The year 2021 will undoubtedly be remembered as a landmark chapter in the history of the cryptocurrency ecosystem. Fueled by the aftermath of Bitcoin’s 2020 halving and expansive monetary policies from central banks like the Federal Reserve, the crypto market experienced an unprecedented bull run. The total market capitalization surged from $77.95 billion at the beginning of the year to a record-breaking $3 trillion by November.
In parallel with this financial boom, innovations such as DeFi, NFTs, meme coins, GameFi, Metaverse, and Web3.0 redefined digital interaction and value exchange. Milestones like Coinbase’s Nasdaq listing highlighted institutional adoption, while public blockchains—serving as foundational infrastructure for decentralized applications—saw remarkable growth across key metrics.
The DeFi wave that began in late 2020 continued into 2021, attracting millions of users. According to DeFi Pulse, the total value locked (TVL) across DeFi protocols exceeded $24.32 billion by December 27. Dune Analytics reported that the number of unique addresses interacting with DeFi protocols surpassed 4 million by year-end. This surge created fertile ground for emerging blockchains aiming to challenge Ethereum’s dominance.
New chains like Solana, Avalanche, and Binance Smart Chain (BSC) gained traction in the first half of the year, capitalizing on Ethereum’s high gas fees and network congestion. In the second half, as NFTs and GameFi took center stage, specialized blockchains such as Flow and Tezos rose in prominence. Meanwhile, major upgrades—including Ethereum’s London hard fork and Polkadot’s parachain auctions—set the stage for long-term transformation.
Let’s explore the defining narratives of the 2021 public blockchain landscape.
Ethereum Maintains Leadership Amid Scaling Challenges
Despite fierce competition, Ethereum retained its position as the undisputed leader in the blockchain ecosystem. ETH price climbed from around $750 at the start of the year to a peak of $4,860 in November, settling near $4,050 by year-end—a more than 50% increase. Its market dominance also grew from 11% to 21%, underscoring its central role in crypto.
👉 Discover how Ethereum continues to shape the future of decentralized finance and smart contracts.
While plagued by high transaction costs and slow processing speeds, Ethereum’s robust developer community and extensive ecosystem kept it at the forefront. Most new projects still launch on Ethereum first before expanding to alternative chains—a strategy known as multi-chain deployment.
A pivotal development was the implementation of EIP-1559 during the August London upgrade. This change introduced a fee-burning mechanism that has permanently removed over 1.24 million ETH (worth ~$5 billion) from circulation, shifting Ethereum toward a deflationary model. Analysts estimate this could absorb up to 4% of annual ETH issuance, creating long-term bullish pressure.
On the scalability front, Ethereum advanced its Layer 2 (L2) roadmap significantly. Major rollup solutions—Optimism, Arbitrum, zkSync, and StarkWare—secured substantial funding, with Optimism and Arbitrum launching mainnets. L2BEAT data shows that Layer 2 TVL reached $5.6 billion by late December, led by Arbitrum with $2.52 billion (44.99% share).
Although L2 solutions face technical limitations and skepticism, they represent a critical step toward sustainable scalability. Ethereum remains not just a platform but a trendsetter—its evolution influencing the entire industry.
The Battle for Second Place Heats Up
While Ethereum dominates, the race for second place has become one of 2021’s most dynamic battlegrounds.
According to Defi Llama, Terra leads non-Ethereum chains with $20.89 billion in TVL, followed by BSC ($17.27B), Avalanche ($12.27B), and Solana ($12.25B). Ethereum’s TVL remains nearly eight times larger than Terra’s, but these challengers are carving out significant niches.
Binance Smart Chain: The Early Mover
BSC capitalized on Binance’s massive user base and low fees to attract DeFi projects rapidly. In Q2, it frequently ranked second in TVL, offering a compelling alternative to Ethereum for yield farmers and developers.
Solana: Performance-Driven Growth
Solana differentiated itself through speed and developer incentives. By hosting high-reward hackathons—like the May event that spawned 326 new projects—it built momentum organically. Backed by FTX and its founder SBF, Solana now hosts over 5,985 open-source repositories and 1.6 million Phantom wallet users.
Avalanche: Bridging Speed and Incentives
Avalanche enhanced its cross-chain bridge in July using Intel SGX technology, reducing transfer time from minutes to just 10 seconds and cutting gas fees to one-tenth of Ethereum’s. The $180 million Avalanche Rush liquidity mining program further accelerated adoption.
Notably, Avalanche’s fee-burning mechanism mirrors EIP-1559, fostering scarcity and boosting demand for AVAX tokens.
Fantom and Terra: Innovation Meets Utility
Fantom used similar tactics—cross-chain bridges and liquidity rewards—to grow TVL 50-fold within days, peaking at $5.78 billion. Meanwhile, Terra emerged as a standout with its stablecoin-focused vision.
Terra USD (UST) surpassed DAI as the largest decentralized stablecoin, backed by a robust on-chain financial ecosystem including DEXs, lending platforms, and derivatives. Its companion app Chai already had tens of thousands of users in South Korea before 2021. LUNA’s market cap entered the top 10 cryptocurrencies.
