The value of a layer 1, or L1, network comes from people conducting peer-to-peer transactions with that blockchain. The native token of any given blockchain – BTC in the case of Bitcoin – acts as an incentive mechanism to get people to ensure that the data stored on the blockchain is secure and accurate.
The value is especially relevant in areas of the world where central bankers have caused local currencies to hyperinflate. One of the mistakes being made by U.S. lawmakers and regulators is looking at cryptocurrencies from a U.S.-centric perspective only.
It appears regulators don’t care about the functionality or reliability of blockchains, especially as some of the loudest opponents of crypto are in favour of central bank digital currencies – a type of digital currency issued by a central bank. The animosity feels more related to the decentralized nature of crypto – the ability to take fiat currency and exchange it for another asset of value, without the need for a central body (central banks, regulators, politicians, conventional banks, etc.).
Here are some of the larger layer 1 protocols and their recent performance
The performance runs the gamut from impressive to anything but, which is how it probably should be. On a technical level, BTC is correlated most to ether (ETH), the second-largest cryptocurrency after bitcoin, with its lowest correlation being to crypto exchange Binance’s BNB token.
What I find intriguing about layer 1s is the nuance that exists between them. As one L1 comes into existence, another attempts to improve upon it on the basis of speed, scalability, etc. For instance, I am admittedly anchored to Bitcoin. Its foundation as a peer-to-peer network gives it a first-mover advantage and the largest market share.
The ability to develop smart contracts on top of the Ethereum blockchain, where predetermined conditions are met and executed via code, is another facet that I find value in.
In many ways, crypto forces someone focused on assets and prices to level up on technology, while the tech-focused person is incentivized to get up to speed on market dynamics. The discipline of tech and the discipline of assets are pulled together, much in the way that code links tasks within a smart contract.
