of major contracts existing on Ethereum without requiring code alterations.
At a technical level, Sei incorporates this integration within its binary structure. It automatically imports Geth, a Go-based implementation of the EVM, to process Ethereum transactions. The innovative use of Geth ensures full bytecode compatibility, thus enabling the straightforward processing of applications originally designed for Ethereum. Moreover, Sei's specialized interface for the EVM facilitates updates, whether they pertain to state changes or the invocation of non-EVM contracts.
One of the standout features of Sei's approach is the promise of unchanged Remote Procedure Call (RPC) interfaces, ensuring that developers and users accustomed to Ethereum's ecosystem can transition effortlessly. This compatibility extends to widely used tools and applications such as Metamask, Remix, and Hardhat, allowing for their use by simply switching the RPC connection to Sei. Such a level of integration significantly boosts the usability of these applications, thereby enhancing both developer and user experiences on the Sei network.
With Sei v2, users will be able to add the Sei RPC from Metamask.
Sei achieves this groundbreaking backward compatibility through a combination of optimistic parallelization and state storage optimizations. Specifically, the incorporation of a version of Geth tailored for Sei facilitates the efficient handling of Ethereum's updates and transactions directly on the Sei blockchain, achieving increased performance and scalability.
By blending the hyper-optimized parallel execution layer with the rich ecosystem and developer community of Ethereum, Sei v2 aims to significantly enhance the blockchain landscape for EVM developers worldwide. The initiative represents a synergistic fusion, combining Solana's performance capabilities with Ethereum's extensive tooling and community support, thereby positioning Sei v2 as a leading force in the evolution of blockchain technology.
SEI Token
A successful blockchain requires more than simply technological innovation. Several critical factors must ultimately come together, including the team, narrative, timing, developer talent, and others. However, none may be more important than the tokenomics and token distribution. The design of a blockchain's tokenomics can significantly impact its sustainability, growth, and ability to attract users and liquidity. Effective token design involves a delicate balance of incentives, ensuring that validators, developers, and users are motivated to contribute to the network's health and expansion.
The SEI token serves as the cornerstone of the Sei Network and encompasses a multifaceted role within the ecosystem, unlike L2 and rollup tokens. As the native utility token, SEI is instrumental in facilitating various core functionalities that ensure the smooth operation, security, and governance of the network. This is yet another key difference between Ethereum rollups, which simply have governance tokens and use ETH as the gas token, and various alt-L1s. Alt-L1 tokens traditionally play a role in governance (as is the case with SEI), but they also have additional utility, which helps drive value to the network and could potentially result in value accrual for the token.
One of the primary applications of SEI is in the settlement of network fees. Users are required to pay transaction fees in SEI to execute operations on the Sei blockchain, a common practice across blockchain networks designed to compensate for the computational resources consumed. Additionally, like other PoS chains, SEI plays a pivotal role through Delegated Proof of Stake (DPoS) validator staking. SEI holders are presented with the opportunity to participate directly in the network's security by either delegating their tokens to validators or by staking their SEI to operate a validator node themselves. This mechanism not only secures the network through distributed consensus but also incentivizes token holders by allowing them to earn rewards for their contribution to network stability.
SEI's utility extends to serving as native collateral within the Sei blockchain ecosystem. Applications built on the Sei blockchain can leverage SEI as a form of liquidity or collateral, facilitating various financial operations and services within the network.
Moreover, SEI integrates a fee market system where users can expedite their transaction processing by paying a tip to validators. This mechanism not only benefits the users seeking priority but also rewards the validators and, by extension, those who delegate their SEI to validators, by sharing a portion of the tips collected.
Beyond utility, well-thought-out tokenomics and token distribution strategies attract investment, encourage participation, and foster a sustainable economy within the blockchain, ensuring its long-term success and resilience. This is one area where alt-L1s have stumbled, setting the project back right from the onset.
Aptos Token Launch
The introduction of new tokens, like the highly-anticipated launch of Aptos and its APT token, often attracts considerable attention from investors, analysts, and enthusiasts alike. However, this can also significantly complicate things. Before its official launch, the project was shrouded in ambiguity, particularly concerning its tokenomics and distribution strategy. Mere days before the token was set to be listed on exchanges and freely traded, the team had yet to release a thorough overview of the token supply and release schedule. This lack of transparency understandably elicited concerns within the cryptocurrency community, underscoring the importance of clear, accessible information regarding token distribution for potential investors.
Despite efforts to address these concerns through a detailed blog post outlining the token distribution after the token went live, skepticism persisted. The disclosed information revealed that out of the 1 billion APT tokens minted at the inception of the project, a substantial portion was allocated to various stakeholders in a manner that raised further questions about the token's governance and future market dynamics. In total, Aptos and its investors control a massive ~50% stake in the 1 billion minted APT tokens.
This concentration of ownership becomes even more pronounced when considering the Aptos Foundation's dual role in controlling both the 16.5% of tokens directly allocated to it and the entirety of the community's 51% share. This arrangement places a minimum of 67.5% of the APT tokens under the foundation's purview, a detail highlighted by Polychain as a potential concern for the token's decentralized governance and the equitable distribution of rewards.
Algorand Token Launch
Algorand's funding journey began with private auctions and sales primarily targeting insider investors. This was then followed up by its first public ICO in July 2019, where 25 million ALGO tokens were sold at an average price of $2.40 each. Immediately following the ICO, the ALGO price collapsed, presumably due to early investors selling off their tokens, creating substantial community backlash. In response, Algorand initiated a buyback program, offering 90% refunds for the ICO tokens, resulting in the buyback of about 20 million of the 25 million ALGO sold. This action, while intended to mitigate investor losses, highlighted a significant lack of confidence within the broader Algorand community, as it effectively nullified 80% of the ICO.
The initial token creation event of 10 billion ALGO tokens, with only a minuscule 0.25% made available to the public and even less—approximately 5 million—remaining with retail investors after the buyback, underscores a stark imbalance in token distribution. This concentration of ownership among the project's insiders and early investors not only challenges the development of an engaged community but also exerts downward pressure on the token's market value.
SEI’s Launch
When it comes to token allocations, Sei also reserved a significant portion of the supply for the team and insiders. While 48% is allocated to the Ecosystem Reserve, 49% is reserved for private investors, the team, and the Foundation.
We can compare this with other L1 blockchains over the years (image below) and see that SEI’s initial token allocation to insiders and the foundation is comparable to other successful chains like Solana, Avalanche, and Binance.
However, it should be noted, that since Sei is a relatively new project, only 22% of the total tokens have been unlocked, with a fairly aggressive emissions/unlock schedule beginning in August 2024.
Conclusion
Ethereum’s position as the market leader in the smart contract blockchain space is both a testament to its pioneering technology and a reflection of the challenges it faces in maintaining scalability, liquidity, and interoperability. Its innovative approach, characterized by the widespread adoption of the Ethereum Virtual Machine (EVM) and Solidity, has fostered an expansive developer community and a vibrant ecosystem of decentralized applications (dApps). Yet, as Ethereum evolves, it confronts the inherent limitations of its Layer 1 (L1) network and the complexities introduced by its Layer 2 (L2) solutions, particularly rollups. These challenges, along with the fragmentation of liquidity and the high costs of L1 settlement, underscore the necessity for continuous innovation within Ethereum's framework and beyond.
