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After a prolonged bear market, the crypto winter end is finally in sight. While the last bull market saw many innovations on the application level, like P2E and GameFi, people quickly realised the crypto user experience needs improvement to achieve mass adoption.
With this in mind, this article explores some of the top cryptocurrencies reshaping the industry and providing a better user experience in 2023.
Layer 1s
Anyone who has paid attention to the crypto markets recently has likely been chasing the hottest new layer 2 airdrops. Whether it is Optimism, Arbitrum or, more recently zkSync, the layer 2 narrative has been massively heating up.
That said, a quiet majority still holds most of the market share and is rapidly evolving: layer 1s. While many focus on scaling Ethereum with layer 2 solutions, they suffer more centralisation and rigidity.
On the other hand, some of the most exciting layer 1 solutions, such as Injective and Polkadot, can design their blockchain architecture in a more bespoke and interoperable way. The advantages of layer 1 chains are their customizability, interoperability and decentralisation.
Looking ahead to the end of 2023, we could see much more development on alternative layer 1 chains as projects begin to understand the user experience benefits compared to EVM chains, which require constant bridging on the usersā side.
Layer 2s
While alternative layer 1s has benefits in customizability, interoperability and user experience, Ethereum layer 2 protocols are certainly packed full of their own benefits.
But before we get started, it is important to note why we use Ethereum layer 2s. A layer 2 is a separate blockchain that runs parallel to the layer 1 chain, validating some of the transactions and storing them on its network, and only reporting a small amount of data back up the layer one chain for finality, known as a ārollupā.
First and most obviously, many crypto wallets do not support non-Ethereum Virtual Machine (EVM) chains. This means users who use networks like Injective and Polkadot need to use a separate wallet. That said, Ethereum layer 2 solutions are EVM supported so that users can manage their crypto across Ethereum and the layer 2 chain from one wallet.
Secondly, by reporting back to Ethereum, layer 2 chains benefit from the layer 1s security. This is especially important since Ethereum has a much more robust and battle-tested history of providing a secure service that alternative layer 1s.
That said, the layer 2 protocols are less proven. Still, the innovation and expert development of chains like Arbitrum makes them strong candidates to perform well throughout the rest of the year.
Low cap coins with high potential like Optimism and Arbitrum are known as āoptimistic rollupsā. Simply put, optimistic rollups must publish more data to Ethereum, as they assume all their rolled-up transactions are legitimate.
On the other hand, a zero-knowledge (zk) rollup like zkSync cryptographically proves each transaction is correct on its chain, meaning it stores fewer data on the Ethereum chain.
Both of these methods have their advantages, mainly where data is stored. However, the zero-knowledge narrative will likely gain traction, as optimistic rollups have already seen massive popularity.
Protocol Level Applications
Finally, letās check out some of the most promising decentralised applications that will take the industry by storm this year.
Perpetual DEXs
With the collapse of FTX and the constant FUD of Binance, investors are becoming increasingly aware of the risk of storing capital with custodians. While swapping tokens with spot trading was possible through DEXs, leveraged or perpetual futures trading was not.
However, different projects have recently emerged that allow traders to leverage trade straight from their non-custodial wallet.
The best new cryptocurrency that is a perpetual DEX is GMX, which is built on the Arbitrum chain. With GMX, users can trade Bitcoin, Ethereum and other top cryptocurrencies with up to 50X leverage and zero slippage.
Liquid Staking Derivatives (LSD)
Following the Ethereum Shanghai upgrade that is set to take place on April 12, all staked Ethereum will be unlocked, and a new narrative will emerge: liquid staking derivatives.
In a nutshell, liquid staking is the process of providing your ETH to a validator and receiving a synthetic equivalent in return. At the same time, your ETH is locked, and you are earning a commission.
The synthetic version acts the same as the staked equivalent, meaning you could provide liquidity with it, sell it, lend it etc. Effectively, you can earn much more yield through liquid staking.
Currently, there are many LSD protocols with tokens. Some of the most well-known ones are Lido DAO, Rocket Pool and Frax Share.
Cross-Chain Aggregation
As we mentioned earlier, interoperability is key to a better user experience. However, the Ethereum, Polkadot and Cosmos chains work under different virtual machines, so sometimes the best we can do is make the experience seamless.
One of the best ways to do this is with a cross-chain aggregator. A cross-chain aggregator allows you to swap cryptos across multiple blockchains from one dApp. Better yet, the cross-chain aggregators pull liquidity from various sources, so you will always receive a great price.
Currently, the most popular cross-chain aggregator is Magpie Protocol, which also allows users to track their assets across different chains from inside the app.
Multi-Chain Wallets
Managing crypto on different blockchains is easier if your wallet supports multiple chains or virtual machines. This means you can track and trade crypto from one wallet, no matter the blockchain.
Currently, Ledger is the top multi-chain wallet, and it also offers Ledger Live so that you can interact with dApps across multiple networks.
Disclaimer
The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.