It’s a Multi-Chain World, Bitcoin Just Dominates It

The original blockchain still reigns, but neither Bitcoin nor its closest competitor, Ethereum, can count on becoming the only game in town any time soon.

AccessTimeIconOct 3, 2021 at 3:50 p.m. UTC
Updated May 11, 2023 at 4:40 p.m. UTC

On Tuesday, CoinDesk Research will drop its Quarterly Review for Q3, featuring 60 slides jam-packed with insights, analysis and data. For me, one of the takeaways is that like it or not, we live in a multi-chain world.

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For example, the report notes that in September bitcoin dominance – that is, the original cryptocurrency’s share of total crypto market capitalization – was 42%. That’s the lowest it’s been at that point in the year in any of the previous four years.

Total market cap (CoinDesk Research)

The report’s authors, CoinDesk Research analysts George Kaloudis and Teddy Oosterbaan, are careful to note this is due to an explosion in growth of other networks rather than a lowering of bitcoin’s power.

“BTC losing dominance does not imply that it is losing, especially as it continues to cement itself as a sound money and global monetary network,” they write. “Waning dominance for bitcoin more accurately suggests that there is money flowing into other projects with different use cases, as typically occurs during times of optimism in digital assets.”

And flow it has. Note that while Ethereum’s share was higher in the most recent September than at any time in the series since 2017 – the heyday of initial coin offerings and CryptoKitties – the share for all other blockchains was the highest of any of the last five Septembers.

As Kaloudis and Oosterbaan note throughout the report, alternative “layer 1″ (L1) blockchains gained popularity as the congestion and high fees on Ethereum spurred demand for networks with similar smart contract capabilities but faster throughput. At least, faster for now. Baseball legend Yogi Berra’s quote comes to mind: “Nobody goes there anymore. It’s too crowded.”

You see this demand reflected in the market capitalizations of these L1 networks’ native currencies and the total value locked (TVL), or money invested, in their decentralized finance (DeFi) protocols. Cardano’s ADA, Binance Smart Chain’s BNB, Solana’s SOL, Avalanche’s AVAX and Terra’s LUNA are now in the top 12 coins by market cap.

While Ethereum remains king among DeFi host networks, look at how diverse these bars measuring TVL have become:

Total value locked (CoinDesk Research)

Again, bitcoin remains the crypto market’s bellwether, the coin with the greatest institutional adoption and network effect, with an unparalleled level of security hard won by miners’ politically incorrect energy consumption. (Disclosure: It’s the only coin I own.) That seems unlikely to change.

But the Bitcoin network’s scaling limitations, along with those of its largest competitor, Ethereum, mean neither can count on becoming the only game in town any time soon.

The CoinDesk Quarterly Review for Q3 also covers non-fungible tokens (NFT), stablecoins, BTC’s performance relative to gold and stocks and more. Mark your calendars for Oct. 5 and be sure to bookmark the CoinDesk Research page.


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Marc Hochstein

Marc Hochstein is the executive editor of Consensus, CoinDesk's flagship event. He holds BTC above CoinDesk's disclosure threshold of $1K and de minimis amounts of other digital assets (details on profile page).