The exploration of alternative Layer 1 (alt-L1) blockchains and the development of technologies like Sei v2 illustrate the dynamic nature of the blockchain industry and its ability to address many of the limitations of Ethereum while still leveraging the core components that made it so successful originally. By addressing the key issues of throughput, latency, and fees, Sei v2 offers promising avenues for users and developers seeking alternatives to Ethereum's constrained scalability and high operational costs. Moreover, the advent of backward compatibility with the EVM marks a significant step towards removing the friction costs associated with moving to a new blockchain, enabling mass adoption not experienced by most other alt-L1s.
Disclaimer: This report was commissioned by the Sei Foundation. This research report is exactly that — a research report. It is not intended to serve as financial advice, nor should you blindly assume that any of the information is accurate without confirming through your own research. Bitcoin, cryptocurrencies, and other digital assets are incredibly risky and nothing in this report should be considered an endorsement to buy or sell any asset. Never invest more than you are willing to lose and understand the risk that you are taking. Do your own research. All information in this report is for educational purposes only and should not be the basis for any investment decisions that you make.
Ethereum As the Market Leader
Ethereum has established itself as a leading platform in the smart contract blockchain space, thanks to several key factors that set it apart from competitors. At the core of Ethereum's success are its strong network effects, which manifest in various significant ways. Ethereum is home to the most developers, dApps, TVL, liquidity, fees, revenue, and more compared to its peers.
One major advantage for Ethereum is the widespread adoption of the Ethereum Virtual Machine (EVM) and Solidity, the primary language used for creating smart contracts on the platform. The EVM's compatibility has become a benchmark in the industry, prompting many other blockchain platforms to ensure they are EVM-compatible to facilitate interoperability with Ethereum. This move aims to leverage Ethereum's substantial user base and developer ecosystem.
Regarding usage, around 94% of the total value locked (TVL) in smart contracts is in those written in Solidity, with Vyper, another language designed for the EVM, accounting for an additional 2.5%. This indicates that a significant majority of smart contract value is held on Ethereum, underscoring the platform's dominance in the space.
Additionally, Ethereum's developer community is notably larger than that of any other smart contract platform. As of 2024, it boasts around 75,000 open-source developers. This large pool of developers is crucial because it drives the platform's innovation and growth, leading to a continuous increase in the number and complexity of smart contracts on the network.
Another metric to gauge an ecosystem’s developer community, rather than simply counting the number of devs, involves focusing on two specific on-chain metrics: the count of unique addresses that deploy contracts and subsequently interact with them, and the share of total gas used by these deployments. This innovative on-chain metric provides a clearer and more objective gauge of developer activity, offering insight into actual usage and engagement rather than just code changes. It reflects the real-world application of projects on the blockchain, emphasizing the deployment and interaction of contracts within the network's operational context. Ethereum exemplifies the strength of this on-chain activity metric, with over 500 unique addresses deploying contracts and interacting with them daily, accounting for roughly 1.5% of the total gas usage.
Ethereum Suffering Under Its Own Success?
From its inception, it was acknowledged that the Ethereum Layer 1 (L1) blockchain alone could not scale sufficiently to support the entire global economy. Recognizing this limitation, Ethereum's co-founder, Vitalik Buterin, introduced a roadmap emphasizing an L2-centric approach for scalability. This plan envisioned the expansion of Ethereum through thousands of L2 chains, all connected in some manner to the foundational L1 chain, either technically or through branding. Once simply a theory, this plan has now materialized into reality, with Ethereum’s L2 ecosystems boasting more monthly active users (MAUs) and transactions than the mainnet.
Ethereum's daily transaction volume on the mainnet hovers around the 1 million mark, a figure that represents the current throughput ceiling given the Ethereum Virtual Machine's (EVM) configuration. Despite this, the demand for transactions on EVM-compatible chains continues to rise, with Ethereum's rollups absorbing a significant portion of this increased demand. Notably, these rollups are now processing approximately two to three times more transactions daily than the Ethereum mainnet itself.
The introduction of rollups marks a pivotal evolution in Ethereum's ecosystem. These solutions not only make launching a new, highly secure chain with lower transaction fees easier but also unlock new use cases, thereby attracting a broader user base than the original L1 chain could.
Rollup Constraints
While rollups have inarguably seen impressive adoption, as these solutions gain traction, they bring forth a set of challenges that underscore the complexities inherent in blockchains.
While rollups can and have helped scale the Ethereum base layer, scalability constraints and operational complexities around the reliance on a single sequencer for transaction processing remain issues for some use cases and builders. Rollups that build upon the EVM inherit these challenges, limiting their ability to offer radically improved performance and cost efficiency. Ethereum's throughput remains a bottleneck, with the network handling ~15-20 transactions per second (TPS) under average conditions. In comparison, scaling solutions like Arbitrum can average ~20-50 TPS, while other blockchains like Solana can process ~300-600 TPS (non-vote). Because Ethereum’s targeted block size is (currently) ~15 million gas, this puts a ceiling on the scalability of rollups. Given that it requires 16 gas to verify a single byte of data, Ethereum's throughput for data processing and verification is confined to around 937,500 bytes per block. When considering rollup transactions, which are compacted and submitted to Ethereum in batches, the platform's capacity to process rollup transactions per block is further limited. Assuming an average rollup transaction size of 12 bytes, Ethereum can theoretically accommodate ~78,000 rollup transactions per block. With an average block time of 12 seconds, this translates into a theoretical throughput ranging from approximately 5,200 to 6,000 transactions per second (TPS). However, even though these numbers are generous, this calculation assumes that in this scenario, the entirety of Ethereum's block space would be used for rollups. This is obviously an unrealistic scenario, given the presence of native applications like Uniswap, Opensea, token transfers, and others on the Ethereum base layer. The competition for block space between rollups and native Ethereum applications inevitably reduces the practical TPS limit for rollups to below 5,000 TPS.
Another critical drawback of rollups is the fragmentation of liquidity across multiple layers. This fragmentation not only complicates the landscape for users and developers but also poses significant hurdles for cross-rollup communication. Despite their ability to leverage Ethereum's liquidity, rollups essentially operate as independent entities, each with its own liquidity pool. This separation creates silos within the Ethereum ecosystem, impeding seamless interaction and exchange between different rollups. The absence of a universally accepted protocol for bridging and messaging exacerbates this challenge, as does the reliance on external bridges with varying degrees of security and trust assumptions.
Initial L2 offerings such as Optimism and Arbitrum maintained a close alignment with the Ethereum L1 chain. However, this closeness comes at a high cost, with both platforms incurring millions of dollars in expenses monthly, paid in ETH to Ethereum, for the privilege of settling transactions on the main chain. These costs can be substantial, affecting the overall efficiency and scalability of rollups.
These issues have prompted entrepreneurs to view the substantial costs of utilizing the Ethereum L1 as an opportunity for innovation. Emerging protocols like Celestia and EigenLayer are endeavoring to "unbundle the L2 stack" by offering services to L2s at significantly lower costs. While others, like Solana, Aptos, Sui, and others offer a completely different experience with faster, cheaper transactions, albeit with entirely new tradeoffs for users and developers.
Making the Leap: Leaving Ethereum for Alt-L1
Given that Ethereum, and even its rollups, do not possess limitless scalability and have their own issues around liquidity fragmentation, many users and developers are left to look at other blockchains to meet their needs. Presumably, many of these users would, all else being equal, prefer to remain in the Ethereum ecosystem due to its numerous benefits, but simply need higher throughput, lower latency, cheaper fees, etc. So, where do they go?
