Footprint Analytics: The Flourishing Development of Public Chains - A Multi-Chain World Moving from Ideal to Reality | 2021 Blockchain Annual Report

Author: Sabrina, Analyst at Footprint Analytics
Date: January 2022
Data Source: Footprint Analytics

This article is part of the Footprint Analytics Blockchain Annual Report.

In 2021, the development of public blockchain ecosystems entered a period of explosive growth, and the vision of a multi-chain world transitioned from idealistic to realistic.

Development and Classification Overview of Public Chains

According to data from Footprint Analytics, there are currently 86 public chains recorded, compared to 11 at the beginning of 2021, representing nearly a 7-fold increase in quantity.

At the beginning of last year, Ethereum dominated 96% of the market, while hundreds of new DApps in DeFi, NFTs, GameFi, and SocialFi made the network almost unable to operate independently due to congestion and cost issues.

With Ethereum's market share dropping to 62% by the end of the year, new chains - competing with and cooperating with the Ethereum ecosystem - have become a major event entering 2022.

Almost all public chain solutions aim to handle more transactions than Ethereum and do so faster and cheaper.

These public chains, whether starting from a technical, ecological, traditional financial integration, or emerging trend perspective, excel in different areas within the impossible triangle.

In this article, we will look at the different types of public chains that support the scalable use of blockchain.

Currently, we can categorize different types of public chains into the following three categories:

• Layer 1 technology innovation chains, which compete with Ethereum by improving performance through transforming the public chain itself. This includes exchange-branded public chains (such as BSC, Cronos, Heco, etc.), interoperable chains like Cosmos and Polkadot, and public chains such as Solana, Avalanche, Terra, Fantom, etc.
• Sidechains, as an Ethereum Virtual Machine compatible extension solution, partially complement Ethereum to specifically handle Ethereum's excess capacity. Examples include Ronin, designed specifically for NFT transactions, and Polygon, which provides a universal framework to build and connect Ethereum blockchain networks.
• Layer 2, as a fully complementary solution to Ethereum, is essentially part of Ethereum. It achieves off-chain scaling by building second-layer technical solutions to process some transactions (Rollups). Currently, Rollups technology mainly consists of Optimistic-rollups and ZK-rollups. For more information on L2, please read this in-depth Footprint article on the topic.

Overview of Public Chain Ecosystem

By the end of 2021, the total value locked (TVL) of all public chains peaked at 293 billion, a tenfold increase from 2020.

Among them, various Layer 1 public chains have adopted various strategies to build their ecosystems, seizing the largest market share from Ethereum, with explosive growth in TVL in 2021.

Currently, the number of DeFi projects on various public chains is approaching 1,000. BSC, Polygon, Avalanche, Solana, Fantom, Terra, Arbitrum, and Cronos have grown to be among the top ten public chains with DeFi projects, excluding Ethereum in terms of the number of DeFi projects.

The ecosystems of various public chains have gradually expanded to cover various DeFi business types such as DEX, yield, lending, assets, staking, and minting. From the distribution of on-chain ecosystems of the Top 10 public chains, DEX, lending, and yield are the main pillar businesses of public chains at present.

As a new trend in 2021, NFT and GameFi have flourished.

Many vertical public chains have emerged to differentiate themselves based on emerging trends. In addition to Ethereum, the Ronin public chain, which focuses on the NFT market, has become the second-largest NFT trading public chain.

GameFi, which demands higher returns, playability, and smoothness, also requires higher performance and transaction costs from public chains. Clearly, Ethereum cannot meet these requirements. Hive, WAX, and BSC are among the top three public chains in terms of active users for GameFi in a single month .

2021 Public Chain Stars

The Terra public chain, built around stablecoin protocols, briefly surpassed BSC relying on strong exchange resources at the end of the year to become the second-ranked public chain.

Avalanche is undoubtedly one of the most dazzling public chains of 2021. Its TVL saw the largest increase in 2021, ranking fourth in TVL among all public chains.

Its strong competitor, Solana, currently ranks fifth in TVL.

Rapid Growth of Cross-chain Bridge Business

As the blockchain world is now divided into multiple public chains, bridging the gap between these different public chain solutions and projects has become a necessity.

The cross-chain bridge business began to grow rapidly in October 2021. By December 31, 2021, the TVL of cross-chain bridge projects had exceeded 10 billion U.S. dollars.

Most cross-chain bridge protocols are built on Ethereum as L2 extension cross-chain bridges, with the goal of interoperating with Ethereum.

In addition to a variety of rich cross-chain bridges, cross-chain bridge aggregators such as Chainswap and FundMovr are also popular among users and developers. Cross-chain bridge aggregators help users exchange different assets directly while crossing chains. The demand for universal components for cross-chain interoperability, which allows developers to build their use cases without the need for development, has also become a new trend.

Conclusion

With widespread adoption and an influx of new users, blockchain has expanded far beyond the scope of Bitcoin and Ethereum.

Various public chains aim to address pressing Web3.0 issues, and their relatively low development costs make it possible to have many public chains. However, this fragmentation poses new challenges for developers and users, while also creating a demand for interoperability solutions.

To read more about public chains, please check out Footprint Analytics: An Overview of Chains.

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