Contemporary retail traders have access to a wide range of different instruments like an advanced trading bot platform or automatic market making. However, many of these tools are realized using upper blockchain layers or on centralized exchanges that take users’ funds into custody. Decentralized solutions on Bitcoin, Ethereum, Cardano, and other L1s are still pretty slow and cumbersome.
The idea of implementing an underlying layer 0 blockchain has been brewing in the industry for quite some time. The pioneering solution is Polkadot with its ability to support multiple chains, facilitate cross-chain transactions, and focus on delivering a flexible development framework that seems to satisfy most teams hoping to create the next big thing in the crypto domain.
We will talk about top layer 0 blockchain technologies and provide interesting options that cater to investors interested in supporting wide-scale technological solutions promising to bring all existing platforms together into a single truly interconnected ecosystem.
What is layer 0 in crypto?
A typical protocol from this category is focused on building connections between other DeFi projects while focusing on the durability and reliability of the architecture aiming at dethroning smart contracts as go-to options for bridging the gaps in the interchain space. These basement networks are capable of solving a plethora of technical issues and can be used for all sorts of purposes including validating data, building unique reward systems, wrapping tokens, etc.
By acting as roots for mainstream mainnets like Bitcoin, Cardano, Ethereum, Solana, and many others, chains like Cosmos or Avalanche want to become foundational elements of the global blockchain infrastructure. It is a noble goal chased by several large projects that have garnered a lot of interest from the community of international investors.
One of the biggest advantages of this particular approach is the seamless integration of technological solutions that do not interfere with protocols of already existing networks. Since many investors and users of $BTC and $ETH are fine with them in the first place and do not want to see massive changes to established security measures, procedures, and frameworks.
How layer 0 works in blockchain
A protocol is a yarn ball of state channels validating information using functionality defined by its users. It is not only a program existing somewhere in the cloud. The real-world infrastructure is also a significant part of the foundation of L0 with nodes, servers, and other types of hardware forming the necessary backbone for all operations.
To make working in the ecosystem effortless and smooth, all architectures must be able to support a variety of consensus protocols including PoW, PoS, proof-of-activity, and others. Various interconnections within the domain are tied together in an improved topology to ensure that the underground floor of the crypto industry delivers on its three biggest promises: better scalability, true neutrality, and adaptability.
L0 also has consensus mechanisms and issues native tokens to ensure that users stay interested in using technological solutions offered by the protocols. In theory, this setup allows for better outcomes for all participants and the industry as a whole providing the necessary incentives for everyone to continuously support the whole blockchain ecosystem.
Benefits of layer 0 networks
The advantages of introducing an additional level to the overall architecture of the crypto domain are quite significant. They promise influential improvement across the board and an easier path toward global wide adoption. Let’s take a closer look at some of the benefits afforded by the introduction of these “basement” technologies.
- Enhanced interoperability. In layman's terms, all mainnets that have exemplary brand recognition operate in isolation from each other limiting accessibility and reducing the chance that a regular person would consider them for day-to-day financial operations. The solution is something like the Polkadot layer 0 technology. At the time of writing, this network supports 100 different parachains allowing users to easily interact with different digital assets.
- Even more scalability. L2 protocols are designed to improve upon the architectures of existing L1s. The solutions are often quite limited in terms of applicability as they are often strongly focused on specific mainnets. On the other hand, L0s are capable of significantly increasing TPS counts for the larger crypto ecosystem. For example, the aforementioned Polkadot handles up to a thousand TPS.
- Heaven for developers. Dapps can be created quickly without the need to lay down the groundwork since many features and frameworks are already in place. One of the most prominent Cosmos layer 0 network features is the SDK allowing developers to build and deploy new blockchains at significantly lower costs.
- Shared data validation. One of the best features of using L0 solutions is the additional security coating provided by the necessity for multiple data validation processes. Targeting individual blockchains is much harder and vulnerabilities are covered by the large number of validators. For example, the Relay Chain on Polkadot has over 300 validators.
- Cheaper transactions. L0 is a great way to significantly reduce fees by offloading operations to networks with lower congestion. L1 like Ethereum and Bitcoin are quite expensive and can be slow at times depending on the load. It is possible to improve these metrics by using an underlying common fabric throughout which information is shared quickly and efficiently.
- Better prospects for the technology. Projects like the Avalanche layer 0 network are designed with future additions and expansions in mind. L0s are flexible and adaptable to ensure that power users and enthusiasts can continue relying on the blockchain ecosystem and develop new tools and solutions without fearing for the longevity of the underlying technological infrastructure.
Since the very concept of this technology is about enhancing the overall efficiency of the crypto landscape, all of its advantages are concentrated in the quest for increased scalability and efficiency.
Layer 0 crypto list
Thanks to the growing interest in this particular sector of the crypto industry, many tokens issued by L0s are quite popular among enthusiasts. While some metrics like market capitalization and price action dynamics may seem unfavorable compared to many L1s, one should remember that the utility and additional features of some L0 tokens have value and practical use cases making up for the difference in the overall cash flow.
