Under-the-radar L1 outlook 2023

What exciting innovations are happening in the smaller layer 1's and why you should pay attention.

With the plethora of crypto projects and the multitude of different Layer 1's, it is easy to miss some of the innovations happening in those with a smaller market cap. However, several exciting things are happening in that space. Here are our top 5 under-the-radar Layer 1's to be on the lookout for in 2023 (in no particular order).

1. Agoric

Why are we bullish?

Over $1b in security exploits occurred in 2022. With a DeFi TVL of less than $50b, we paid a 2% royalty per transaction to hackers last year. If blockchain ever wants to be taken seriously, protocols must be designed in a manner that stops bleeding billions. Agoric offers a foundational level of security centered around offer safety and object capabilities. This Metaverse Podcast with co-founder Mark Miller explains the significance of Agoric’s design choices for security. After a successful $90m ICO early this year (sold out in less than 2 hours), they recently launched their Mainnet in October. The promise for builders? Secure DeFi that will not get hacked, ready for mass adoption.

How is it innovative?

Most developers use existing libraries or components to build applications. In other words, very few developers write unique lines of code. Why? Because it is challenging to write secure code. Agoric brings this familiar experience to the blockchain world. They developed a JavaScript native smart contract platform (this wasn't easy – but with names like Mark Miller and Dean Trible on the team, they had the brains to pull it off). The platform offers a library of safe, reusable components to rapidly build and deploy products on-chain. Check out some of the available components, including an automated market maker (AMM).

What are some of the most interesting projects building on the chain?

Five projects have announced they are building for mainnet-2, including apps such as LH2 Staking, a unique liquid staking project focused on increasing the decentralization of Agoric, resulting in a more robust and resilient network.

What do we predict for the chain in 2023?

One to watch will be Inter Protocol token (IST), an over-collateralized stablecoin that through IBC will be made available to the entire Cosmos ecosystem, including Agoric. Due to all these hacks, confidence in DeFi is at an all-time low; however, developments in Agoric could lay the foundation for a Renaissance much sooner than we might expect.

2. Concordium

Why are we bullish?

Identity and accountability will play a key role in blockchain seeing mass adoption. For Web3 to see the next billion users, we will need to see more enterprise adoption, which will only come through increasing the level of trust in the system. The Concordium Web3 ID, as a verified on-chain identity, can create the level of trust, accountability, and compliance required for institutions to onboard. Concordium is also relevant for much more than enterprise blockchain use cases. With their identity layer integrated at the protocol level, there are endless use cases across all industries.

Concordium has raised 52M EUR and built a very strong team to execute this vision. The team includes leading scientists who have systematically built Concordium from the ground up using science-based and peer-reviewed protocols. This has been recognized by several big companies, which even led to Concordium setting up a joint venture with Geely, the mother company of Volvo.

How is it innovative?

Concordium is innovating in its approach to identity in the blockchain landscape. Through Concordium's Web3 ID, they create self-sovereign identities where the user is in control of their identity and sensitive data. This is powered by Zero Knowledge Proofs to preserve privacy with each transaction, but not anonymity. All Concordium accounts can be traced back to either the individual or business through an identity object issued by a third-party ID issuer. To help with compliancy, Concordium has an identity disclosure mechanism, which is an anonymity or privacy revoker that the regulator can trigger. Regulators must obtain a court order to demand an anonymity revoker to decrypt the user's identity.

Additionally, the Concordium wallet can also be KYC checked, which helps to tackle a significant problem for both users and builders. Without Concordium, businesses operating in markets with KYC requirements have to do this check on every wallet, for example in DeFi lending products or gambling, which puts a massive strain on their business. With Concordium's ID/KYC-ready wallet, an external 3rd party has already completed the KYC check.

What are some of the most interesting projects building on the chain?