User Switching Cost and Frictions
While many new chains offer performance benefits, the journey from Ethereum to a non-EVM chain is fraught with switching costs and frictions. One of the first hurdles a user encounters is the need to bridge assets to the new blockchain, a process that is not only technically complex but also potentially expensive. Each bridge has its own set of fees, and the cost can vary widely depending on the network congestion and the specific assets being transferred. Furthermore, the security of bridges remains a concern, with several high-profile bridge exploits underscoring the risks involved in using these cross-chain conduits.
Another significant friction point is the necessity of obtaining the native gas token of the new chain. Gas tokens are essential for executing transactions, including smart contract interactions and token transfers. For someone entrenched in the Ethereum ecosystem, acquiring a new chain's gas token can be a convoluted process, often requiring them to engage with cryptocurrency exchanges or swap services, which introduces additional fees and steps in the transition process.
Additionally, the move to a non-EVM chain often means that familiar wallets, staking tools, and governance portals of the Ethereum ecosystem are no longer applicable. Users must find and learn to use new software tools compatible with the target blockchain. This learning curve is not trivial; each wallet or tool has its unique interface, features, and security practices. The time and effort invested in mastering these new platforms can be substantial, deterring less tech-savvy users and slowing down the migration process for those determined to make the switch.
Finally, for crypto users, venturing into a new blockchain ecosystem must confront the challenge of understanding and evaluating the risks associated with its dApps. While Ethereum's long history and extensive developer community offer a certain degree of reliability and security, newer or less-established blockchains may not provide the same level of assurance. Users must conduct thorough research to identify reputable dApps, understand the specific risks associated with them, and learn the nuances of the new ecosystem's security practices.
Developer Switching Costs
As for developers, one of the biggest obstacles to moving away from Ethereum and its EVM ecosystem is the need to, essentially, start completely over. This transition requires learning a new programming language, new developer tools, token standards, audits/QC procedures, etc. It is a considerable time investment and could ultimately impact the security and functionality of the code produced. Additionally, adapting to different Software Development Kits (SDKs) and less mature development tools presents a steep learning curve. Ethereum's rich ecosystem offers a plethora of tools and libraries that facilitate application development, testing, and deployment, a luxury often not available in newer blockchain environments.
Over the course of its ~8-year existence, Ethereum and its developer community have created a diverse and comprehensive ecosystem, positioning itself as the gold standard within the smart contract industry. The platform's evolutionary journey into a mature and robust environment for dApp development has been a long one, filled with numerous instances of “learning from your mistakes.” Yet, the Ethereum developer ecosystem remains the largest, most active, and arguably, most innovative in the space to this day.
The Ethereum platform's hallmark lies in its establishment of benchmark standards, such as ERC20 and ERC721, which have revolutionized token standardization. These standards have served as the foundation for thousands of new projects, helping to proliferate cutting-edge dApps and infrastructure not seen in other ecosystems. Furthermore, Ethereum's commitment to fostering seamless communication within its network through the Ethereum JSON-RPC Client API, alongside foundational web libraries like Ethers.js, exemplifies its leadership in promoting developer efficiency and enhancing user experiences. The adoption of composability and the open-source ethos enables anyone to easily build upon the work of others, either by forking the code or utilizing immense developer resources like WAGMI to build their own app easily.
This approach to development empowers developers to harness a plethora of EVM tools, ranging from shared metadata facilitated by Ethereum's Social Graph to development environments like Remix and frameworks such as Truffle. The integration of toolkits such as OpenZeppelin, Hardhat, and Foundry, alongside infrastructure staples like Gnosis Safe and Metamask, underscores Ethereum's unprecedented influence over the crypto ecosystem.
The scarcity of development tools and resources in emerging blockchains (when compared to Ethereum) can be discouraging to developers looking to build and build fast. The necessity to navigate these differences not only complicates the development process but also may deter developers from exploring innovative opportunities in new blockchain spaces. If a blockchain’s developer community and tooling are underdeveloped, it can prolong development cycles and increase security risks due to the lack of well-tested frameworks.
As the blockchain industry evolves, enhancing cross-ecosystem tool compatibility and expanding developer resources will be key to reducing these barriers and encouraging a more diverse and vibrant Web3 development landscape.
Solana has emerged as a formidable contender in the L1 landscape, distinguished by its high-speed, low-cost transactions and a unique, non-EVM design philosophy centered on a monolithic and integrated design structure. This approach aims to enhance composability and optimize user experience through simplified transactions and a unified Token Program. However, for all Solana’s benefits, its developer tooling and overall developer experience (DX) remain very limited and incompatible with the EVM. On top of that, Solana's Rust programming language and account-based architecture present challenges similar to the EVM, such as the risk of blindly signed transactions and wallet drains. As a low-level language, Rust presents a challenging learning process due to its complex nature. When working on extensive projects, the compilation of the program could extend to as long as ten minutes. Currently, only a few blockchain platforms, including Solana and Near, have adopted Rust for development.
Move-based chains like Aptos and Sui, while sharing overarching objectives with Solana, diverge significantly in their implementation, thanks in large part to the Move programming language and MoveVM. This object-based approach to asset management offers a stark contrast to the account-based models employed by Ethereum and Solana, meaning almost nothing translates from the EVM world to the MoveVM.
The One Non-EVM Feature Most Chains Agree On
There has been no shortage of alt-L1s or “Ethereum killers” over the years, all offering improvements over the Ethereum experience via numerous design changes. In this competitive space, several platforms stand out, each bringing unique capabilities and facing distinct challenges. Among these, Aptos, Sui, Solana, and Sei emerge as noteworthy contenders, each carving out its niche in the ecosystem. Thanks to the success of the Solana network and its parallel execution environment since 2021, one of the most popular themes in alt-L1s currently is virtual machines with parallel execution capabilities.
Parallel execution allows for the simultaneous processing of multiple transactions, a stark contrast to the traditional sequential execution model followed by pioneers such as Bitcoin and Ethereum. Sequential processing ensures transaction integrity by executing operations one after the other, thereby preventing any potential conflicts between transactions. However, this method poses limitations on the network's scalability and performance, often resulting in increased latency.
The implementation of parallel execution mechanisms within a cryptocurrency network marks a leap toward addressing these scalability challenges. By grouping transactions and processing them concurrently across various validators, networks can significantly enhance their transactions per second (TPS) rate. This improvement not only boosts network throughput but also facilitates greater scalability. Ensuring the orderly processing of transactions in a parallel execution environment necessitates sophisticated consensus algorithms and protocols. These systems are designed to establish a coherent transaction order and achieve consensus among all validators, thereby maintaining the integrity and security of the blockchain.
The advent of alt-L1 chains with parallel execution capabilities has redefined the boundaries of blockchain performance. This development is pivotal for the future of cryptocurrency, promising to accommodate the growing demand for faster, more efficient, and scalable blockchain networks.
Given all this, the natural question emerges, “Wouldn’t it be great if there were a blockchain that had all the benefits of the EVM but also the scalability enhancements offered by parallel execution?” Enter the parallel EVM.
By enabling transactions to be processed simultaneously across multiple cores, parallel EVMs harness the full computational potential of the network. Moreover, from a user experience perspective, the enhancements brought about by parallel EVMs are manifold. Faster transaction processing times mean that users can enjoy quicker confirmation times for their transactions, a crucial factor for dApps requiring real-time interaction. This improved performance directly impacts user satisfaction and can significantly increase the adoption rate of blockchain technology across various sectors.
