Dog competition

Jill Gunter, crypto investor and founder, talks about the increasingly fierce competition between blockchains – and what it will take to win

Jill Gunter is no stranger to crypto – she has seen the market through its ups and downs, conducting research on blockchain protocols, working at several crypto startups and co-found his own, and investing as a crypto VC at Slow Ventures. Gunter started following the crypto space in 2011, when she worked in the world of traditional finance as a derivatives trader at Goldman Sachs and when Bitcoin was the only major layer-1 blockchain.

Since, Gunter told TechCrunch’s Chain Reaction podcastit was able to witness three distinct development phases within the industry that led it to this moment of fierce competition between several established blockchains, and even more new protocols entering the fray.

The first phase is what Gunter called the era of altcoins. Protocols like Litecoin, Dogecoin and ZCash originated during this era, when developers sought to modify the Bitcoin protocol in specific ways, such as changing block size to change system throughput, she explained.

“What you found was a lot of blockchains and a lot of tokens that had a lot of the same properties as Bitcoin, but changed the feature set,” Gunter said.

The next phase in the development of new blockchains came with the creation of Ethereum in 2015, according to Gunter. Ethereum brought a “radical change” in terms of what you could do with a blockchain by introducing the concept of programmability.

The modern era of layer 1 blockchains, she continued, can be understood as a time of developers trying to modify the feature sets of programmable blockchains to solve some of the problems with Ethereum that exist today. Developers are trying to reduce fees, improve usability, and add privacy features to applications on the blockchain that the Ethereum layer-1 chain itself does not have.

Ethereum’s high transaction costs and low throughput have continued to plague the network with issues, frustrating users. Yuga Labs’ recent metaverse land sale made headlines last week when people trying to buy NFTs faced exorbitant gas fees and failed trades due to the popularity of the drop.

While alternative blockchains such as Solana and Avalanche offer lower costs and can process transactions much faster than Ethereum, Gunter said these other chains have not been “fully proven as Ethereum. was” because they didn’t have to deal with so many users right away.

Moreover, these new channels have all “centralized something in one way or another,” Gunter continued.

“For the most part, these elements have ways on their roadmap to continue to decentralize over time, but again, we haven’t seen the ones that have been tested yet. We don’t we haven’t seen yet how decentralization really matters to users in terms of the architecture of these things,” Gunter said.

These different blockchains must increasingly compete with each other to attract developers to their ecosystems. As co-founder of the privacy-focused Layer 1 blockchain Espresso systemsGunter knows firsthand how difficult it can be to get engineers to invest time in developing projects on a specific channel when there is so much competition.

“I personally don’t think it’s good enough to just hold up a white paper that says, oh, we’re actually going to be more scalable and more decentralized than anything else,” Gunter said. “I think you need to have really differentiated functionality from what’s already out there. And I think neither is good enough without the other – I think you need to explain why your system will be the most popular and the stronger over time.

Certainly, she added, all Layer 1 projects “make the right noise”, but have not yet been tested by users. Especially if crypto continues to experience a market downturn, the winners and losers in the struggle between layer 1 blockchains could be separated faster than the industry expected.

You can listen to the full interview with Günter on our podcast, Chain Reaction. Subscribe to Chain Reaction on Apple, Spotify or your alternative podcast platform of choice to follow us weekly.