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On-chain data released by Messari, focusing on the layer-1 blockchain ecosystem analysis during Q1 2023, show that the market capitalization of the leading chains rebounded by 83%. Ethereum and BNBChain emerged as the most deflationary networks in Q1 2023.
Ethereum leads rebound
The cryptocurrency market experienced a rebound in Q1 2023, witnessing an average increase of 83% quarter-on-quarter (QoQ) in the market capitalization of the featured layer-1 blockchains. However, despite this recovery, their market cap remains down by 58% year-on-year (YoY), the researchers note.
Among the featured L1s, Ethereum emerged as the clear leader, boasting a market cap over twice the combined total of the other networks.
The high usage and gas fees propelled Ethereum to generate the highest revenue in the quarter, totaling a staggering $457 million, nearly 2.8x the combined revenue of all other featured L1s. Notably, Hedera also experienced significant revenue growth, with a 489% increase QoQ, primarily driven by its consensus service.
The report delves into the financial ratios of the analyzed level-1s, shedding light on their respective market positioning. With a price-to-sales (P/S) ratio of 16x, Tron held the highest ratio, followed closely by Ethereum at 188x.
An interesting outlier was WAX, a network outside the top 20 in market capitalization, yet its P/S ratio stood out due to the revenue generated from NFT marketplace fees.
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BNBChain and Ethereum remain deflationary
In terms of token inflation rates, only BNBChain and Ethereum emerged as the blockchains with the most deflationary tendencies in Q1 2023, with rates of -5.4% and -0.2%, respectively.
The deflation was a result of burning a portion of their transaction fees. Other networks displayed varying inflation rates due to proof-of-stake (PoS) reward issuance.
Additionally, the report notes that most of the featured networks’ tokens have fully vested, with the exceptions being Avalanche, Hedera, NEAR Protocol, and Harmony. Each network has distinct percentages of unlocked genesis supply, excluding staking rewards.
While the overall transaction activity of the blockchain networks in the review did not witness significant growth in Q1 2023, stacks (STX) stood out with a notable 34% increase. Conversely, Avalanche’s C-Chain activity experienced a decline attributed to the launch of subnets.
Furthermore, the report highlights that all networks witnessed an increase in validator counts and staked tokens during the quarter.
Ethereum boasted the largest security budget, with a substantial $32.6 billion worth of ETH staked. The Nakamoto coefficient, measuring the number of entities capable of causing a network halt, typically refers to Ethereum’s figure as 1 or 2.
1/ @ph0rt0n compares the financial, network, and ecosystem analyses of 14 Layer-1s (L1) in Q1'23.
— Messari (@MessariCrypto) June 1, 2023
Featured L1s include @avax, @BNBCHAIN, @Cardano, @Ethereum, @harmonyprotocol, @Hedera, @NEARProtocol, @Polkadot, @0xPolygon, @Solana, @Stacks, @tezos, @trondao, and @WAX_io. 👇🧵 pic.twitter.com/EqHxrnsF6x
The researchers also examined the growth of the decentralized finance (DeFi) ecosystem, using their total value locked (TVL) as a crucial metric. Ethereum, BNB Chain, and Tron emerged as the dominant players in Q1 2023, witnessing an increase in TVL during the market rebound.
However, Stacks and Cardano experienced significant growth in TVL, showcasing their potential as emerging players in the DeFi space. While Ethereum boasted a diverse DeFi ecosystem, other networks exhibited a more concentrated distribution.
In related news, a report published by crypto.news last Feb. shed light on a wave of scalable alternatives that are poised to disrupt the established order and propel the crypto industry to new heights.
According to the report, the contenders, Radix, Polkadot, and Cardano have the best chances of solving the long-standing blockchain scalability issue, while also offering promising solutions that can potentially revolutionize the way cryptocurrencies function.
The future adoption and success of these protocols will shape the landscape of the crypto industry and pave the way for a new era of decentralized applications (dApps) and financial systems.
Read more: Ethereum versus Solana: similarities and differences