Research Report on the Eco_ Development of Public Blockchains

Abstract
There are few projects on the public blockchain which can withstand the turbulence of the market. Since 2021, public blockchains have been progressing in terms of investment, financing and ecosystem innovation. Therefore, this report will do the research on the token market, operation and status quo of public blockchains with the approach of focusing on the problems that exist in the ecosystem, while providing suggestions for improvement.


Summary
◆ In the last six months, many public blockchain projects have been active in the market in terms of investment and financing. The projects include Polkadot and Kusama’s Layer0 underlying cross-chain, Solana’s Layer1 technological innovation chain, Layer2/ Sidechain’s problem-solving technological chain, BSC and Heco’s exchange brand public blockchain, and ICP’s assumption public blockchain of next generation. There are various features in these five public blockchain projects.

◆ The token market for public blockchains shows a similar trend, where SOL, Matic and BNB have been developing at a stable rate, but their cognition of the ICP market needs improving. Solana produces and processes blocks at the highest speed; Polygon has the most daily trading volume and newly added users; GateChain TPS has the highest level with 2000. It is out in front of its competitors in the industry. The cross-chain public blockchain also has the highest rate of active users. The number of users have been accumulated recently after the launch of ICP.

◆ BSC has a rich variety of ecosystems. Polygon onboards a large number of mature ethereum projects, and also has numerous Polkadot native projects. Solana attracts a large number of projects with its high performance. Most ecosystems of public blockchains fall under the umbrella of Decentralized Finance. Polkadot’s fund supports many projects within their ecosystems, while ICP focuses more on the infrastructure.

◆ The public blockchain projects are dynamic. The first phase of Kusama's parachain slot auction has come to an end, which will give insight for future Polkadot slot auctions. There is an outburst of fund raising in Solana projects. With the help of well-known institutions, future projects are being funded to help build their ecosystems.

◆ There are many similarities between public blockchain projects as well as intense competition. With the booming token market, there are too many projects that are surplus to the demand of users, which has impeded the development of blockchains. To address this issue, projects in the market need to develop in different ways and reform the supply issues. DAO and public blockchain funds on the ecosystem can offer support. When it comes to the more developed projects in the cryptocurrency space, the expansion and retention of user flow as well as the optimization of users’ experience is pivotal.

◆ The supply and demand side in the cryptocurrency market largely rely on the booming
development of the token market. There is a mismatch between supply and demand of
projects in the ecosystem. The Purple Ocean Strategy focuses on the basic demand of
users. When the value of projects has been fulfilled, users will support the public
blockchain, and vice versa.


1 The Differences in the Technology and Development Path of Diverse Public Blockchains
After 2017, the industry faced the "Cambrian Explosion" of public blockchains, which temporarily became the most appealing path for investors. Numerous projects claiming to be the strongest and the best public blockchain emerged in the crypto market. However, due to the fierce and intense competition amongst public blockchains, very few projects could maintain their vitality and popularity. The determination of a team and financial backing play a vital role in the sustainable development of projects. Value is created through the development of the project's ecosystems.

In 2021, apart from Ethereum, there have been many standout public blockchains in terms of development, ecosystem structure and overall token value. Recently, Gate.io Research published a report called “The Application Value and Development Trend of Blockchain.” The report discusses the development of certain public blockchains from the perspective of financial strength, industrial structure and various technological features. In this report, the author further analyzes public blockchains based on which projects have actively operated in recent six months. With the approach of survey sampling, the author divides them into five sections: layer0 base cross-chain, layer1 technological innovation, layer2/sidechain processing technology, exchanges’ official public blockchain, and next generation public blockchain ideation. (Note: the existing layer2/sidechain has similar functions to the public blockchain, such as constructing Dapps. Therefore, this report bases its research on the public blockchain.)

1.1 Layer-0 Base Cross-Chain
Generally speaking, public blockchain projects are constructed on the basis of consensus and single-chain design. Taking Ethereum as a paradigm, while Polkadot and Kusama put forward the concept of Layer0. There is a unique path for the construction of multiple chains, which broadens the horizon in terms of building blockchains. Relay Chain enables each independent chain (Parachain) to be interconnected. Interoperability increases the network effect across chains and creates more on-chain opportunities for innovation.
Considering Kusama is the antecedent network of Polkadot and its basic technical framework is similar to Polkadot's, this section will focus on Polkadot.

● The Relay Chain is at the core of the Polkadot ecosystem. It is responsible for the security, interoperability and consensus of the entire system;

● Parachains are independent chains with their own consensus, autonomous sovereignty and ecosystem, which allows for the transmission of tokens and data information on the RelayChain.