Furthermore, the adoption of parallel processing opens new horizons for developers. With increased transaction throughput and reduced costs, developers are afforded a greater degree of flexibility in designing and deploying dApps. This fosters an environment ripe for innovation, where developers can experiment with novel blockchain applications without being constrained by the technical limitations of traditional processing methods.
Sei
Sei emerged as a formidable player in the alt-L1 space with the release of its v1 mainnet beta on August 15, 2023. V1 was designed around the idea of trading digital assets, not just in the realm of Decentralized Finance but also enhancing decentralized gaming, social applications, and the NFT landscape. Essentially, v1’s aim is to meet the widespread need for effective and secure trading of digital assets, serving as a key application of blockchain technology. With v1, Sei set new benchmarks in blockchain performance, achieving block finalization speeds of 390 milliseconds, making it one of the fastest blockchains currently available.
Sei v2
However, Sei v2 (launching in Q2 2024) is a significant upgrade over the original. Sei v2 will offer a compelling alternative for users and developers seeking refuge from Ethereum's limitations without forsaking the familiar comforts of its ecosystem. By ingeniously combining parallel execution with EVM compatibility, v2 offers a solution that addresses the core concerns of performance and usability in one fell swoop. This innovative approach ensures that transactions are processed more efficiently, significantly reducing bottlenecks that have plagued Ethereum during peak usage times, all while maintaining a seamless experience for those accustomed to the Ethereum environment.
For users, this means the transition to Sei does not require the abandonment of well-loved tools and applications. The compatibility with Ethereum allows for the continued use of popular wallets like Metamask, enabling a smooth transition with minimal friction. Developers, too, benefit from this synergy; they can continue to write smart contracts in Solidity, leveraging the vast array of development tools and libraries they have grown accustomed to. Furthermore, the familiarity of dApps ensures that users can navigate the Sei ecosystem with ease, enjoying improved performance without the need to learn new interfaces or workflows. Sei's architecture, therefore, represents a bridge between the old and the new, providing a pathway for both users and developers to explore the advantages of a more advanced blockchain infrastructure without sacrificing the ecosystem's comforts they have come to rely on.
Among the notable features of Sei V2 is its optimistic parallelization capability, which simplifies the development process by eliminating the need for explicit dependency definitions. This, along with improvements to the storage layer through SeiDB, aims to mitigate state bloat, enhance state read/write performance, and facilitate easier state synchronization for new nodes. Furthermore, Sei V2 is designed to ensure seamless interoperability with existing EVM chains, fostering an environment of unparalleled composability between EVM and other execution environments supported by Sei.
As of now, Sei's major upgrade is nearing completion, with the final stages of code development in progress. Following thorough audits, a public testnet release is scheduled for Q1 2024, with a mainnet deployment anticipated in the first half of 2024. This strategic roadmap underscores Sei's commitment to innovation and its role in shaping the future of blockchain technology, offering a glimpse into a more scalable, efficient, and user-friendly digital infrastructure.
EVM Backwards Compatibility
In the exploration of alt-L1 blockchains, one notable gap persists: the absence of backward compatibility with the EVM developers. Backward compatibility is crucial as it allows for the migration of audited contracts from EVM-compatible blockchains without requiring any modifications. This functionality stands out as a pivotal advancement, particularly for platforms like Sei, which enables the seamless redeployment of major contracts existing on Ethereum without requiring code alterations.
At a technical level, Sei incorporates this integration within its binary structure. It automatically imports Geth, a Go-based implementation of the EVM, to process Ethereum transactions. The innovative use of Geth ensures full bytecode compatibility, thus enabling the straightforward processing of applications originally designed for Ethereum. Moreover, Sei's specialized interface for the EVM facilitates updates, whether they pertain to state changes or the invocation of non-EVM contracts.
One of the standout features of Sei's approach is the promise of unchanged Remote Procedure Call (RPC) interfaces, ensuring that developers and users accustomed to Ethereum's ecosystem can transition effortlessly. This compatibility extends to widely used tools and applications such as Metamask, Remix, and Hardhat, allowing for their use by simply switching the RPC connection to Sei. Such a level of integration significantly boosts the usability of these applications, thereby enhancing both developer and user experiences on the Sei network.
With Sei v2, users will be able to add the Sei RPC from Metamask.
Sei achieves this groundbreaking backward compatibility through a combination of optimistic parallelization and state storage optimizations. Specifically, the incorporation of a version of Geth tailored for Sei facilitates the efficient handling of Ethereum's updates and transactions directly on the Sei blockchain, achieving increased performance and scalability.
By blending the hyper-optimized parallel execution layer with the rich ecosystem and developer community of Ethereum, Sei v2 aims to significantly enhance the blockchain landscape for EVM developers worldwide. The initiative represents a synergistic fusion, combining Solana's performance capabilities with Ethereum's extensive tooling and community support, thereby positioning Sei v2 as a leading force in the evolution of blockchain technology.
SEI Token
A successful blockchain requires more than simply technological innovation. Several critical factors must ultimately come together, including the team, narrative, timing, developer talent, and others. However, none may be more important than the tokenomics and token distribution. The design of a blockchain's tokenomics can significantly impact its sustainability, growth, and ability to attract users and liquidity. Effective token design involves a delicate balance of incentives, ensuring that validators, developers, and users are motivated to contribute to the network's health and expansion.
The SEI token serves as the cornerstone of the Sei Network and encompasses a multifaceted role within the ecosystem, unlike L2 and rollup tokens. As the native utility token, SEI is instrumental in facilitating various core functionalities that ensure the smooth operation, security, and governance of the network. This is yet another key difference between Ethereum rollups, which simply have governance tokens and use ETH as the gas token, and various alt-L1s. Alt-L1 tokens traditionally play a role in governance (as is the case with SEI), but they also have additional utility, which helps drive value to the network and could potentially result in value accrual for the token.
One of the primary applications of SEI is in the settlement of network fees. Users are required to pay transaction fees in SEI to execute operations on the Sei blockchain, a common practice across blockchain networks designed to compensate for the computational resources consumed. Additionally, like other PoS chains, SEI plays a pivotal role through Delegated Proof of Stake (DPoS) validator staking. SEI holders are presented with the opportunity to participate directly in the network's security by either delegating their tokens to validators or by staking their SEI to operate a validator node themselves. This mechanism not only secures the network through distributed consensus but also incentivizes token holders by allowing them to earn rewards for their contribution to network stability.
SEI's utility extends to serving as native collateral within the Sei blockchain ecosystem. Applications built on the Sei blockchain can leverage SEI as a form of liquidity or collateral, facilitating various financial operations and services within the network.
Moreover, SEI integrates a fee market system where users can expedite their transaction processing by paying a tip to validators. This mechanism not only benefits the users seeking priority but also rewards the validators and, by extension, those who delegate their SEI to validators, by sharing a portion of the tips collected.
Beyond utility, well-thought-out tokenomics and token distribution strategies attract investment, encourage participation, and foster a sustainable economy within the blockchain, ensuring its long-term success and resilience. This is one area where alt-L1s have stumbled, setting the project back right from the onset.
Aptos Token Launch
The introduction of new tokens, like the highly-anticipated launch of Aptos and its APT token, often attracts considerable attention from investors, analysts, and enthusiasts alike. However, this can also significantly complicate things. Before its official launch, the project was shrouded in ambiguity, particularly concerning its tokenomics and distribution strategy. Mere days before the token was set to be listed on exchanges and freely traded, the team had yet to release a thorough overview of the token supply and release schedule. This lack of transparency understandably elicited concerns within the cryptocurrency community, underscoring the importance of clear, accessible information regarding token distribution for potential investors.
