2022 Edition- Presented by Solana Foundation and Ava Labs

TL;DR 

Many smart contract blockchains built using novel technologies have seen significant user adoption in the past few years. Currently, research and development activity is largely focused on scaling blockchain technologies to accommodate potentially billions of regular users. Several scaling approaches are being experimented on across smart contract platforms:  

• New Layer-1 (L1) technologies: Incorporate novel technologies (e.g., sharding, zero-knowledge proofs, parallel runtime environments, etc.) within monolithic chains. 
• Interoperable chains: An ecosystem of app chains, ideally with high security as well as seamless communication and interaction between them. 
• Sidechain/Layer-2 (L2) solutions: Connect a new chain to an existing chain to leverage its security/decentralization while increasing scalability. 
• Modular approaches: Multiple task-specific chains that leverage the function of one another to fulfill the core functions of a monolithic blockchain – data availability, consensus, settlement, and execution. 

Entities that interact with smart contract platforms can be divided into two groups – developers that build and deploy blockchain-enabled decentralized applications (DApps) as well as the community of end users that interact with the said DApps.  

Major takeaways for DApp end-user communities across ecosystems: 

• End-user adoption trends are a mixed bag: Most ecosystems show a decrease in active addresses coinciding with the downturn in the market starting in late 2021. However, a few individual ecosystems, notably Tron, have defied this trend. Lower market prices also impact the total value locked (TVL) and the average transacted value on-chain, both of which have generally decreased significantly. 
• Low-fee transactions are in-demand: We can see this in the robust numbers for active address and transaction counts for low-fee ecosystems such as Tron and BNB Chain. However, there is sustained strength in demand for Ethereum L1 block space despite its high fees. 
• Multichain ecosystems are growing but have a long way to go: Daily active addresses and transaction counts of app chains and L2 scaling solutions show an increasing trend despite weak market conditions, especially for the rollup-centric Ethereum scaling solutions (e.g., Arbitrum & Optimism).  

• Social metrics show resilience despite market conditions: Interest from the general public is showing strength as measured by the increasing number of Twitter, Reddit, and YouTube traffic. However, recent news events (e.g., FTX collapse, etc.) may be short-term catalysts for the elevated social metrics.  

Major takeaways for DApp development activity: 

• Battle of the execution environments? We observe the emergence of EVM alternatives such as Solana’s Sealevel runtime, MoveVM, WebAssembly (Wasm), MoveVM, and CairoVM that compete for the attention of DApp developers. 
• Decreasing trend in developer activity. The proxies for measuring developer activity in this report show a decreasing trend across all L1s, coinciding with the market downturn since late 202. 
• Ecosystem growth: A thriving blockchain ecosystem relies on a self-sustaining community of developers and end users. Many of the ecosystems discussed have significant funding dedicated toward ecosystem expansion. Funding efforts may include developer grants, native token airdrops, incentivized liquidity mining to increase locked value on-chain, funding developer and community education, strategic partnerships, and many others. 

Outlook and challenges for the smart-contract platform landscape: 

• Fragmented ecosystems: Independent blockchain ecosystems may not have native interoperability with one another due to fundamental differences in their design. Tools that enable trustless messaging/interoperability between incompatible chains (e.g., Ethereum and Cardano) is a lively area of research and development that will be crucial in addressing audience fragmentation and liquidity across blockchain ecosystems. 
• Exploits and hacks: The severity of smart contract exploits/hacks continues to be a major issue. Sophisticated DApps (e.g., money markets, bridges, DEXs, and more) may also require complex code that increases the surface area for malicious attacks. Uncovering vulnerabilities within specific DApps and complex development environments with broad expressivity remains extremely challenging. 
• Discovery of new blockchain-enabled applications: What are the next “killer apps” of blockchain technology? Decentralized finance (DeFi) and non-fungible tokens (NFTs) are examples that have garnered significant interest since 2020, helping bring DApps to the mainstream for the first time. Continued interest from DApp developers incentivized to discover and build innovative blockchain-enabled applications may be an important indicator for the health of the industry as a whole. 

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.