Blockchain.com CEO: In addition to making investors very profitable, Ethereum "killers" are limited

This article comes fromThe Block, original author: Ryan Weeks

Odaily Translator | Nian Yin Si Tang

Summary:

This article comes from

, original author: Ryan Weeks

Odaily Translator | Nian Yin Si Tang

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Summary:- A handful of VC investors have profited handsomely from the so-called Ethereum “killer” — despite Ethereum’s continued dominance.- With many investors now backing the latest wave of Layer 1 players, Blockchain.com's Peter Smith questions whether this is the best use of capital.

If the likes of Solana, Avalanche, and Near Protocol were the first wave of so-called Ethereum "killers," then Aptos and Sui (a new layer 1 blockchain based on Move, a programming language originally developed by Facebook engineers) can be counted as the second wave . As the most watched public chain rookie this year, both are vigorously promoting the financing process.

also,In July, people familiar with the matter said that the Web3 startup founded by former Meta Platforms employees and the developer of SuiMysten Labs is seeking to raise at least $200 million in Series B funding at a $2 billion valuation

, this round of financing will be led by FTX Ventures, and investors have committed to provide at least $140 million in funding.It is reported that Mysten Labs has previously completed a US$36 million Series A financing, led by a16z, with participation from Coinbase Ventures, NFX, Slow Ventures, Scribble Ventures, Samsung NEXT, and Lux ​​Capital.also,

Aptos announced the completion of $150 million in financing in the same month

, FTX Ventures and Jump Crypto led the round, and other investors included Griffin Gaming Partners, Franklin Templeton, Circle Ventures and Superscrypt. Aptos, which has raised $350 million so far this year, plans to invest in the development of its secure and scalable layer 1 blockchain.

Prior to March,

Apotos Completes $200 Million Financing

, Dozens of well-known Web3 investment institutions including a16z, Tiger Global, Katie Haun, Multicoin Capital, Three Arrows Capital, ParaFi Capital, FTX Ventures and Coinbase Ventures participated in the investment.

However, Ethereum is still very much alive and is the dominant protocol for doing decentralized business. In fact, it is in the final stages of moving to a proof-of-stake model in order to reduce the cost of using the network and improve energy efficiency.

“None of these alternative Layer 1s came close to beating Ethereum, but they made investors a lot of money,” he said in an interview with The Block. “If you were an early investor in Layer 1, this project got A certain scale, even a small one, can pay you big.”

"In this conversation, it's important to distinguish between 'will these projects have a large and meaningful impact on users and everyday life, and build the future of finance?' from 'can we make money?' because those two things are not Always one-on-one."

In the broader venture capital world, it is unusual for investors to back multiple startups in the same niche — in part because they run the risk of conflicts of interest between companies that could become rivals. Not so in the world of encryption. Several venture capitalists have backed multiple projects with the mission of “beating” Ethereum. For example, both Solana and Aptos are backed by a16z, Multicoin Capital, Jump Crypto, BlockTower Capital, ParaFi Capital, and others.

For Smith, the case in favor of layer 1 blockchains is clear: their ability to deliver eye-popping returns in a relatively short amount of time, whether or not they succeed in challenging ethereum.

“We’re seeing a lot of investors exiting the successful Layer 1 bets of the previous cycle (Solana, Avalanche, Near) into new Facebook-related Layer 1 bets,” he said.

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Past performance of mainstream Layer 1 projects

According to CoinGecko data, from the beginning of 2021 to November of that year, the market value of Solana's native token SOL soared from less than $100 million to nearly $80 billion. That figure has since dropped back to around $15 billion. Early backers of the project typically buy tokens, not equity, and stand to make huge profits if they cash out even a small portion of their holdings at the top.

“I think there’s some self-returning capital at work, there’s a lot of incentive to keep betting on Layer 1 to beat Ethereum because you’ve already invested a lot of money in that strategy. Ironically though, there’s no Layer 1 yet close to beating ethereum," Smith said.

There is nothing wrong with this idea on the surface. As Smith pointed out, this is a free market. In fact, he thinks the money backing the first wave of ethereum challengers likely came from successful bets on bitcoin and ethereum — or at least the investor’s limited partners’ knowledge of the success of such bets. The question Smith raises is whether continuous Layer 1 investment is an efficient use of capital.

"Some of the things that I find difficult to take seriously with some of the Layer 1 launches now are: As a potential challenger to Ethereum, what have you brought to the market that is better than Solana, Avalanche, Near?" Smith said, "Every one Chains have their own answers, but at the end of the day, all users care about is stability and transaction costs. So I think this is a bit complicated for me - is this the best use of human and financial capital at the time?"

So far, a good portion of the money injected into the new wave of Layer 1 has gone to incentive programs, which were all the rage late last year.