Despite efforts to address these concerns through a detailed blog post outlining the token distribution after the token went live, skepticism persisted. The disclosed information revealed that out of the 1 billion APT tokens minted at the inception of the project, a substantial portion was allocated to various stakeholders in a manner that raised further questions about the token's governance and future market dynamics. In total, Aptos and its investors control a massive ~50% stake in the 1 billion minted APT tokens.
This concentration of ownership becomes even more pronounced when considering the Aptos Foundation's dual role in controlling both the 16.5% of tokens directly allocated to it and the entirety of the community's 51% share. This arrangement places a minimum of 67.5% of the APT tokens under the foundation's purview, a detail highlighted by Polychain as a potential concern for the token's decentralized governance and the equitable distribution of rewards.
Algorand Token Launch
Algorand's funding journey began with private auctions and sales primarily targeting insider investors. This was then followed up by its first public ICO in July 2019, where 25 million ALGO tokens were sold at an average price of $2.40 each. Immediately following the ICO, the ALGO price collapsed, presumably due to early investors selling off their tokens, creating substantial community backlash. In response, Algorand initiated a buyback program, offering 90% refunds for the ICO tokens, resulting in the buyback of about 20 million of the 25 million ALGO sold. This action, while intended to mitigate investor losses, highlighted a significant lack of confidence within the broader Algorand community, as it effectively nullified 80% of the ICO.
The initial token creation event of 10 billion ALGO tokens, with only a minuscule 0.25% made available to the public and even less—approximately 5 million—remaining with retail investors after the buyback, underscores a stark imbalance in token distribution. This concentration of ownership among the project's insiders and early investors not only challenges the development of an engaged community but also exerts downward pressure on the token's market value.
SEI’s Launch
When it comes to token allocations, Sei also reserved a significant portion of the supply for the team and insiders. While 48% is allocated to the Ecosystem Reserve, 49% is reserved for private investors, the team, and the Foundation.
We can compare this with other L1 blockchains over the years (image below) and see that SEI’s initial token allocation to insiders and the foundation is comparable to other successful chains like Solana, Avalanche, and Binance.
However, it should be noted, that since Sei is a relatively new project, only 22% of the total tokens have been unlocked, with a fairly aggressive emissions/unlock schedule beginning in August 2024.
Conclusion
Ethereum’s position as the market leader in the smart contract blockchain space is both a testament to its pioneering technology and a reflection of the challenges it faces in maintaining scalability, liquidity, and interoperability. Its innovative approach, characterized by the widespread adoption of the Ethereum Virtual Machine (EVM) and Solidity, has fostered an expansive developer community and a vibrant ecosystem of decentralized applications (dApps). Yet, as Ethereum evolves, it confronts the inherent limitations of its Layer 1 (L1) network and the complexities introduced by its Layer 2 (L2) solutions, particularly rollups. These challenges, along with the fragmentation of liquidity and the high costs of L1 settlement, underscore the necessity for continuous innovation within Ethereum's framework and beyond.
The exploration of alternative Layer 1 (alt-L1) blockchains and the development of technologies like Sei v2 illustrate the dynamic nature of the blockchain industry and its ability to address many of the limitations of Ethereum while still leveraging the core components that made it so successful originally. By addressing the key issues of throughput, latency, and fees, Sei v2 offers promising avenues for users and developers seeking alternatives to Ethereum's constrained scalability and high operational costs. Moreover, the advent of backward compatibility with the EVM marks a significant step towards removing the friction costs associated with moving to a new blockchain, enabling mass adoption not experienced by most other alt-L1s.
Disclaimer: This report was commissioned by the Sei Foundation. This research report is exactly that — a research report. It is not intended to serve as financial advice, nor should you blindly assume that any of the information is accurate without confirming through your own research. Bitcoin, cryptocurrencies, and other digital assets are incredibly risky and nothing in this report should be considered an endorsement to buy or sell any asset. Never invest more than you are willing to lose and understand the risk that you are taking. Do your own research. All information in this report is for educational purposes only and should not be the basis for any investment decisions that you make.
Ethereum As the Market Leader
Ethereum has established itself as a leading platform in the smart contract blockchain space, thanks to several key factors that set it apart from competitors. At the core of Ethereum's success are its strong network effects, which manifest in various significant ways. Ethereum is home to the most developers, dApps, TVL, liquidity, fees, revenue, and more compared to its peers.
One major advantage for Ethereum is the widespread adoption of the Ethereum Virtual Machine (EVM) and Solidity, the primary language used for creating smart contracts on the platform. The EVM's compatibility has become a benchmark in the industry, prompting many other blockchain platforms to ensure they are EVM-compatible to facilitate interoperability with Ethereum. This move aims to leverage Ethereum's substantial user base and developer ecosystem.
Regarding usage, around 94% of the total value locked (TVL) in smart contracts is in those written in Solidity, with Vyper, another language designed for the EVM, accounting for an additional 2.5%. This indicates that a significant majority of smart contract value is held on Ethereum, underscoring the platform's dominance in the space.
Additionally, Ethereum's developer community is notably larger than that of any other smart contract platform. As of 2024, it boasts around 75,000 open-source developers. This large pool of developers is crucial because it drives the platform's innovation and growth, leading to a continuous increase in the number and complexity of smart contracts on the network.
Another metric to gauge an ecosystem’s developer community, rather than simply counting the number of devs, involves focusing on two specific on-chain metrics: the count of unique addresses that deploy contracts and subsequently interact with them, and the share of total gas used by these deployments. This innovative on-chain metric provides a clearer and more objective gauge of developer activity, offering insight into actual usage and engagement rather than just code changes. It reflects the real-world application of projects on the blockchain, emphasizing the deployment and interaction of contracts within the network's operational context. Ethereum exemplifies the strength of this on-chain activity metric, with over 500 unique addresses deploying contracts and interacting with them daily, accounting for roughly 1.5% of the total gas usage.
Ethereum Suffering Under Its Own Success?
From its inception, it was acknowledged that the Ethereum Layer 1 (L1) blockchain alone could not scale sufficiently to support the entire global economy. Recognizing this limitation, Ethereum's co-founder, Vitalik Buterin, introduced a roadmap emphasizing an L2-centric approach for scalability. This plan envisioned the expansion of Ethereum through thousands of L2 chains, all connected in some manner to the foundational L1 chain, either technically or through branding. Once simply a theory, this plan has now materialized into reality, with Ethereum’s L2 ecosystems boasting more monthly active users (MAUs) and transactions than the mainnet.
Ethereum's daily transaction volume on the mainnet hovers around the 1 million mark, a figure that represents the current throughput ceiling given the Ethereum Virtual Machine's (EVM) configuration. Despite this, the demand for transactions on EVM-compatible chains continues to rise, with Ethereum's rollups absorbing a significant portion of this increased demand. Notably, these rollups are now processing approximately two to three times more transactions daily than the Ethereum mainnet itself.
The introduction of rollups marks a pivotal evolution in Ethereum's ecosystem. These solutions not only make launching a new, highly secure chain with lower transaction fees easier but also unlock new use cases, thereby attracting a broader user base than the original L1 chain could.
Rollup Constraints
While rollups have inarguably seen impressive adoption, as these solutions gain traction, they bring forth a set of challenges that underscore the complexities inherent in blockchains.
