The public chain incentive competition reignites, is a reshuffle moment approaching, and is the multi-chain era about to arrive?

Author: Kyle

Source: Hive Finance

New hotspots such as NFTs, on-chain derivatives, and blockchain games are emerging one after another, pushing DeFi into another Summer. According to data from DeFi Llama, on August 31, the total locked value (TVL) of the entire DeFi ecosystem reached $153.7 billion, recovering to the peak level of May 11.

The DeFi market continues to grow, and new blockchain networks in the market see opportunities, prompting the dominant chains to take action.

The first shot was fired back in April this year when Ethereum Layer 2 scaling solution Polygon launched a $100 million DeFi fund, attracting many well-known protocols such as Aave and Curve, with on-chain TVL growing from $77.8 million in early April to $5.32 billion today.

The "bullet" of the demonstration effect flew for a month, coinciding with a major market crash. Four months later, in August, the market capitalization of crypto assets rebounded, and several chains began to launch incentive programs one after another.

Recently, the Avalanche Foundation announced a $180 million liquidity mining reward program to encourage more applications and assets to join its public chain ecosystem; on August 30, the smart contract platform Fantom launched an incentive program, announcing an investment of 370 million FTM to promote ecosystem growth; on the same day, a consortium of leading Ethereum DeFi protocols announced a joint investment of $100 million to support the development of the blockchain ecosystem Celo.

Taking advantage of the golden period of explosive growth in DeFi, new blockchain networks have initiated a grand ecological incentive arms race, leading to a new round of reshuffling in the public chain sector.

Currently, Ethereum still reigns supreme among public chains with a TVL of $114.7 billion, but the rise of new public chains such as BSC, Solana, and Avalanche cannot be underestimated. These latecomers generally have better network performance and are adept at leveraging their latecomer advantages to quickly cultivate ecosystems, likely ushering in a period of rapid growth.

There has long been a prediction in the industry that Ethereum would not dominate alone, and the market would be multi-chain. Looking at it now, the door to a flourishing blockchain world is opening.

Multiple chains launch ecological incentive programs worth over $100 million

If the public chain wars of 2017 to 2018 were a brutal exploration of the "old era" of blockchain, then under the torrent of DeFi's explosion, blockchain networks such as Ethereum, Solana, Polygon, Avalanche, Celo, and Fantom have truly begun to implement their once-conceptual ideas.

The development of DeFi has not been long; the concept was only created in August 2018, when well-known protocols like Uniswap and Maker were still in a foggy exploratory phase. Even if the developers at that time could see the future, they would find it hard to imagine that just two years later, DeFi would experience explosive growth as a "killer application."

Today, the entire DeFi ecosystem is becoming increasingly vast, flourishing across various public chains and attracting a large amount of capital and users. Unlike the previous round of public chain wars, today's public chains are not only competing in performance but also in developer ecosystems, application innovation, and the ability to capture new hotspots such as NFTs and the metaverse.

These differences are destined to make the new round of battles among blockchain networks more grandiose than before. Taking advantage of the golden period of explosive growth in DeFi, blockchain networks have recently initiated a grand DeFi incentive arms race.

From a timeline perspective, Ethereum Layer 2 scaling solution Polygon fired the first shot in this round of ecological incentive competition. In April this year, Polygon announced the launch of a $100 million DeFi fund to promote ecosystem development. The fund will focus on integrating users into decentralized products and platforms within the ecosystem, with the empowerment plan set to last for 2 to 3 years.

Polygon's goal is clear: to attract more users and capital. In the context of Ethereum network congestion and high Gas fees, as Ethereum's native Layer 2, Polygon allows DeFi protocols on Ethereum Layer 1 to migrate easily. In just a few months, well-known protocols such as Aave, Curve, Sushiswap, and 1inch have completed their deployments on Polygon.

With the support of the DeFi fund, the Polygon ecosystem has rapidly grown. According to DeBank data, on August 31, Polygon's total locked value (TVL) reached $5.32 billion, a 6738% increase from $77.8 million in early April.

