Layer 1 Blockchains: The Need to Move Beyond Speed
Mitchell Demeter, CEO of Sonic Labs, explains what Layer 1 blockchains must achieve today to remain competitive.
The blockchain landscape has undergone significant changes in recent years, with an increasing number of chains competing for users and developers. Previously, Layer 1 networks competed solely on speed and transaction costs. However, with the increasing commercialization of block space, the key to success now lies in retaining users and developers.
Shifting Strategy
Sonic Labs is shifting its strategy towards building a sticky and long-term value creation model. In an interview with crypto.news, Demeter describes how Sonic is introducing several upgrades to reward token holders and create a more sustainable business model. The goal is to move beyond the speculative phase and focus on delivering real value to users and token holders.
Demeter emphasizes that the real battle now is to attract and retain users and builders. With many fast and cheap chains available, the differentiator lies in creating a unique and stable builder environment. Sonic is exploring various Ethereum improvement proposals (EIPs) to enhance the developer experience and make the chain more stable.
Fee Model and Tokenomics
Sonic’s fee model is also undergoing changes. Currently, the model reimburses 90% of fees to developers and 10% to reviewers. However, this model does not benefit token holders. To address this, Sonic is working on converting the model to a scale model, where builders might get around 15%, validators 10%, and the rest is burned. This will ensure that increased usage benefits token holders.
Demeter also discusses the importance of creating a sustainable funding model and exploring licensing opportunities to fund token buybacks and destruction. The goal is to create a self-sustaining ecosystem that benefits all stakeholders.
Competition and Market Outlook
When it comes to competition with Ethereum and Layer 2s, Demeter believes that Sonic’s flexibility and ability to move faster with protocol changes and experiments give it an edge. He also notes that Layer 2s are ultimately dependent on Ethereum and that Sonic’s own network and distributed validator set provide more flexibility.
Regarding the broader crypto market, Demeter views it as being in a transition phase. With liquidity becoming more scarce and investors becoming more demanding, the focus is shifting from speculation to building real companies with sustainable business models. He believes that most of the pain is behind us and that liquidity will return, driven by fundamentals rather than speculation.
For more information, read the full interview with Mitchell Demeter, CEO of Sonic Labs, on crypto.news.