While rollups can and have helped scale the Ethereum base layer, scalability constraints and operational complexities around the reliance on a single sequencer for transaction processing remain issues for some use cases and builders. Rollups that build upon the EVM inherit these challenges, limiting their ability to offer radically improved performance and cost efficiency. Ethereum's throughput remains a bottleneck, with the network handling ~15-20 transactions per second (TPS) under average conditions. In comparison, scaling solutions like Arbitrum can average ~20-50 TPS, while other blockchains like Solana can process ~300-600 TPS (non-vote). Because Ethereum’s targeted block size is (currently) ~15 million gas, this puts a ceiling on the scalability of rollups. Given that it requires 16 gas to verify a single byte of data, Ethereum's throughput for data processing and verification is confined to around 937,500 bytes per block. When considering rollup transactions, which are compacted and submitted to Ethereum in batches, the platform's capacity to process rollup transactions per block is further limited. Assuming an average rollup transaction size of 12 bytes, Ethereum can theoretically accommodate ~78,000 rollup transactions per block. With an average block time of 12 seconds, this translates into a theoretical throughput ranging from approximately 5,200 to 6,000 transactions per second (TPS). However, even though these numbers are generous, this calculation assumes that in this scenario, the entirety of Ethereum's block space would be used for rollups. This is obviously an unrealistic scenario, given the presence of native applications like Uniswap, Opensea, token transfers, and others on the Ethereum base layer. The competition for block space between rollups and native Ethereum applications inevitably reduces the practical TPS limit for rollups to below 5,000 TPS.
Another critical drawback of rollups is the fragmentation of liquidity across multiple layers. This fragmentation not only complicates the landscape for users and developers but also poses significant hurdles for cross-rollup communication. Despite their ability to leverage Ethereum's liquidity, rollups essentially operate as independent entities, each with its own liquidity pool. This separation creates silos within the Ethereum ecosystem, impeding seamless interaction and exchange between different rollups. The absence of a universally accepted protocol for bridging and messaging exacerbates this challenge, as does the reliance on external bridges with varying degrees of security and trust assumptions.
Initial L2 offerings such as Optimism and Arbitrum maintained a close alignment with the Ethereum L1 chain. However, this closeness comes at a high cost, with both platforms incurring millions of dollars in expenses monthly, paid in ETH to Ethereum, for the privilege of settling transactions on the main chain. These costs can be substantial, affecting the overall efficiency and scalability of rollups.
These issues have prompted entrepreneurs to view the substantial costs of utilizing the Ethereum L1 as an opportunity for innovation. Emerging protocols like Celestia and EigenLayer are endeavoring to "unbundle the L2 stack" by offering services to L2s at significantly lower costs. While others, like Solana, Aptos, Sui, and others offer a completely different experience with faster, cheaper transactions, albeit with entirely new tradeoffs for users and developers.
Making the Leap: Leaving Ethereum for Alt-L1
Given that Ethereum, and even its rollups, do not possess limitless scalability and have their own issues around liquidity fragmentation, many users and developers are left to look at other blockchains to meet their needs. Presumably, many of these users would, all else being equal, prefer to remain in the Ethereum ecosystem due to its numerous benefits, but simply need higher throughput, lower latency, cheaper fees, etc. So, where do they go?
User Switching Cost and Frictions
While many new chains offer performance benefits, the journey from Ethereum to a non-EVM chain is fraught with switching costs and frictions. One of the first hurdles a user encounters is the need to bridge assets to the new blockchain, a process that is not only technically complex but also potentially expensive. Each bridge has its own set of fees, and the cost can vary widely depending on the network congestion and the specific assets being transferred. Furthermore, the security of bridges remains a concern, with several high-profile bridge exploits underscoring the risks involved in using these cross-chain conduits.
Another significant friction point is the necessity of obtaining the native gas token of the new chain. Gas tokens are essential for executing transactions, including smart contract interactions and token transfers. For someone entrenched in the Ethereum ecosystem, acquiring a new chain's gas token can be a convoluted process, often requiring them to engage with cryptocurrency exchanges or swap services, which introduces additional fees and steps in the transition process.
Additionally, the move to a non-EVM chain often means that familiar wallets, staking tools, and governance portals of the Ethereum ecosystem are no longer applicable. Users must find and learn to use new software tools compatible with the target blockchain. This learning curve is not trivial; each wallet or tool has its unique interface, features, and security practices. The time and effort invested in mastering these new platforms can be substantial, deterring less tech-savvy users and slowing down the migration process for those determined to make the switch.
Finally, for crypto users, venturing into a new blockchain ecosystem must confront the challenge of understanding and evaluating the risks associated with its dApps. While Ethereum's long history and extensive developer community offer a certain degree of reliability and security, newer or less-established blockchains may not provide the same level of assurance. Users must conduct thorough research to identify reputable dApps, understand the specific risks associated with them, and learn the nuances of the new ecosystem's security practices.
Developer Switching Costs
As for developers, one of the biggest obstacles to moving away from Ethereum and its EVM ecosystem is the need to, essentially, start completely over. This transition requires learning a new programming language, new developer tools, token standards, audits/QC procedures, etc. It is a considerable time investment and could ultimately impact the security and functionality of the code produced. Additionally, adapting to different Software Development Kits (SDKs) and less mature development tools presents a steep learning curve. Ethereum's rich ecosystem offers a plethora of tools and libraries that facilitate application development, testing, and deployment, a luxury often not available in newer blockchain environments.
Over the course of its ~8-year existence, Ethereum and its developer community have created a diverse and comprehensive ecosystem, positioning itself as the gold standard within the smart contract industry. The platform's evolutionary journey into a mature and robust environment for dApp development has been a long one, filled with numerous instances of “learning from your mistakes.” Yet, the Ethereum developer ecosystem remains the largest, most active, and arguably, most innovative in the space to this day.
The Ethereum platform's hallmark lies in its establishment of benchmark standards, such as ERC20 and ERC721, which have revolutionized token standardization. These standards have served as the foundation for thousands of new projects, helping to proliferate cutting-edge dApps and infrastructure not seen in other ecosystems. Furthermore, Ethereum's commitment to fostering seamless communication within its network through the Ethereum JSON-RPC Client API, alongside foundational web libraries like Ethers.js, exemplifies its leadership in promoting developer efficiency and enhancing user experiences. The adoption of composability and the open-source ethos enables anyone to easily build upon the work of others, either by forking the code or utilizing immense developer resources like WAGMI to build their own app easily.
This approach to development empowers developers to harness a plethora of EVM tools, ranging from shared metadata facilitated by Ethereum's Social Graph to development environments like Remix and frameworks such as Truffle. The integration of toolkits such as OpenZeppelin, Hardhat, and Foundry, alongside infrastructure staples like Gnosis Safe and Metamask, underscores Ethereum's unprecedented influence over the crypto ecosystem.
The scarcity of development tools and resources in emerging blockchains (when compared to Ethereum) can be discouraging to developers looking to build and build fast. The necessity to navigate these differences not only complicates the development process but also may deter developers from exploring innovative opportunities in new blockchain spaces. If a blockchain’s developer community and tooling are underdeveloped, it can prolong development cycles and increase security risks due to the lack of well-tested frameworks.
As the blockchain industry evolves, enhancing cross-ecosystem tool compatibility and expanding developer resources will be key to reducing these barriers and encouraging a more diverse and vibrant Web3 development landscape.