Given the breadth of use cases where ID/KYC is essential, we are seeing a broad range of projects across RegDeFi, NFTs, fashion, and gaming building on Concordium. SpaceSeven is an NFT marketplace that has been built on the Concordium smart contract enteprise blockchain platform, which has allowed them to build the world's first fully regulatory compliant, e-commerce scale, and user-first open NFT marketplace.

MOJOMOTO is the digital provider for fashion, mastering all aspects of getting the brand, stores, and consumers connected using the latest digital technology. MOJOMOTO is FashionTech, and they present in collaboration with various brands, artist and events for relevant NFT drops, including high-quality 3D assets.

What do we predict for the chain in 2023?

The technology and DeFi roadmap will help to better connect the Concordium ecosystem. Over the course of 2023 we’ll see a number of bridges, starting with Ethereum, which will help to bring increased liquidity. Additionally, later in the year, there will be a decentralized exchange on Concordium, Concordex, further enhancing connectivity to other ecosystems.

We also expect developer activity to increase significantly. Seier Capital launched a grant program of $10 million, which should substantially increase the size and quality of the Concordium ecosystem. Furthermore, Concordium has several upcoming hackathons in 2023, which should boost a thriving Concordium ecosystem.

3. Sei Network

Why are we bullish?

Use-case-specific blockchains entered the scene in 2022, clearly stating that the L1 wars are not over. On the flip side, crowded with other big new entrants such as Aptos, Sui (yes, a one-letter difference) shows that the L1 war may be in for a second season in 2023.

Sei Network is trying to become the best Layer 1 for DeFi in Cosmos. It plays into the narrative of the multi-chain universe thesis where each use-case should be built on its own sovereign chain optimized for maximum efficiency. Their team brings both DeFi and TradFi know-how, merging credentials from Cosmos and Goldman Sachs. They raised a $5m seed led by Multicoin and announced a $50m ecosystem fund to support the development of new applications.

But what makes them so unique is their ability to attract top-tier talent from other L1s. According to co-founder Feng, Sei's ecosystem has over 50 teams, mainly coming from blockchains like Solana, NEAR, Polkadot, and the defunct Terra. “They're teams that have already raised venture funding and launched their applications but felt that their current Layer 1 ecosystems lacked what allowed them to really scale and provide the best user experience, which is why they came to us," Feng said. "All of these teams came over without any incentives."

How is it innovative?

Sei Network will use its 'DeFi optimized' architecture to attract builders to their blockchain. Specifically, there are three differentiating features. Most strikingly, they have a built-in on-chain central limit order-book (CLOB) which is a highly efficient trading method that matches customers' bids and offers. Traders generally prefer order books over AMMs (the mechanism used by most DEXs such as Uniswap) due to the detailed breakdown of asset liquidity, such as order book depth and spread. But until now, CLOBs could not be put on chain due to limitations in speed and scalability. Sei network makes this possible by optimizing execution and settlement for high transaction throughput. The chain bundles orders together and the parallelism allows for up to 0.9 second blocktimes on testnet. It also increases the difficulty for front-running and MEV by incorporating frequent batch auctions.

What are some of the most interesting projects building on the chain?

Despite still being in testnet, at least six DEXes and one structured product protocol were onboarded onto the network. Vortex Protocol, for instance, is a decentralized exchange focusing on derivatives for IBC chains. Geletto is the first luck-based gaming platform on Cosmos. It currently offers lottery games for various IBC assets.

Furthermore, as an IBC-connected chain, they can tap into the wider Cosmos Hub for liquidity, security, and growth. They have, for instance, already announced partnerships with Babylon. Sei Network will also be connected to Axelar and the Gravity bridge, further connecting the chain beyond Cosmos.

What do we predict for the chain in 2023?

The Terra Luna collapse was a heavy hit for the Cosmos DeFi community. But out of the ashes rises a new Phoenix and the Cosmos community is gearing up for a big 2023. Sei network will be an accelerator for the DeFi growth in Cosmos next year attracting high quality dApps to build on an on-chain order-book. We are seeing a very active and engaged #seilors community with over 100k twitter followers and twice that in Discord.

