Ethereum, BNB Chain and Solana: How Are L1s Handling the Bear Market?
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Ethereum, BNB Chain and Solana: How Are L1s Handling the Bear Market?

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4 months ago

A look at on-chain metrics of some of the top layer-1 smart contract platforms — Ethereum, BNB Smart Chain and Solana.

Ethereum, BNB Chain and Solana: How Are L1s Handling the Bear Market?

Article correction: Daily active addresses for Solana has been updated to the daily first signers metric from hellomoon.io, which counts unique signers and is a more direct comparison for daily active users between EVM (Ethereum, BNB Chain) and non-EVM (Solana) chains. Solscan.io’s daily active wallets can be associated with many token accounts.

When it comes to layer-1 (L1) smart contract platforms, three major players currently dominate the landscape — Ethereum, BNB Chain and Solana.

Each of these has its own value proposition, including — but not limited to — Ethereum’s reputation and extensive developer resources, BNB Chain’s developer friendliness and efficient proof-of-staked-authority architecture, and Solana’s scalability and cost-efficiency.

Over the last year, each of these platforms has seen a dramatic evolution in its DApp landscape and user base, and all now have a thriving DeFi ecosystem. With DApps like Uniswap and MakerDAO (Ethereum), PancakeSwap and Venus (BNB Chain), Raydium and Serum (Solana), each platform is beginning to beat its own path and distinguish itself from the competition.

But while these platforms experienced meteoric growth throughout the 2021 bull run, we are now firmly in the grips of a bear market, and the metrics have almost invariably taken a beating.

Here, we take a look at how the three layer-1 have fared since reaching their respective all-time high (ATH) native token prices back in November 2021. The results might surprise you.

Looking at the change in the value of each platform’s native token, BNB comes out squarely on top after falling from a peak value of $654.32 to $225.86 at the time of writing — equivalent to a 65.5% decline. This largely mirrors its performance during the 2018 bear market, where BNB outperformed almost all other top 100 assets and showed strength amidst the bear trend.

Ether (ETH) fell by 77.1% over the same period to reach $1,097 at the time of writing. This was only exceeded by SOL, which experienced an 87% decline in the same timespan. This may be at least partially owed to the network’s multiple outages in recent months.
One of the best measures of on-chain activity is the number of transactions a blockchain processes over a given time period. This is an excellent indicator of demand for network resources and can be used to determine the extent a blockchain is being utilized among users.

Comparing Ethereum, BNB Chain and Solana on this metric, we found that since achieving their all-time highest asset value in November 2021, all three platforms have seen a marked decline in on-chain activity. BNB Chain currently has the greatest drawdown, with its daily transactions falling 58.2% from the day of its ATH, while Solana and Ethereum are down 18.1% and 13.7% respectively.

As you might expect, when a layer-1 asset achieves its all-time highest value, this typically leads to an influx of on-chain activity driven by speculators looking to capitalize on the price action. But this spike doesn’t always translate to long-term growth in the user base.

By comparing the number of daily active addresses on each chain, and using this as a proxy for the number of daily active users, we found that BNB Chain and Ethereum declined by 68.8% and 27.2% respectively since November 2021. Using hellomoon.io’s daily first signers as a proxy for Solana daily active users, it has increased by almost 50% from 164,558 on its ATH in November 2021, to 246,673 on July 11, 2022 — potentially driven by the expansion of its NFT and DeFi ecosystem, including its integration with OpenSea and the significant adoption of the Phantom Wallet.

Alongside dwindling transaction volume, the total fees generated by each blockchain per day have fallen off a cliff, potentially reducing revenues for miners and validators, but lowering costs for end-users.

All three platforms saw a reduction of between 88.8% and 91.9% in their daily network fees between November 2021 and July 2022. Among these, Ethereum has seen the largest drop in daily network fees — from $8.74M at the peak to $709K in this time. This comes as the price of gas dropped by 89% over the same period, putting the average transaction fee at $0.7.

This is a product of both dwindling transaction volume and reduced competition for block space, as well as a reduction in the absolute value of the gas tokens — ETH, SOL and BNB — each of which is down 64.7 to 86.3% YTD as previously mentioned.

Lastly, we find that the number of new network participants — defined as a newly active unique address on each blockchain — has been gradually falling since November 2021 for both Ethereum and BNB Chain, but Solana has managed to buck the trend.

Since reaching its all-time high, BNB Chain has seen its new daily active addresses fall by just north of 17.9% whereas Ethereum is faring worse at 51.8% over the same period. Solana, on the other hand, saw its new daily active addresses climb by 58.6% over this period, making it the only major layer-1 to consistently grow its user base throughout the bear market.

Overall, despite the harsher collapse of its token value, Solana appears to have less of a decline compared to Ethereum and BNB Chain in certain measures of on-chain activity. However, these metrics mentioned above are just a measure of certain factors — there are numerous other components in play that determine which token will emerge ahead when the market returns to form. One could argue that the development of infrastructure and DApps to bring in the next wave of users is more critical. As they like to say in bear markets: “It’s time to build.”

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