Solana has emerged as a formidable contender in the L1 landscape, distinguished by its high-speed, low-cost transactions and a unique, non-EVM design philosophy centered on a monolithic and integrated design structure. This approach aims to enhance composability and optimize user experience through simplified transactions and a unified Token Program. However, for all Solana’s benefits, its developer tooling and overall developer experience (DX) remain very limited and incompatible with the EVM. On top of that, Solana's Rust programming language and account-based architecture present challenges similar to the EVM, such as the risk of blindly signed transactions and wallet drains. As a low-level language, Rust presents a challenging learning process due to its complex nature. When working on extensive projects, the compilation of the program could extend to as long as ten minutes. Currently, only a few blockchain platforms, including Solana and Near, have adopted Rust for development.
Move-based chains like Aptos and Sui, while sharing overarching objectives with Solana, diverge significantly in their implementation, thanks in large part to the Move programming language and MoveVM. This object-based approach to asset management offers a stark contrast to the account-based models employed by Ethereum and Solana, meaning almost nothing translates from the EVM world to the MoveVM.
The One Non-EVM Feature Most Chains Agree On
There has been no shortage of alt-L1s or “Ethereum killers” over the years, all offering improvements over the Ethereum experience via numerous design changes. In this competitive space, several platforms stand out, each bringing unique capabilities and facing distinct challenges. Among these, Aptos, Sui, Solana, and Sei emerge as noteworthy contenders, each carving out its niche in the ecosystem. Thanks to the success of the Solana network and its parallel execution environment since 2021, one of the most popular themes in alt-L1s currently is virtual machines with parallel execution capabilities.
Parallel execution allows for the simultaneous processing of multiple transactions, a stark contrast to the traditional sequential execution model followed by pioneers such as Bitcoin and Ethereum. Sequential processing ensures transaction integrity by executing operations one after the other, thereby preventing any potential conflicts between transactions. However, this method poses limitations on the network's scalability and performance, often resulting in increased latency.
The implementation of parallel execution mechanisms within a cryptocurrency network marks a leap toward addressing these scalability challenges. By grouping transactions and processing them concurrently across various validators, networks can significantly enhance their transactions per second (TPS) rate. This improvement not only boosts network throughput but also facilitates greater scalability. Ensuring the orderly processing of transactions in a parallel execution environment necessitates sophisticated consensus algorithms and protocols. These systems are designed to establish a coherent transaction order and achieve consensus among all validators, thereby maintaining the integrity and security of the blockchain.
The advent of alt-L1 chains with parallel execution capabilities has redefined the boundaries of blockchain performance. This development is pivotal for the future of cryptocurrency, promising to accommodate the growing demand for faster, more efficient, and scalable blockchain networks.
Given all this, the natural question emerges, “Wouldn’t it be great if there were a blockchain that had all the benefits of the EVM but also the scalability enhancements offered by parallel execution?” Enter the parallel EVM.
By enabling transactions to be processed simultaneously across multiple cores, parallel EVMs harness the full computational potential of the network. Moreover, from a user experience perspective, the enhancements brought about by parallel EVMs are manifold. Faster transaction processing times mean that users can enjoy quicker confirmation times for their transactions, a crucial factor for dApps requiring real-time interaction. This improved performance directly impacts user satisfaction and can significantly increase the adoption rate of blockchain technology across various sectors.
Furthermore, the adoption of parallel processing opens new horizons for developers. With increased transaction throughput and reduced costs, developers are afforded a greater degree of flexibility in designing and deploying dApps. This fosters an environment ripe for innovation, where developers can experiment with novel blockchain applications without being constrained by the technical limitations of traditional processing methods.
Sei
Sei emerged as a formidable player in the alt-L1 space with the release of its v1 mainnet beta on August 15, 2023. V1 was designed around the idea of trading digital assets, not just in the realm of Decentralized Finance but also enhancing decentralized gaming, social applications, and the NFT landscape. Essentially, v1’s aim is to meet the widespread need for effective and secure trading of digital assets, serving as a key application of blockchain technology. With v1, Sei set new benchmarks in blockchain performance, achieving block finalization speeds of 390 milliseconds, making it one of the fastest blockchains currently available.
Sei v2
However, Sei v2 (launching in Q2 2024) is a significant upgrade over the original. Sei v2 will offer a compelling alternative for users and developers seeking refuge from Ethereum's limitations without forsaking the familiar comforts of its ecosystem. By ingeniously combining parallel execution with EVM compatibility, v2 offers a solution that addresses the core concerns of performance and usability in one fell swoop. This innovative approach ensures that transactions are processed more efficiently, significantly reducing bottlenecks that have plagued Ethereum during peak usage times, all while maintaining a seamless experience for those accustomed to the Ethereum environment.
For users, this means the transition to Sei does not require the abandonment of well-loved tools and applications. The compatibility with Ethereum allows for the continued use of popular wallets like Metamask, enabling a smooth transition with minimal friction. Developers, too, benefit from this synergy; they can continue to write smart contracts in Solidity, leveraging the vast array of development tools and libraries they have grown accustomed to. Furthermore, the familiarity of dApps ensures that users can navigate the Sei ecosystem with ease, enjoying improved performance without the need to learn new interfaces or workflows. Sei's architecture, therefore, represents a bridge between the old and the new, providing a pathway for both users and developers to explore the advantages of a more advanced blockchain infrastructure without sacrificing the ecosystem's comforts they have come to rely on.
Among the notable features of Sei V2 is its optimistic parallelization capability, which simplifies the development process by eliminating the need for explicit dependency definitions. This, along with improvements to the storage layer through SeiDB, aims to mitigate state bloat, enhance state read/write performance, and facilitate easier state synchronization for new nodes. Furthermore, Sei V2 is designed to ensure seamless interoperability with existing EVM chains, fostering an environment of unparalleled composability between EVM and other execution environments supported by Sei.
As of now, Sei's major upgrade is nearing completion, with the final stages of code development in progress. Following thorough audits, a public testnet release is scheduled for Q1 2024, with a mainnet deployment anticipated in the first half of 2024. This strategic roadmap underscores Sei's commitment to innovation and its role in shaping the future of blockchain technology, offering a glimpse into a more scalable, efficient, and user-friendly digital infrastructure.
EVM Backwards Compatibility
In the exploration of alt-L1 blockchains, one notable gap persists: the absence of backward compatibility with the EVM developers. Backward compatibility is crucial as it allows for the migration of audited contracts from EVM-compatible blockchains without requiring any modifications. This functionality stands out as a pivotal advancement, particularly for platforms like Sei, which enables the seamless redeployment of major contracts existing on Ethereum without requiring code alterations.
At a technical level, Sei incorporates this integration within its binary structure. It automatically imports Geth, a Go-based implementation of the EVM, to process Ethereum transactions. The innovative use of Geth ensures full bytecode compatibility, thus enabling the straightforward processing of applications originally designed for Ethereum. Moreover, Sei's specialized interface for the EVM facilitates updates, whether they pertain to state changes or the invocation of non-EVM contracts.
One of the standout features of Sei's approach is the promise of unchanged Remote Procedure Call (RPC) interfaces, ensuring that developers and users accustomed to Ethereum's ecosystem can transition effortlessly. This compatibility extends to widely used tools and applications such as Metamask, Remix, and Hardhat, allowing for their use by simply switching the RPC connection to Sei. Such a level of integration significantly boosts the usability of these applications, thereby enhancing both developer and user experiences on the Sei network.
With Sei v2, users will be able to add the Sei RPC from Metamask.