● Bridges are special blockchains that can communicate with external blockchains like Ethereum and Bitcoin.

● Polkadot is constructed on top of Substrate. Its state machine WebAssembly (Wasm) is used by Google, Apple, Microsoft and other professional companies, to build high-performance virtual environment; Libp2p, a cross-platform networking framework, is the targeted standard for future DApps.The ecosystem was built using three specific types of code, Rust, C++, and Golang.

1.2 Layer1 Technological Innovation
Solana is ahead of its competitors in terms of technological innovation on the Layer1 public blockchain. It is committed to creating public blockchains with a high TPS and high scalability by using PoH and PoRep. Solana's goal is to accommodate up to 710,000 transactions per second on a 1 gigabit network without data fragmentation. According to their official website, Solana has eight key innovations, of which the combination makes Solana the world's first network-scale blockchain.It is estimated that Solana will be able to accommodate 710,000 per second on a 1 gigabit network.

1.3 Layer2/Sidechain Processing Technology
Ethereum's high handling fees and scalability issues is what inspired the layer2/ side chain. It is an ideal solution for optimization. Polygon, which was formerly known as Matic has also become popular. Polygon is expected to become an aggregator of Ethereum Layer2 solutions, enabling desirable functionality performance that is currently hard to achieve on the Ethereum network.

Polygon currently has two compatible paths for increasing capacity: Secured Chains (Layer2 Chain) and Standalone Chains (Sidechain).

● Secured Chains rely on Ethereum for its verification mechanism and safety. They support capacity expansion schemes, such as MaticPlasma (implemented), Zk Rollup, Optimictic Rollups and Validum Chains. The scheme is suitable for application projects with strict safety requirements.

● Standalone Chains are independent of Ethereum and have their own verification procedures, which is responsible for its own security. They support PoSChain (implemented), Sidechain, PoSChain and Enterprise Chain. This solution is suitable for projects that have their own decentralized networks and security, whereby they achieve greater independence and flexibility.


The competitive landscape for cryptocurrency exchanges first took shape in 2017, when cryptocurrency was in a bull market. In 2020, driven by Decentralized Finance, Binance, Huobi and OKEx, have made major moves in public blockchains. At present, the ecosystem construction of the BSC and Heco chains are in full swing. On the one hand, the success of the exchanges’ public chain lies in the technological reference and innovation under the framework of the gradually mature public blockchain. On the other hand, what is more important is the support of brand influence, public credibility and the advantages in flow which originated from the exchanges themselves.
There is not much technical disclosure about BSC and Heco, which are favored by application project sides essentially because of their special "weak bond" with exchanges. Meanwhile, exchanges actively create ecological funds to attract project sides to build applications on the chain. Building a public blockchain itself is not the purpose of the exchanges, whose vision is to cultivate a complete blockchain ecology based on the exchange's trading ecology by introducing the flows and providing financial support, so as to form blockchain ecological closed loops of technological innovation, project research and development, application landing and trading liquidity.
GateChain has a clear development direction which is focusing on user’s asset security and decentralized trading. The original online hot insurance accounts and the design of supporting trading models realize a safe guarantee for settlement. The innovations of the project mainly include: account models of Vault Account mechanism on the chain, RTM (Revocable Transaction Model), and the main chain structure based on Gatemint underlying consensus protocol.

1.5 Next Generation Public Blockchain Ideation
There are many types of public chains ranging from the established public chains like ETH, EOS, TRON, to the latest trending ones like Algorand, Near, Nervos, Polkadot, Cosmos & Filecoin. There are many public blockchains that are currently aiming for a long term solution. Many of them are working on innovative solutions like cross-chain transfers, capacity expansion and scalability while we have some like Internet Computer Protocol (ICP) which are making paths for future blockchain projects
ICP aims to become a "world-class Internet computer", a global computing platform by improving the functions of public Internet and enabling it to escrow back-end softwares. In ICP, instead of using server computers and commercial cloud services, developers can create websites, enterprise IT systems, and various Internet services by installing codes on public networks.

ICP is designed in a hierarchical structure, with the base layer being an independent data center that escrows exclusive hardware nodes. The nodes are then combined to create the subnetwork “Subnets” on top of which are “Canister smart contracts” that store code and status information. The innovation of the ICP network mainly lies in the consensus mechanism, governance mechanism, encryption key management and so on. Theoretically speaking, the scalability and computing capability of ICP can be expanded indefinitely.

