- Avalanche protocol’s DeFi head said in a recent interview that risk is mounting with a concentration of DeFi activity in Ethereum Layer-2 solutions.
- An attack on Ethereum Layer-1 could impact all on-chain systems and assets on Layer-2 solutions.
- Luigi DeMeo believes the war for dominance among Layer-1 solutions is on and Avalanche is competing with Ethereum.
Ethereum blockchain Layer-1’s dominance and adoption increased in 2023 with a rising number of DeFi protocols and apps joining as Layer-2 and Layer-3 solutions.
While this is perceived as a bullish sign for ETH adoption, Avalanche network’s DeFi head Luigi DeMeo argues that it concentrates risk on the Ethereum chain.
DeMeo explains that the war for dominance among Layer-1 solutions is on and Avalanche C-Chain tackles the concentration risk more effectively than Ethereum.
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Avalanche competes with Ethereum blockchain for Layer-1 dominance
Avalanche C-Chain, the blockchain that enables the creation of Ethereum-compatible smart contracts, tackles concentration risk more effectively than the Ethereum blockchain, according to DeMeo. The DeFi head explains that the rapid expansion of projects on Layer-2 and 3 has increased the concentration risk on the Ethereum blockchain.
DeMeo told DeFi researcher (Ignas @DefiIgnas) that a bug or an attack on the Ethereum Layer-1 chain puts the assets on Layer-2 solutions at risk. This challenge associated with the ETH blockchain is tackled by the use of three separate chains,
- C-Chain is EVM compatible for smart contracts with fast finality.
- P-Chain is where validation occurs.
- X-Chain is a UTXO-based chain used for fund transactions.
The three chains mitigate risk concentration and according to DeMeo, this makes Avalanche an Ethereum competitor.
Avalanche vs. Ethereum, Layer-1 wars continue
The war for dominance and higher market share intensifies as Avalanche continues to tackle the challenges presently faced by the Ethereum blockchain.
1/14 What’s the role of L1s in the era of L2s?
I interviewed @luigidemeo, Head of DeFi/DevRel at Avalanche to share his perspective.
We also explored Avalanche’s endgame vision.
Here’s what he had to say: pic.twitter.com/bJnYdqfkND
— Ignas | DeFi Research (@DefiIgnas) June 1, 2023
Luigi DeMeo believes welcoming multiple Layer-1 solutions provides choice, more fault tolerance and competition. This spreads the risk among several protocols and safeguards user assets from being compromised by an attack on a Layer-1 blockchain.
Despite DeMeo’s optimism, at current price of $14.21, AVAX total market capitalization totals $4.8 billion, just a a small fraction of Ethereum’s $223 billion market cap.