This article will be so L1s generally. You probably already know my opinions on L1s by now — I think modular blockchains win over monolithic ones in the long run. That doesn't mean monolithic chains stop being a thing, they will exist alongside modular chains. In the fullness of time we'd have a big modular blockchain and a large monolithic chain.

That aside, what happens this year with L1s? We'd get another L1 war like we do every cycle. This time the battleground would be on parallelization. Sorry to say this (my Solana fans), but Ethereum is the gold standard when it comes to L1s. Yes, Bitcoin is an L1 but it's not often mentioned when talking about L1s because it lacks native smart contract capabilities. That leaves Ethereum as a yardstick when it comes to smart contract-enabled L1s. L1s are all in competition with themselves, regardless of whether they are modular or monolithic by nature

My bad, L1 stands for Layer 1 and L2 Layer 2. I can't tell you how they function or what exactly they do. This isn't the right article for that.

Enter Solana, the leading L1 outside Ethereum. It had a monstrous year in 2023, up over 900%. I think that performance continues to happen. The ecosystem has seen a huge uptick in volume, Devs, dApps and more importantly users. Solana is where ETH was back in 2020, as ETH recovered from its $80 moment. Lots of people will attempt to do the “reversion to the mean” trade with solana, only to have their shorts blown out. The price of $SOL is quite overstretched at the moment, and a pullback or sideways price action wouldn't be out of place.

Think the best way to gain exposure is by being long other coins in the ecosystem as beta plays to SOL. $JTO, $PYTH, and $ORCA seem to be the hot things on Solana right now. We'd also have new token launches in the ecosystem as the year goes by — coming from Jupiter, MarginFi etcetera. Will be on the outlook for the next interesting thing on Solana.

Ethereum has always been the main competition to other L1s. Back in 2020, we had the rise of different alternative L1s, and what was their selling point against Ethereum? “Ethereum is slow, we are fast”. They achieved this by having high TPS and using the DPoS consensus mechanism rather than a slower PoS. That became table stakes for L1s, you had to have a high number of TPS and use DPoS for consensus mechanism or another variant — anything but vanilla PoS. And it worked, if you had a high TPS and DPoS you raised a lot of money from VC and the coins of the respective blockchains were pumped massively. Despite everything pumping we had three outstanding winners — Solana, Luna, and Avalanche hench the meme — SOLUNAVAX.

What's the meta this time around for L1s, what's the stable stake, what's that thing L1s can point to Ethereum and say “Look, Ethereum doesn't have this, and we have it, therefore we are better”. Whether they are truly better than Ethereum isn't the issue here, the crux of the matter here is that there's something they can point to that Ethereum lacks. It will be even more pronounced if it gives them an edge over Ethereum to an extent. Last time it was high TPS, this time it's Parallelization and Local Fee Market. I have written extensively on both topics in the past, so wouldn't go in-depth. But what you should know is that blockchains (whether modular or monolithic) process transactions sequentially (i.e. one after the order). Parallelization will process transactions simultaneously (as long as they don't touch the same state or memory). Parallel Execution will enable faster transactions than sequentially ordering transactions.

To be fair, last cycle's high TPS were all theoretical or on testnets. Parallel Execution is bringing all of those high TPS to reality. So it's still a play on “we are faster than Ethereum” but this time under another label — parallelization (I love this industry). The local Fee Market makes transaction fees cheaper. Chains without a Local Fee Market (LFM) all share a general fee market. That means a rollup user will be affected by a surge in transactions fee caused by a new NFT mint. With LFM, each use case could have its fee market, and as a result, won't be affected by exogenous factors.

PE and LFM are two key technological innovations that Ethereum currently lacks, both on the L1 and L2s. Although there's a plan to bring PE to Ethereum via L2s. That's what the team at Eclipse are building. Only Solana has a functioning PE and LFM to a large extent (now you know why $SOL prices were up that much last year). Other blockchains that have PE to an extent are Aptos, Sei, Sui, Neon and Monad (although it isn't live yet). $SEI and $NEON have done extremely well in recent weeks and I expect that trend to continue, while $SUI and $APT have only begun to pick up steam. I'm bullish on any L1 that has PE and LFM. Fantom and Near are other L1s that have parallelization (although via sharding). $FTM and $NEAR might turn out to be great investments based on the parallelization narrative, but it's not something I'd like to own as they are old tokens, and they are just trying to pivot into a narrative. I love new shiny stuff, and would rather stick to the likes of $APT, $SEI, $SUI, $SOL, and $NEON.

There's also a meme that can be born out of these “ASSS” (Aptos, Sui, Sei, and Solana). Just like we had SOLUNAVAX last cycle. Maybe this comes out in another way, but regardless I expect parallelization to be part of the play. Parallelization is difficult to engineer, unlike high TPS which was relatively easier and more of a marketing gimmick as it was all theoretical. As a result, the high TPS trade got crowded quickly. In the fullness of time, most L1s will have PE and LFM, but it will take some time before it's commoditized giving an edge to chains that already have it.