Polygon's on-chain TVL expanded to $5.32 billion

Polygon's incentive program has had a demonstration effect. On August 18, Avalanche, still in its early network development phase, also joined this incentive competition. The Avalanche Foundation announced the launch of an $180 million liquidity mining reward program called Avalanche Rush, encouraging more applications and assets to join the Avalanche DeFi ecosystem. According to the plan, Avalanche will integrate Aave and Curve, two DeFi protocols with high total locked values, and provide their users with three months of network-native token AVAX rewards.

After the announcement of Avalanche's incentive program, AVAX surged from $23 to a peak of $59 within a week, a 156.5% increase. Its on-chain total locked value also grew from $222 million on August 18 to $1.92 billion today, an 8.6-fold increase in less than half a month.

On August 30, the smart contract platform Fantom also launched an incentive program, announcing an investment of 370 million FTM to better align incentives among users, builders, and the network. If a protocol team can maintain the protocol's TVL above a time-weighted average of $5 million or $100 million, they can apply for rewards from the Fantom Foundation.

On the same day, a consortium of leading DeFi protocols including Aave, Curve, and SushiSwap announced a financial inclusion plan called "DeFi for the People," jointly investing $100 million to promote the development of the blockchain ecosystem Celo.

As massive funds drive the way, new public chains are stepping onto the path of ecosystem growth, laying the groundwork for subsequent changes in the public chain sector.

Predictions come true as public chains enter a flourishing era

Although mainstream assets like BTC have not yet returned to pre-crash prices after the "5.19" crash, the scale of the DeFi market has returned to previous high levels under the fermentation of new hotspots like NFTs and derivatives.

DeFi Llama shows that on August 31, the TVL of the entire DeFi ecosystem reached $153.7 billion, comparable to the peak period on May 11. This indicates that the development of DeFi will not stagnate due to market fluctuations; instead, it has a stronger growth force.

Undoubtedly, the explosion of DeFi is also driving market demand for public chains, prompting blockchain networks to enter a rapid evolution phase.

In the current public chain field, Ethereum remains the undisputed king, with an on-chain TVL exceeding $114.7 billion, accounting for 74.6% of the entire market. However, public chains like Solana, BSC, and Avalanche are becoming new forces that cannot be ignored.

Since May this year, the Solana ecosystem has rapidly expanded, with over 400 projects established on the chain, covering various sectors such as DEX, derivatives, oracles, NFTs, lending, and IDO platforms. According to DeFi Llama data, Solana's on-chain TVL reached $3.33 billion, a 428.5% increase from $630 million in early July.

Solana's on-chain TVL increased to $3.33 billion

As the concepts of NFTs and the metaverse are being hyped, projects like Degenerate Ape Academy have emerged on the Solana public chain, attracting many new players to purchase on-chain. The growth of capital and users has also driven a significant increase in its native token SOL, which surged from $24 to a peak of $120 since July 20, a 400% increase, making it one of the best-performing assets in the recent market.

Additionally, BSC, which developed earlier and is backed by the Binance ecosystem, currently has a TVL of $20.6 billion, making it the second-largest public chain in the market after Ethereum. Since its launch last year, its ecosystem has become basically sound and has entered a stable development phase.

It is foreseeable that as blockchain networks like Polygon, Avalanche, and Fantom simultaneously launch incentive programs, their ecological value is likely to enter a period of rapid growth. Compared to Ethereum, these networks generally have better performance, faster transaction processing efficiency, and lower fees. In the context of the continuously expanding DeFi market, they are expected to attract more developers and players to enter.

Industry insiders believe that as Dogecoin, NFTs, and other blockchain products gain popularity, blockchain is gradually becoming more widespread. Not only DeFi but also blockchain games are becoming popular with the improvement of public chain performance. In fact, some residents in Southeast Asian countries are even "playing to earn" through games like Axie Infinity to increase their income, "which indicates that the value of blockchain is beginning to permeate into the general public."

In 2017, public chains were still in the conceptual phase and difficult to implement. At that time, there was a prediction that Ethereum would not dominate alone and that the market would be multi-chain. Now, as the prediction comes true, the flourishing of public chains is becoming a reality, and as blockchain continues to iterate, the reshuffling will continue.