These new chains alleviated Ethereum’s congestion but raised concerns about decentralization—a trade-off between performance and principle.
Cross-Chain Bridges Surge Amid Security Concerns
As multi-chain usage grew, so did demand for cross-chain bridges. By year-end, over 100 bridge projects existed—up from fewer than 40 in September.
Dune Analytics reported $25.23 billion in total bridge TVL. Top performers included:
- Ronin Bridge: $6.78B
- Polygon Bridges: $6.66B
- Avalanche Bridge: $6.14B
- Arbitrum Bridges: $2.58B
- Fantom Anyswap Bridge: $1.42B
Two models emerged:
- Native bridges built by chain teams (e.g., Arbitrum Gateway)
- Third-party protocols like Multichain (formerly Anyswap), cBridge, and Hop Protocol
Multichain raised $60 million from top-tier investors like Sequoia Capital, signaling strong confidence in cross-chain infrastructure.
However, bridges remain high-risk due to their complex architecture and concentration of assets—prime targets for hackers.
Polkadot and Cosmos: The Cross-Chain Contenders
Despite their potential, “cross-chain titans” Polkadot and Cosmos underperformed expectations.
Polkadot launched its long-awaited parachain auctions in late 2021—a milestone allowing projects to connect to its relay chain. Yet DOT’s price declined post-auction due to high entry costs; securing a slot requires locking millions in DOT tokens, deterring early-stage builders.
Cosmos, though quieter, achieved solid progress. Its Inter-Blockchain Communication (IBC) protocol processed over 5.8 million transactions, with 25 chains connected within eight months. Notably, Terra is built on Cosmos SDK—proving Cosmos’ foundational influence.
IBC plans to integrate Bitcoin, Ethereum, Polkadot, and others in 2022—potentially unlocking massive liquidity across siloed networks.
NFT-Focused Blockchains Gain Momentum
As NFTs surpassed DeFi in user engagement—DappRadar recorded over 3.31 million weekly interactions by July—dedicated NFT blockchains gained traction.
Flow: Mainstream Appeal Through NBA Top Shot
Flow, developed by Dapper Labs, went viral thanks to NBA Top Shot, which attracted mostly non-crypto fans—only 20% were seasoned crypto users. Flow supports other NFT ventures like Chainmonsters and Genies.
WAX: The "King of NFTs"
WAX claims capacity for 2 million weekly transactions and brands itself as the “King of NFT.” It hosts 27 NFT games and targets mainstream collectors with low-cost entry points.
Tezos: Sustainable and Affordable
Tezos emphasized eco-friendliness and low fees. Its platform Hic Et Nunc became popular among digital artists for affordable minting and trading—some pieces cost just a few dollars or are free.
A PwC report highlighted Tezos’ energy efficiency: after transitioning to PoS consensus, its network consumed less energy than 17 average global citizens despite processing 50 million transactions.
Emerging Trends and Future Outlook
Beyond headlines, several projects advanced meaningful innovation:
- BitTorrent Chain (BTTC) launched by TRON and BitTorrent aims to enable heterogeneous cross-chain interoperability.
- DFINITY introduced the "Internet Computer" on May 8—a bold reimagining of cloud computing on blockchain.
- Algorand optimized scalability and compliance, achieving TPS 125x higher than Bitcoin.
- Near Protocol and Conflux expanded their Layer 2, DeFi, NFT, and cross-chain capabilities.
- EOS, once hailed as “Blockchain 3.0,” faded into irrelevance after losing key leadership and momentum.
Frequently Asked Questions (FAQ)
Q: Why did Ethereum remain dominant in 2021 despite high gas fees?
A: Ethereum’s strong developer community, extensive tooling, and first-mover advantage kept it central to DeFi and NFT innovation—even as users explored alternatives.
Q: Which blockchain had the most successful NFT ecosystem in 2021?
A: Flow stood out due to NBA Top Shot’s mainstream success, bringing millions of new users into crypto through sports memorabilia.
Q: What is the significance of EIP-1559 for Ethereum?
A: EIP-1559 introduced fee burning, reducing ETH supply over time and contributing to a deflationary economic model—a major upgrade for long-term value accrual.
Q: Are cross-chain bridges safe?
A: While essential for interoperability, bridges are vulnerable to exploits due to their complexity and high asset concentration—security remains a top concern.
Q: Can any blockchain overtake Ethereum?
A: Not yet. While Solana, Avalanche, and Terra made gains in specific areas like speed or stablecoins, none matched Ethereum’s overall ecosystem depth or resilience.
Q: What does “multi-chain future” mean for users?
A: Users now interact across multiple blockchains via bridges and wallets like MetaMask or Phantom—enjoying better speeds and lower costs while managing diverse portfolios.
👉 Explore how multi-chain strategies are shaping next-generation crypto investment approaches today.
In conclusion, 2021 marked a shift from single-chain dominance to a diversified, multi-chain reality. Ethereum remains dominant but no longer unchallenged. New players succeeded by addressing real pain points—cost, speed, niche use cases—while cross-chain infrastructure matured amid growing demand.
This era of experimentation laid the foundation for broader adoption—one where innovation thrives across ecosystems rather than within isolated silos.