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How to use other L1 chains?

How to use other L1 chains?

March 17, 2022
3
 min read

Other L1 chains offer faster and cheaper transactions than Ethereum mainnet. In this guide, we'll cover Solana, Avalanche, and Terra.

By: Peter

Other L1 chains offer faster and cheaper transactions than Ethereum mainnet.

If your goal is to learn web3, you could save thousands in transaction fees by using other L1 chains instead of Ethereum mainnet. 

In this guide, we’ll walk through:

  1. Blockchain ecosystem
  2. Solana
  3. Avalanche
  4. Terra

This guide is not meant to be comprehensive. Our goal is to help you understand how to use these other chains to learn crypto while saving money on gas. You can also explore our NFT and DeFi paths to better understand some of the terms below.

What follows is not investment advice.

Blockchain ecosystem

Before we talk about specific chains, let’s look at the NFT and DeFi ecosystem at a high level:

As you can see, Ethereum L1 still dominates NFT sales (88%) and DeFi total value locked (60%). Other chains are trying to gain traction through the following flywheel:

  1. Attract developers through incentives
  2. Developers build dapps that attract more users
  3. More users attract more developers (back to step 1)

Since Ethereum is so dominant, many chains want to be EVM-compatible. The latter simply means that any Ethereum dapp can be ported over to the new chain without much work. 

Here’s how you can get started with three beginner-friendly L1 chains - Solana, Avalanche, and Terra.

Solana

Great if you want to try amazing wallets and explore NFTs.

Solana has great wallets in Phantom, Solflare, and Glo

Solana is an L1 chain co-founded in 2017 by Anatoly and other ex-Qualcomm leaders (whitepaper). Its native token is SOL.

Solana has amazing wallets, the 2nd highest NFT sales volume behind Ethereum, and a growing DeFi ecosystem. The network did experience several outages in early 2022, but that hasn’t slowed its growth.

To get started with Solana:

  1. Get a Solana wallet: Phantom, Solflare, and Glow are all good options.
  2. Get some SOL: Use an exchange to buy or swap for SOL (e.g., Coinbase, Uniswap).
  3. Explore Solana NFTs and dapps: Visit Magic Eden to browse Solana NFTs or check out Solana’s dapp ecosystem

Avalanche

Great if you want to explore DeFi (decentralized finance)

Avalanche was co-founded in 2020 by Emin Gun Sirer, a professor from Cornell University (whitepaper). Its native token is AVAX.

Unlike Solana and Terra, Avalanche is EVM compatible. That means that any developer can port their Ethereum dapp to Avalanche to enjoy faster and cheaper transactions. Avalanche has a thriving DeFi ecosystem while NFT sales are more nascent.

To get started with Avalanche:

  1. Connect Avalanche to Metamask: Follow the instructions here.
  2. Get some AVAX: Use an exchange to buy AVAX (e.g., Coinbase, Uniswap) or bridge your ETH to AVAX.
  3. Explore Avalanche dapps: Check out Avalanche’s dapp ecosystem.

Terra

Great if you want 20% APY yields and something different

Get 20% APY on stablecoin UST using Terra’s Anchor Protocol

Terra is an L1 chain co-founded in 2018 by Do Kwon (whitepaper). Its native token is LUNA.

Terra’s mission is to bring DeFi to the masses through a suite of stablecoins. The protocol’s foundation is the relationship between its two main tokens: UST and LUNA:

  1. UST is an algorithmic stablecoin pegged to the US dollar ($1 UST = $1 USD). 
  2. LUNA is Terra’s native token used for governance and staking (e.g., letting validators earn fees for processing transactions).

UST and LUNA have a 1:1 relationship with each other: 

  • To create $1 UST, you have to burn $1 in LUNA
  • To create $1 in LUNA, you have to burn $1 in UST

UST is an algorithmic stablecoin because it uses market forces to maintain its 1:1 peg to the US dollar. Consider the following scenario:

  1. UST is trading at $1.05
  2. A user burns $1 in LUNA to get 1 UST and then sells the UST for $1.05, making $0.05.
  3. More users do step 2 to make a profit, driving down UST’s price to its natural peg of $1.

Terra has the 2nd largest DeFi ecosystem by total value locked (behind only Ethereum). Just 18 dapps dominate this ecosystem. Terra’s flagship dapp is Anchor, which offers 20% APYs on UST stablecoins, making it one of the best choices for a DeFi beginner.

To get started with Terra:

  1. Get a Terra wallet: Visit Terra Station and get the Chrome extension.
  2. Get some LUNA: You can buy UST directly on Kraken. Alternatively, you can buy LUNA from non-US exchanges like KuCoin and OkCoin. Either way, transfer the asset to your Terra wallet.
  3. Explore Terra dapps: A great one to start with is Anchor, which offers 20% APYs on UST stablecoins. Use your Terra wallet to swap LUNA to UST if you have LUNA.

We've covered alot of topics in this Intro to Web3 path. Let's summarize a few key takeaways on how you can avoid getting rekt as a beginner.

Up next: How to avoid getting rekt?

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