Let’s take a closer look at some protocols that act as the underlying floor for the whole crypto industry by offering innovative technological solutions.
Polkadot
This platform is still the most dominant among L0s. The core functionality of this blockchain is delivered through the use of Substrate, the native SDK, that employs Rust libraries and allows for efficient development of decentralized apps that can be directly deployed on the network. At the moment, over 100 different parachains provide additional utility and interchain functionality to a variety of upper platforms like Ethereum, Cardano, Bitcoin, and many others.
The $DOT token has great value due to its involvement in a variety of processes in the Polkadot ecosystem. Holders can participate in governance and vote on important issues. The coin can be staked and bonded. Despite experiencing a significant drop in the Summer of 2022, the token managed to remain quite valuable. As of the time of writing, the market cap is $6.61 billion and daily trading volumes routinely exceed $150 million.
Avalanche
Designed from the ground up as a holistic environment for L1 building, this platform is an excellent choice for developers aiming to create their unique blockchain solutions quickly. The network uses a unique consensus mechanism combining elements of classic and Nakamoto approaches with the main innovation meaning its metastability across all deployed Dapps. The creators of this L0 believe that it is the fastest and most reliable architecture in the entire crypto landscape.
The advantages of the $AVAX token for holders are quite impressive. It is an interesting digital asset that avoids the idea of compounding holdings and trying to remove the potential for centralization completely. Proof-of-uptime and proof-of-correctness are designed to provide the necessary incentives to users and stakers. AVAX has good market dynamics with a $8.3 billion market cap and over $200 million daily trading volume.
Cosmos
The SDK provided by this project is often cited as one of the easiest to work with. The framework allows developers to connect systems using the IBC protocol used by all Dapps in the ecosystem and employ one of the best PoS consensus mechanisms called CometBFT. The popularity of the SDK is apparent as the network has over 250 related Dapps.
The native token of the ATOM chain has been struggling for quite a while, but investors and developers are still enthusiastic about it. The market performance of the coin looks fine with an over $1.6 billion market cap and $83 million daily trading volume. At the highest, volumes reached $1.9 billion and the price was close to $42.65 per $ATOM.
Layer Zero
One of the most interesting layer 0 blockchain examples of recent times is this platform that focuses on an innovative message verification system that unites DVNs (decentralized validators network) into a massive web of nodes that use different methods of verifying a message sent from one blockchain to another. This design ensures that security is unmatched and throughput is higher. At the time of writing, the project had a variety of useful tools for developers including message libraries, execution codes, and more.
The team chose a bad time to launch the product. The overall bearish movement of the market created too many obstacles for the $ZRO token to gain traction. On the other hand, the community of developers is quite strong and optimistic suggesting future growth and improvement as well as price appreciation. Buying low can be a good strategy for investors interested in allocating capital to a digital asset with some potential. At the beginning of July 2024, the market cap reached $991 million.
The future of the sector
This particular list of layer 0 crypto coins does not include projects like GEEQ that failed to captivate crypto enthusiasts with strong performance and robust architecture. While technology and utility are quite important for the success of any given blockchain platform, brand recognition and hype also play a huge role. Some experts argue that technical downfalls are acceptable if enough people support the network. The brief resurgence of the Luna project after its incredible fiasco serves as evidence.
We strongly believe that persistent efforts from the developers can create the necessary level of hype and provide outstanding utility to all users of the crypto ecosystem. However, many L0s still do not have much to show despite existing for over 5 years. It is quite hard to make an educated guess about the trajectory of this sector and how influential capital holders will look at it in years to come.
Many Dapps deployed on the “basement” level are desperately gasping for cash inflows. Tokens are all over the place with some overperforming and others feeling the pressure from the market. It is important to remember that the current period in the history of the crypto market is not the best indicator of the general direction of many tokens. We are once again experiencing a bearish trend that can last for quite a while without any significant price surges.
Many L0s had good performances in the past. These were mostly driven by the promise to deliver something extraordinary. After some time, investors who believed in something too good to be true left, and only dedicated supporters stuck around. We are entering the era of maturation for many of the best layer 0 networks. There is a strong sense of potential improvement and possible price appreciation.
We do not suggest that you should set up an AI trading bot and start focusing on buying everything related to Avalanche, Cosmos, and Polkadot. However, it is important to remember that these projects are designed as long-lasting technological solutions. Their potential is not fully explored and promises impressive returns to investors who have sufficient risk tolerance and can afford to hold tokens in the long term.
The main takeaway
L0s provide a wide range of advantages to the crypto industry as a whole and can solve a variety of issues including congestion and fee structures. Without any doubt, we need these solutions to ensure that the blockchain industry becomes widely used across the globe. At the moment, L1s are inefficient and cumbersome compared to competing systems designed in tradfi. If you are looking for promising investments in the crypto domain, take a closer look at tokens issued by popular L0s like $AVAX, $ATOM, and $DOT.