Public blockchain serves as the underlying infrastructure, whose development
progress and quality are the benchmark for measuring the development of the overall
blockchains. The market value of any coin for a particular blockchain depends upon how its core technical capabilities handle the tests of users and the market. This section will analyze the
development of public blockchain projects with high vitality in the recent six months
from the perspectives of token market performance, block operation, ecological
layout and other trends.


2.1 The Market Performance of Public Blockchain Tokens
Given the market price of each public blockchain coin, it has had a similar trend to that of the entire cryptocurrency market in the recent six months. The price has risen all the way from the beginning of the year till the mid of May, and then has heavily corrected. Using [0.4,0.6] as the measurement standard, SOL rises steadily and falls in a small range, with a relatively stable performance in general. Matic and BNB also performed steadily after the downturn of their respective prices. DOT has a strong momentum in growth but has a wide range of decline. KSM has a similar trend to HT and GT. ICP was launched at the top of the bullish market, and the price reached its peak and then fell sharply, of which the contributing factor is the lack of market recognition due to the launch within a short period of time.
1 In order to offset the huge gap between the unit prices of different tokens, the price data has been generalized and all the data have been mapped in the range [0,1]. The generalization formula is Xt*=（Xt-Min）/（Max-Min), where Max and Min are the maximum and minimum values of the unit price in a given period.

2.2 The Operation of Public Blockchain
We browsed through the official websites and blockchain explorers of each public blockchain project to collect the relevant data for our study on how the public chain projects operate. According to the survey, among all the projects, Solana has the highest speed in producing blocks with its TPS being highly efficient and doing justice to its slogan "The World's Fastest Public Blockchain". In terms of trading volume and the number of users, exchanges’ public blockchain have a clear victory. BSC is currently the most active public blockchain. Meanwhile, the Layer2/sidechain Polygon is gathering momentum in terms of development, whose total trading volume ranks next to Heco, but Polygon has a large daily trading volume, and the number of users newly added daily tops the list. Polkadot and Kusama have a small total number of users but have the highest rate of active users. ICP has been online for a short time, and there is not much information available regarding it. However, the total number of users for ICP has reached more than 160,000 within a short period of time which is close to Kusama’s numbers.The current block height of GateChain is around 1208074, with a total trading volume exceeding $430,000 while the total number of accounts exceeding 28,000. GateChain’s highest TPS has reached up to 2031 and hosts trading processing speed which is among the best in the industry. (Note: There can be a deviation in the data due to the dynamic change, and the statistical caliber about the date may also have a deviation because of different information disclosure.)

The overall development of the public blockchain ecosystem is the key to its future success in terms of their market value. Currently, BSC hosts the most number of projects on its chain among the 7 samples we have mentioned so far. Since its launch in September 2020, BSC has developed rapidly and there have been various applications of it. Polygon has been doing pretty great where it has been capturing a number of mature projects from Ethereum blockchain as it provides them more room for better efficiency. Polkadot has also been performing great where it has hosted a number of projects that have got a good number of audience in the recent times.Solana has also deployed many features to its blockchain network which has helped it attain high trading throughput and seb-second latency time. Heco focuses on decentralized, efficient and energy-saving public blockchain. In fact, one month after its launch, Heco became the public block chain with the highest lock-up assets and the largest number of active users. GateChain on the other hand features trading and asset security. The project on the GateChain “Hipo DeFi” supports DeFi trading with multiple currencies and wallets, as well as NFT trading and cross-chain. Currently, more than 20,000 NFT commodities have been launched.


In the blockchain ecosystem, DeFi seems to be the main theme of public blockchain projects and finance can play a great role in it. Polkadot and Solana have a relatively more complete ecosystem layout while BSC and Heco have an advantage in terms of liquidity. NFT and other gaming projects can offer a smoother experience on Polygon. The Polkadot fund supports many projects within their own ecosystem. ICP, which builds the next generation of Internet, is going through continuous research and development, paying more attention to technological innovation and infrastructure development which also practically implements enterprise projects. With a great business acumen, its ecosystem construction in the future is worth the hype and expectation. (Note: As there are many tracks of ecological projects on the public blockchain, and various categories can be overlapped, only major tracks are hereby displayed.)

In view of DeFi projects, TVL is an indicator to measure their scale and market acceptance. Ethereum is the pioneer of DeFi outburst, but now the development of DeFi on BSC and Heco can compete with it. At present, the total volume locked of PancakeSwap is 6.5B more than that of Maker, ranking the fourth of ETH total value locked, and closely follows Curve, ranking the third, with 8.4B. Heco's MDEX project can also rank in the top 10 of DeFi total value locked on the ETH chain.