Sei achieves this groundbreaking backward compatibility through a combination of optimistic parallelization and state storage optimizations. Specifically, the incorporation of a version of Geth tailored for Sei facilitates the efficient handling of Ethereum's updates and transactions directly on the Sei blockchain, achieving increased performance and scalability.
By blending the hyper-optimized parallel execution layer with the rich ecosystem and developer community of Ethereum, Sei v2 aims to significantly enhance the blockchain landscape for EVM developers worldwide. The initiative represents a synergistic fusion, combining Solana's performance capabilities with Ethereum's extensive tooling and community support, thereby positioning Sei v2 as a leading force in the evolution of blockchain technology.
SEI Token
A successful blockchain requires more than simply technological innovation. Several critical factors must ultimately come together, including the team, narrative, timing, developer talent, and others. However, none may be more important than the tokenomics and token distribution. The design of a blockchain's tokenomics can significantly impact its sustainability, growth, and ability to attract users and liquidity. Effective token design involves a delicate balance of incentives, ensuring that validators, developers, and users are motivated to contribute to the network's health and expansion.
The SEI token serves as the cornerstone of the Sei Network and encompasses a multifaceted role within the ecosystem, unlike L2 and rollup tokens. As the native utility token, SEI is instrumental in facilitating various core functionalities that ensure the smooth operation, security, and governance of the network. This is yet another key difference between Ethereum rollups, which simply have governance tokens and use ETH as the gas token, and various alt-L1s. Alt-L1 tokens traditionally play a role in governance (as is the case with SEI), but they also have additional utility, which helps drive value to the network and could potentially result in value accrual for the token.
One of the primary applications of SEI is in the settlement of network fees. Users are required to pay transaction fees in SEI to execute operations on the Sei blockchain, a common practice across blockchain networks designed to compensate for the computational resources consumed. Additionally, like other PoS chains, SEI plays a pivotal role through Delegated Proof of Stake (DPoS) validator staking. SEI holders are presented with the opportunity to participate directly in the network's security by either delegating their tokens to validators or by staking their SEI to operate a validator node themselves. This mechanism not only secures the network through distributed consensus but also incentivizes token holders by allowing them to earn rewards for their contribution to network stability.
SEI's utility extends to serving as native collateral within the Sei blockchain ecosystem. Applications built on the Sei blockchain can leverage SEI as a form of liquidity or collateral, facilitating various financial operations and services within the network.
Moreover, SEI integrates a fee market system where users can expedite their transaction processing by paying a tip to validators. This mechanism not only benefits the users seeking priority but also rewards the validators and, by extension, those who delegate their SEI to validators, by sharing a portion of the tips collected.
Beyond utility, well-thought-out tokenomics and token distribution strategies attract investment, encourage participation, and foster a sustainable economy within the blockchain, ensuring its long-term success and resilience. This is one area where alt-L1s have stumbled, setting the project back right from the onset.
Aptos Token Launch
The introduction of new tokens, like the highly-anticipated launch of Aptos and its APT token, often attracts considerable attention from investors, analysts, and enthusiasts alike. However, this can also significantly complicate things. Before its official launch, the project was shrouded in ambiguity, particularly concerning its tokenomics and distribution strategy. Mere days before the token was set to be listed on exchanges and freely traded, the team had yet to release a thorough overview of the token supply and release schedule. This lack of transparency understandably elicited concerns within the cryptocurrency community, underscoring the importance of clear, accessible information regarding token distribution for potential investors.
Despite efforts to address these concerns through a detailed blog post outlining the token distribution after the token went live, skepticism persisted. The disclosed information revealed that out of the 1 billion APT tokens minted at the inception of the project, a substantial portion was allocated to various stakeholders in a manner that raised further questions about the token's governance and future market dynamics. In total, Aptos and its investors control a massive ~50% stake in the 1 billion minted APT tokens.
This concentration of ownership becomes even more pronounced when considering the Aptos Foundation's dual role in controlling both the 16.5% of tokens directly allocated to it and the entirety of the community's 51% share. This arrangement places a minimum of 67.5% of the APT tokens under the foundation's purview, a detail highlighted by Polychain as a potential concern for the token's decentralized governance and the equitable distribution of rewards.
Algorand Token Launch
Algorand's funding journey began with private auctions and sales primarily targeting insider investors. This was then followed up by its first public ICO in July 2019, where 25 million ALGO tokens were sold at an average price of $2.40 each. Immediately following the ICO, the ALGO price collapsed, presumably due to early investors selling off their tokens, creating substantial community backlash. In response, Algorand initiated a buyback program, offering 90% refunds for the ICO tokens, resulting in the buyback of about 20 million of the 25 million ALGO sold. This action, while intended to mitigate investor losses, highlighted a significant lack of confidence within the broader Algorand community, as it effectively nullified 80% of the ICO.
The initial token creation event of 10 billion ALGO tokens, with only a minuscule 0.25% made available to the public and even less—approximately 5 million—remaining with retail investors after the buyback, underscores a stark imbalance in token distribution. This concentration of ownership among the project's insiders and early investors not only challenges the development of an engaged community but also exerts downward pressure on the token's market value.
SEI’s Launch
When it comes to token allocations, Sei also reserved a significant portion of the supply for the team and insiders. While 48% is allocated to the Ecosystem Reserve, 49% is reserved for private investors, the team, and the Foundation.
We can compare this with other L1 blockchains over the years (image below) and see that SEI’s initial token allocation to insiders and the foundation is comparable to other successful chains like Solana, Avalanche, and Binance.
However, it should be noted, that since Sei is a relatively new project, only 22% of the total tokens have been unlocked, with a fairly aggressive emissions/unlock schedule beginning in August 2024.
Conclusion
Ethereum’s position as the market leader in the smart contract blockchain space is both a testament to its pioneering technology and a reflection of the challenges it faces in maintaining scalability, liquidity, and interoperability. Its innovative approach, characterized by the widespread adoption of the Ethereum Virtual Machine (EVM) and Solidity, has fostered an expansive developer community and a vibrant ecosystem of decentralized applications (dApps). Yet, as Ethereum evolves, it confronts the inherent limitations of its Layer 1 (L1) network and the complexities introduced by its Layer 2 (L2) solutions, particularly rollups. These challenges, along with the fragmentation of liquidity and the high costs of L1 settlement, underscore the necessity for continuous innovation within Ethereum's framework and beyond.
The exploration of alternative Layer 1 (alt-L1) blockchains and the development of technologies like Sei v2 illustrate the dynamic nature of the blockchain industry and its ability to address many of the limitations of Ethereum while still leveraging the core components that made it so successful originally. By addressing the key issues of throughput, latency, and fees, Sei v2 offers promising avenues for users and developers seeking alternatives to Ethereum's constrained scalability and high operational costs. Moreover, the advent of backward compatibility with the EVM marks a significant step towards removing the friction costs associated with moving to a new blockchain, enabling mass adoption not experienced by most other alt-L1s.
Disclaimer: This report was commissioned by the Sei Foundation. This research report is exactly that — a research report. It is not intended to serve as financial advice, nor should you blindly assume that any of the information is accurate without confirming through your own research. Bitcoin, cryptocurrencies, and other digital assets are incredibly risky and nothing in this report should be considered an endorsement to buy or sell any asset. Never invest more than you are willing to lose and understand the risk that you are taking. Do your own research. All information in this report is for educational purposes only and should not be the basis for any investment decisions that you make.