4. Oasis Network

Why are we bullish?

Privacy is one of the most important catalysts for blockchain adoption, especially in DeFi. In the past, the lack of privacy has been significant in withholding widespread adoption by institutions. Oasis Network, built by a world-class team led by Dawn Song, is a scalable Layer 1 blockchain with natively built-in privacy features that allow for innovative use-cases to be built in open finance and responsible data economies.

How is it innovative?

Oasis Network offers scaling solutions by natively offering a modular design principle in which computation and consensus are separated (ParaTimes/computer layer). Because of that layered architecture, Oasis Network cannot only scale but also offer strong privacy capabilities. For example, Oasis allows encrypted data to be processed in a trusted execution environment (secure enclaves). Through differential privacy, where the resulting data is also encrypted, individuals don’t need to give up their privacy while allowing companies to make the most of the data. This creates data as a new digital asset, where the tokenized data can unlock novel use cases and a responsible data economy.

With the recent introduction of Sapphire, developers can now create private dApps not only on the Oasis Network, but also add confidentially to existing dApps on other EVM chains (as a L2) for data storage, governance, and computation. All with little or no additional work to existing code.

What are some of the most interesting projects building on the chain?

The earlier mentioned differential privacy is one of the solutions Oasis Labs is working on with big partners like The BMW Group. Oasis is also cooperating with Meta AI to assess the fairness of its AI models in a privacy-preserving manner, something we believe to be vital for AI adoption. Furthermore, Oasis is cooperating with Genetica to enable the first blockchain-based genomic analysis platform to facilitate precision medicine at scale where users remain in control over their genomic data while reaping the benefits of data contributions.

What do we predict for the chain in 2023?

We expect Oasis to gain substantial adoption in 2023. Sapphire is a groundbreaking advance for Solidity developers and sets the stage for Oasis to become a fundamental building block of a Web3 privacy layer.

Also, Oasis Network has an extensive ecosystem fund that will allow many projects to build on Oasis or get incentivized to integrate their privacy solution for existing dApps.

5. Aleph Zero

Why are we bullish?

Although it has been developed for years, Aleph Zero is a relatively new Layer 1 blockchain that is natively privacy-enhancing and ensures scalability through its DAG with AlephBFT consenus protocol, low transactions fees, and maximum security guarantees. It is developed by Cardinal Cryptography, a highly successful technology company responsible for the research and cryptography underlying this L1, as well as building the infrastructure and incubating use cases.

How is it innovative?

One of the most important pieces of technology currently being built is Liminal, the custom privacy framework of Aleph Zero, which combines ZK-Snark technology with multi-party computation. It can act as both a privacy layer natively on Aleph Zero, as well as enhance other L1s with its privacy technology. Liminal is currently in development with the strong involvement of Cardinal Cryptography and Nethermind, who previously worked on the cutting edge of ZKP with the Ethereum Foundation, Starkware, and others.

What exciting things are being built on Aleph Zero?

The technology of Aleph Zero, as well as being compliance first, allows for building novel use cases. An interesting new projects on Aleph Zero is Gatenox, a decentralized identity and verifiable credentials firm led by Pawel Kuskowski, former Global Head of AML at the Royal Bank of Scotland and the CEO of Confirm. Also, a privacy-enhancing decentralized exchange called Common is currently being build.

What do we predict for the chain in 2023?

The addition of Aleph Zero's privacy layer Laminal encourages companies to build permissioned use cases. Just like custom subnets on Avalanche, we believe the combination of permissioned elements in permisioneless blockchains is vital for institutions. In Aleph Zero's roadmap, the next phase includes an Ethereum bridge and integrating the biggest crypto ecosystem will onboard more projects to be able to leverage Aleph Zero's technology. Moreover, an official grant and incubation program hosted by Aleph Zero Foundation and Cardinal Cryptography will come to fruition in 2023.