2.4 The Progress in Other Aspects
2.4.1 Kusama: The first phase of parachain slot auction has come to an end
As the precedent network for multi-chain Polkadot, Kusama has been in the spotlight during recent parachain auctions. The first phase of the five-slot auction came to an end on July 20. In addition to Statemine, the charity chain that was originally assigned to the free slot through governance, the projects that won slots in this auction include Karura, Moonriver, Shiden, Khala and Bifrost.

Karura is a one-stop DeFi hub, which is Acala's precedent network in Kusama, laying the foundation for future Acala auctions in Boca slots; Moonriver is an Ethereum compatible smart contract platform and Moonbeam's precedent network. Smart contracts are an essential part of the future Boca relay chain. Shiden Neiwork, which provides smart contracts for Kusama, is a precedent network for the Plasm Network; Khala is a Web3.0 privacy protection infrastructure that provides privacy computing services. Bifrost provides liquidity for pledged assets and belongs to the DeFi track.


2.4.2 Solana: There is an outburst of financing in the projects, which are also aided by well-known institutions
According to incomplete statistics, Solana appears frequently in blockchain investment and financing recently. Taking the financing status of Solana ecological projects in the first half of June as an example, 70 cases of overseas blockchain investment and financing were counted in total during that period, with those related to Solana accounting for nearly 10%, such as Apricot Finance on the DeFi platform, Synthetify, Symmetry, Parrot Protocol and Jet Protocol, etc. And Solana Labs, the venture capital department of Solana ecosystem, received the largest funding of $314 million, led by A16 and Polychain Capital. This fund is used to launch the incubator and provide financial support for Solana's future ecological layout.


3 Analysis on the Reasons of Similarity and Congestion in the Ecological Projects
3.1 The Excessive Supply and Similarity: The Reform on the Supply Side
It is generally acknowledged that before the launch of Ethereum 2.0, there is the best window period for the development of various public blockchains. And the development of public blockchain infrastructure provides opportunities for the deployment of various DApps. Defi-themed projects are the most eye-catching among the new projects. On the one hand, admittedly, they make the blockchain industry prosperous, but on the other hand, there are also complicated phenomena. In terms of existing projects on the market, they seem quite similar, let alone those inferior projects, which made maliciously expropriation and absconded halfway through the project. For example, in the leading projects of lending, there are Aave, Compound and Maker, which have their own features in security, business innovation and interest rate mechanism design. There are still a large number of new lending projects emerging in the market, but many of them sink under the red ocean. On the one hand, it may result from the lack of innovation or operation and promotion of the project, which holds little attraction for users. On the other hand, it is time-consuming for investors to select from a large number of similar projects.

When it comes to the real-time number of users (7Days) in each DeFi project, except TOP14 leading projects exceeding 10K users, and TOP28 exceeding 5K users, which have relatively active users, other projects seem inactive in their activities. TOP100 project users are all below 1K (which may be affected by the recent market crash). Seen from the real-time number of users (24Hours), the projects have a slack period. The star project Aave24H has less than 3K users, while Aave V2 is only slightly more than 700, and Synthetix, the leader of synthetic assets, is less than 200. Some of the leading projects have a limited number of active users, which is evident in other DeFi projects.

The Research believes that the main reasons are as follows: 1. The open source of the development on the chain: with continuously mature technology of blockchain, and many development codes being open source, the threshold and cost of project research and development have been greatly reduced. 2. The rapid prosperity of the market has attracted many projects, but their experience is insufficient. There are quite a few cross-industry participants, and there is not enough innovation of the core technology developers and. 3. The implementation of blockchain technology (Web3.0) is still at the preliminary stage, and the decentralized supervision and project management mechanism is not complete. The disorderly implementation of projects may appear naturally.

Fortunately, innovative projects or tracks are also being developed. For example, in the field of decentralized finance, in addition to the common tracks such as lending, stable currency, synthetic assets and anchored assets, some projects are exploring new aspects such as volatility protocol, option protocol and digital securitization. Oversupply is the result of congested and similar tracks. In the past, intense competition in the stock market compressed the market space, where scattering tracks and supply-side reform may be the solution. Starting from the supply side, the tracks scatter on the pain points existing in the world below the chain. At the technical level, they make innovations while ensuring safety. In terms of business model design, more application space has been opened up and progress on the incremental track has been made; when it comes to the chain level, decentralized autonomous management of DAO is an ideal solution. DAO members act as supervisors and make open and democratic decisions on the improvement, upgrading and development of project schemes through voting of project believers or participants within the ecosystem. In addition, public chain ecological funds can also play a positive role. For example, Gate Grants provide $10K to 100K for free to realize innovative ideas. With the support of the fund, the projects will no longer be constricted by financial investment. Instead, they can build the castle of blockchain value through strategic and professional investment.

