Evaluation of the best performing layer 1 blockchain protocols

Cryptographic technology has made incredible progress in recent years and now the blockchain protocol industry is extremely competitive. As advances have been made with speed, scalability, and power consumption, the promise of Web3 and the growth of a blockchain-based internet is starting to redefine what the technology can do.

With Bitcoin, blockchain technology was first introduced as a financial tool for creating and managing cryptocurrency. It quickly evolved into programmable money and smart contracts after the launch of Ethereum. Now the blockchain aims to counter the centralization of all databases, storage and computing to support new dapps and innovative services.

As the industry matures from a predominant focus on financial products to a revolutionary decentralized technology stack for Web3, a handful of key metrics are useful for comparing and evaluating Tier 1 competitors: transaction reach, purpose, transaction costs, energy efficiencyAnd cost of on-chain storage.

This article presents a review of those metrics from leading protocols from public datasets and real-time dashboards to provide a clear, comparative picture of how well these chains are currently operating.

Transaction throughput

For blockchain networks to attract users, they must be able to provide an experience that meets the expectations of today’s web users, and do so in a scalable manner. This means offering fast loading of website and application screens (read operations) and moderately fast data writes. Most blockchains perform read operations quite well, but layer 1 protocols can struggle to scale their data writes in such a way that they can accommodate millions of users and still provide a good user experience.

Throughput is a measure that captures the scalability of a network: the ability of a blockchain to write data and update state for millions and billions of web users and Internet of Things (IoT) devices. To provide a satisfying user experience for traditional internet users, a blockchain needs to be able to process thousands of transactions per second. Only Solana and the Internet Computer demonstrate effective transaction speeds that accomplish this feat, although most of Solana’s transactions are validator voting transactions. Voting transactions don’t exist on other chains; the SolanaFM explorer puts Solana’s true TPS at approximately 381. Other chains have either not generated the traffic necessary to demonstrate high throughput or are technically incapable of achieving high throughput.

Purpose

Finality refers to the average amount of time between the proposal of a new valid block containing transactions until the block has been finalized and its content is guaranteed not to be canceled or changed. (For some blockchains, such as Bitcoin, the determination of the moment of finality can only be probabilistic.) This metric also affects the user experience, as users are unlikely to use applications that take more than a few seconds to complete an operation .

Transaction costs

Blockchain has its roots as a financial product that can provide much lower transaction costs than traditional finance and can transact faster. High transaction costs have shaped the way we use the internet and monetize content. Because of these costs, content creators and applications tend to prefer higher transaction value models, such as subscriptions or bulk purchases of content. Transaction costs are typically related in some way to the value of the associated network tokens, so the following values ​​are correct at the time of writing during the week of November 14, 2022.

Lower transaction costs can support the development of new revenue models for websites and applications, such as microtransaction models such as tips. For these types of patterns to emerge, blockchain transaction costs must be a fraction of the expected average transaction value.

Energy efficiency

Industries around the world are working to become more sustainable in the face of climate change. Energy efficiency has also become a major area of ​​focus in the cryptocurrency industry, where it can also be seen as a measure of a blockchain’s ability to execute and, by extension, scalability.

Improving the efficiency of a blockchain not only reduces the carbon footprint of the technology stack, but also reduces the energy costs associated with the protocol. More energy efficient networks and the applications based on them will have an edge in an increasingly competitive market.

On-chain storage cost

On-chain storage has been a persistent challenge for blockchains, which generally have difficulty scaling to meet the needs of consumer-facing applications that require significant data hosting. This has forced many developers to rely on Web2 intermediaries for storage and frontends, compromising security, resiliency, and decentralization.

The Internet Computer was found to have the lowest cost and most stable on-chain data storage among the best performing L1s. The “gas” takes the form of “cycles,” with 1 trillion cycles pegged to 1 XDR (equivalent to $1.31 at the time of writing). Developers convert the ICP into cycles to pay for data usage, with 1GB per month requiring 329 billion cycles or $0.423, or $5.07 per GB per year.

The cost of data storage over L1 protocols typically varies with the value of the associated network token, with the expense increasing with the value of the token and vice versa. Solana’s rent per byte-year is 0.00000348 SOL at the time of writing, which comes to 3,477.69 SOL per GB-year. At SOL’s current price of $13.99, this equates to a rate of $48,652.

Cardano cannot currently store non-financial data such as media files and stores all transactions permanently. For simplicity, we skip the computational cost associated with processing the transaction. Priced at $0.32 at the time of writing, the cost of storing 1GB of transactions depends on the size of each transaction, with 2 million transactions of 500 bytes each resulting in 354,708 ADA ($113,506.56) and 62,500 transactions of 16 KB each equals 53,236.08 ADA ($17,035.54) which is the lowest per-byte rate.

Avalanche has a gas price of around 25 NanoAVAX, with 32 bytes fetching around 0.0005 AVAX. For simplicity, let’s skip the gas costs of executing smart contract code and allocating storage and instead consider only the bare minimum cost of SSTORE operations. This causes it to cost around 15,625 AVAX to store 1GB of data. AVAX is $13.24 at the time of writing, which comes to $206,875.

Ethereum’s congestion and high cost inspired the push for on-chain efficiency and continues to set the spending bar. For simplicity, let’s skip the gas costs of executing smart contract code and allocating storage and instead consider only the bare minimum cost of SSTORE operations. The network consumes 20,000 units of gas to perform the SSTORE operation on 32 bytes of data. By extension, it costs 625 billion units of gas for 1GB of data. With the average gas cost of 20.23 Gwei at the time of writing, this comes to 12.64375 T Gwei, or 12,643.75 ETH. With ETH at $1,225.46 at the time of writing, this equates to $15,494,409.

Conclusion

As the blockchain industry evolves into a next-generation technology stack capable of reopening the consumer internet, only a handful of platforms have the technical specifications necessary to deliver the user experiences expected by the majority of internet users.

High-performance Layer 1 networks will enable the development of applications and services that are not possible, including breakthrough capabilities in the areas of security, microtransactions, and decentralized ownership of data and applications.

Leave a Reply

%d bloggers like this: