What is the 'next Solana'?
Laying out the contenders for the next big L1
Cryptocurrencies can be broadly categorized into three buckets:
Layer 1 Blockchains: Foundational platforms that applications can be built upon. Examples: Bitcoin, Ethereum, Solana.
Applications: Cryptocurrency apps you interact with directly for specific actions (lending, swapping, trading). Examples: Uniswap, Aave, Jupiter.
Middleware Infrastructure: Background protocols that applications can integrate with (bridging, data sourcing). Examples: LayerZero, The Graph, 0x.
L1s have consistently commanded the highest valuations. Bitcoin is a $2 trillion network and Ethereum is $400B, while the largest Ethereum app - Chainlink (middleware) - is only $20B.
This massive difference exists because of the premium attached to being a potential 'store of value'. Only L1s compete at being 'money', and being money is how you reach trillion-dollar status.
First Bitcoin, then Ethereum, and now Solana has joined as an L1 with genuine usage and a massive builder community. Consequently, Solana has risen from $8 post-FTX to $180+.
This raises the question everyone wants answered: who will be the next Solana?
Here’s some quick thoughts on the possible contenders:
Sui - 43B FDV - $SUI:
Solana demonstrated real market demand for a fast, cheap global state machine. While Ethereum needs layer 2s to scale, Solana handles it all on L1. SUI is another fast, cheap chain having a strong year in price and metrics. However, the rationale is questionable. Solana's adoption made sense when Ethereum fees hit $50, but how necessary are more alternatives?
SUI's 2024 metrics have surged, but compared to Solana in 2023, none of these chains have a fraction of Solana's real community, even during the bear market. Still, bull market valuations differ, and the fastest horses often maintain their lead. Currently, SUI is the largest fast/cheap chain after Solana.
Hyperliquid - 26B FDV - $HYPE:
Launched December 1st with and currently valued at a whopping 26B FDV (that is a lot for just launching), Hyperliquid is unique in several ways:
They built a custom L1 with no smart smart contracts with the specific purpose of building an onchain perpetual swaps derivatives exchange that can match the speed of a centralized exchange like Binance. So the product was the goal and they built the L1 to make this specific product.
The exchange is generating an insane amount of fees. See below. These fees are actually almost enough to actually justify a valuation like this.
They did not raise any VC money and investors have no token allocation. This is in stark contrast to most projects. Because VCs have no insider allocation, they have to buy on the open market if they want the token. The distribution feels more fair (this can be nitpicked).
They airdropped a massive 33% of the supply on day 1 to the community users of the exchange, another stark contrast to the typical 7-10% airdrop. Basically anybody who used the platform has made a serious of money (sadly, not me).
The HyperEVM is coming soon, allowing full smart contract capability so anyone can create apps on Hyperliquid.
Right now the chain is only run by four validators, all colocated in Japan. It's very easy to make a blockchain fast when there are a few computers located in one place. It's very hard when there are many around the world. Not exactly decentralized…
For comparison, Ethereum has tens of thousands of validators that sync every 12 seconds. Solana has ~1200 processing blocks in parallel every 400ms. Hyperliquid has... 4. Not exactly decentralized.
I think there will be 16 global validators once the EVM goes live with a plan to add from there. Better but still...
The exchange is doing well, but to attain store of value status Hyperliquid will really need other builders to build apps on its chain.
At least they have some real users now though. I'd say the Hyperliquid exchange usage is more legit than the entire usage of any of these other chains.
Seems ripe for some regulatory issues if it can't meaningfully decentralize fast enough.
There is some evidence that North Korea is probing Hyperliquid for vulnerabilities to try and hack… Erg.
Aptos - 10B FDV - $APT :
Another fast, cheap chain. Both Sui and Aptos use the Move virtual machine for smart contracts (versus Ethereum's EVM using Solidity and Solana's SVM using Rust). Move appears legitimately interesting and enables safer smart contract writing, but whether that’s a reason to be bullish on entire blockchains is unclear…
SUI and APT are often grouped together due to Move. While Aptos lags SUI in most metrics, it's having a good year. The question becomes: do you buy the expensive leader SUI, or bet on Aptos as an undervalued catch-up trade?
For what it’s worth, even though I may question the substance of more fast and cheap chains outperforming, the market sentiment seems to be valuing those traits more than handwavy/fuzzy metrics like ‘decentralization’ or ‘censorship resistance’.
Bittensor - 9.3B FDV - $TAO:
A unique L1 primarily serving as an incentive mechanism for open-source AI. While Bitcoin rewards miners and Ethereum rewards stakers, Bittensor splits new TAO between teams plugging open-source AI models into its system and stakers. Teams create "Subnets" on the network and compete for TAO emissions.
Bittensor is one of my favorite chains here because opinion is sharply divided - half my X timeline considers it revolutionary, half sees it as nonsense vaporware. That’s a recipe for good memetics.
Celestia - 5B FDV - $TIA:
Technologically, I like Celestia a lot. I think it’s genuinely novel and interesting. Celestia the blockchain, the L1, basically does nothing except basic transactions, like Bitcoin. The difference though, is that it is extremely easy to build layer 2’s on top of Celestia, or use it as a place to post data or proofs for other chains to anchor to.
Celestia gives maximum flexibility to other chains to use either its consensus/security, or its data storage capabilities (DA), and as a result, a lot of chains are using Celestia under the hood.
So I like Celestia the ecosystem, but the issue is that the TIA token is not an obvious schelling point in the ecosystem for folks to buy. Lots of chains use Celestia in the background, but many of them have their own tokens that people might want to buy instead. This has made it hard for the TIA token to generate sustained attention and for it to get much of a narrative.
I’m bullish Celestia the technology and the ecosystem, I’m unsure about the token.
Telegram - 27.6B FDV - $TON:
Massive global userbase but unusual, hard to use smart contract language and regulatory concerns. Mixed early results.
Avalanche - 16.2B FDV - $AVAX:
Been around for years. Probably good tech. Over $1B TVL (total value locked, total amount of assets on the chain) so not a total ghost chain. Proven BD success. Not shiny and exciting - make of that what you will.
Upcoming Launches:
Monad: Building ultra-fast parallel EVM L1. Highly anticipated but we’ll see what the plan is to launch a robust ecosystem.
Berachain: Novel emissions where BERA rewards liquidity providers. Again, in Etheruem, new ETH goes to stakers. In Berachain, BERA goes to people who put assets on the platform. So if you keep assets in a DeFi platform on Berachain, you can earn token emissions. This is a good user acquisition strategy as getting TVL on a chain is hard, so inflation going to TVL is interesting.
Sonic: Rebranded Fantom chain relaunching and aiming for ultra-fast EVM a la Monad. Less ‘exciting’ than new and shiny Monad, but perhaps having a userbase of FTM holders is a plus?
Other chains not listed are likely not serious contenders for store of value status at this stage. In fact, all of the above are not really serious contenders either.
There's also likely to be disconnect between "next Solana" valuations and actual activity. The next 10x asset might ultimately drop 90% in the next bear market from current levels. With more and more chains launching, it’s not easy to be sustain attention and economic over time.
While matching Ethereum and Solana's community/builder ecosystem seems unlikely for any of these, there is a chance one of them sticks. Best of luck to all.
None of this newsletter should be considered financial advice.