Given existing relatively mature tracks, innovation may not be the top priority. Ecological operation and the introduction and retention of user flow are the most important. And the regular and sustainable development of the project is the goal. Therefore, projects that focus on the user interaction experience and keep the product and business attractive will have long-term advantages.


3.2 The Demand for Matching and Creation: The Purple Ocean Strategy
On the one hand, the reason for the sudden surge of projects lies in the prosperity of the supply side; on the other hand, constant iteration of demand is the accelerator that promotes this situation. At the stage of project blowout, the supply-side prosperity is caused by the upsurge of token market value, while the attraction of considerable profits in the cryptocurrency market contributes to the demand-side boom, which is more about the trading demand. As a result, the demand of projects does not really come from the application of the project itself. This mismatch between supply and demand often leads to a vacuum in project application and inefficient use of funds, which is in great need of change so that blockchain can have a far-reaching and sound development.

It is relatively easy to match demand, for example, by bringing offline lending business onto the chain so as to develop various lending operations. Consequently, demand is matched, but offline bank lending business can have advantages in operation and marketing, fund volume and compliance regulation. While on the other hand, online businesses lose their strengths for lack of permission, openness and transparency. It may not be a once-for-all solution to attract users by using high rates of returns or lower interest rates. In addition, many projects design products in the name of blockchain, but the landing value of products is doubtful, and the level of matching demand has not been fully achieved.

In order to match and create demand, we can learn something from conventional business logic, listening to customers on the demand side, abandoning simple and coping thinking for marketing sales funnels, and encouraging the landing of more realistic business application scenarios connected on and off the chain. It has been a year since last DeFi Summer, and this is a highly competitive red ocean market as well as a blue ocean market where there is still room for exploration. Such tracks as HashRate distribution, data storage on the public blockchain are mostly just the same. As for this situation, "Purple Ocean strategy" can provide development ideas on the demand side.

Purple Ocean strategy is based on the insight into consumers’ needs and creates a more efficient value chain that meets the core needs of target customers by allocating resources to the cost, efficiency and value of the original value chain. Just as Amazon separated the e-book market from the Red Ocean of book sales; Xiaomi found new routes such as high cost-efficiency, e-commerce model and user orientation from the mobile phone market. And the blockchain industry can also be the case, for example, lending projects targeting the Business market can enhance the value of capital utilization (such as Aave and Compound); the application of blockchain technology can upgrade the next generation of Internet (such as ICP). Once the value of these projects are recognized by the market, it will also support the public blockchain project itself, forming the ideal layout of the public blockchain ecosystem.


4 References
1. Polkadot White Paper. Available at: https://polkadot.network/PolkaDotPaper.pdf
2. Solana-Developer. Available at: https://solana.com/developers
3. Polygon White Paper. Available at:https://polygon.technology/papers/
4. Dfinity-Technical. Available at:https://dfinity.org/technicals
5. Gates V . RTM: Blockchain That Support Revocable Transaction Model[J],2020.Available at: https://arxiv.org/abs/2001.11259
6. Chris McCann. DeFi Infrastructure 101 — Overview & Market Landscape[N],2021.Available at: https://medium.com/racecapital/defi-infrastructure-101-overview-market-landscape-78e096a85834
7. Polkadot Labs. 波卡能从 BSC 和 Solana 的崛起中学到什么？[N],2021.Availableat: https://www.chainnews.com/articles/600757267244.htm
8. Mika Honkasalo. Development Comparison Between Layer 1 Blockchains[N],2021.Available at: https://www.theblockresearch.com/development-comparison-between-layer-1-blockchains-108166


Statement
To issue this research report, we hereby make the following statements:
■ This report is a conclusion drawn by internal members with all due effort of survey and objective analysis, aiming at conducting research and analysis on the blockchain industry, which cannot completely predict the impact on price of tokens in relevant projects.
■ This report is not a tool to measure the value of the research object or the value of tokens issued by relevant projects, and the sole basis for investors to make their final investment decision.
■ All the materials of the projects in this report are sourced from reliable and accurate internal channels. Due to artificial or mechanical errors, information prevails when it is acquired in the first place. Internal members have verified the authenticity and accuracy of all the materials, but won’t make any explicit or implicit statement or guarantee.