ADVFN Logo ADVFN

We could not find any results for:
Make sure your spelling is correct or try broadening your search.

Trending Now

Toplists

It looks like you aren't logged in.
Click the button below to log in and view your recent history.

Hot Features

Registration Strip Icon for tools Level up your trading with our powerful tools and real-time insights all in one place.

Blockchain Innovation: Powering the Businesses of Tomorrow

Share On Facebook
share on Linkedin
Print

Ethereum’s core chain (Layer 1) has reached its limits, a fact foreseen from the outset. A single chain, no matter how powerful, couldn’t handle the global economic engine.

©

Enter Vitalik Buterin’s vision: a “roll-up-centric” future. This plan involves scaling Ethereum “vertically” by leveraging thousands of connected layer 2 chains, each technically or brand-related to the main layer 1. This vision, once experimental, is now a reality. Today, layer 2 chains boast nearly 10 million monthly active users, compared to layer 1’s 6 million.

Layer 2 chains offer a compelling package: easy launch, lower fees, and innovative use cases, attracting more users than Layer 1. The product-market fit was clear, but deploying these chains presented hurdles. Thankfully, those hurdles are fading. Today, deploying a layer 2 chain is as simple as deploying a smart contract on layer 1. This development boom has unleashed a wave of new layer 2 projects, many enabled by the cost-effectiveness of layer 2 blockspace.

With layer 2 chain deployment becoming commonplace, the focus is shifting from infrastructure creation to building enduring on-chain businesses. Developers can now easily deploy layer 2s, leading the market to prioritize entrepreneurs crafting sustainable, high-growth on-chain ventures. The most successful layer 2s see themselves not as fancy data structures but as true startups. Their mission isn’t just solving scalability; it’s achieving (i) user growth, (ii) innovative monetization strategies, and (iii) cost-efficiency.

Ethereum’s high fees have temporarily “unbundled” the layer 2 stack. The first generation of layer 2s, like Optimism and Arbitrum, were tightly linked to the Ethereum layer 1. This tight coupling, however, proved expensive. Both protocols shell out millions in ETH monthly to Ethereum for settling transactions.

Blockchain financial tech to secure for online payments and money transaction. Fintech with encrypted ledger blocks chained. Caucasian businessman work on virtual hologram, cropped, collage, close up

Entrepreneurs noticed this “lucrative margin” on Ethereum layer 1. Protocols like Celestia and EigenLayer are aiming to “unbundle the layer 2 stack” by offering services to layer 2s at a fraction of the cost compared to Ethereum layer 1—100x to 1,000x cheaper. These competitions will likely push Ethereum layer 1’s core development forward as well.

Within the Layer 2 landscape, two distinct philosophies emerge: building “movements” and crafting user-centric products. This translates to general-purpose vs. application-specific chains, mirroring the technical division of optimistic and ZK rollups.

General-purpose chains envision themselves as the internet’s next asset hub, fostering a broad ecosystem. Application-specific chains, on the other hand, laser-focus on delivering the ultimate user experience for a particular use case (think “XYZ”). In both scenarios, the layer 2 architecture is a seamless extension of the core team’s product vision, not the sole objective.

The competition amongst general-purpose layer 2s is likely to become a “winner-takes-all” affair due to their inherent technical similarities. This market, much like others, is expected to follow a power law where a handful of dominant layer 2s capture the lion’s share of user attention and resources. The current top contenders in the Ethereum layer 2 space, as depicted in the omitted screenshot, exemplify this trend.

Learn from market wizards: Books to take your trading to the next level.

CLICK HERE TO REGISTER FOR FREE ON ADVFN, the world's leading stocks and shares information website, provides the private investor with all the latest high-tech trading tools and includes live price data streaming, stock quotes and the option to access 'Level 2' data on all of the world's key exchanges (LSE, NYSE, NASDAQ, Euronext etc).

This area of the ADVFN.com site is for independent financial commentary. These blogs are provided by independent authors via a common carrier platform and do not represent the opinions of ADVFN Plc. ADVFN Plc does not monitor, approve, endorse or exert editorial control over these articles and does not therefore accept responsibility for or make any warranties in connection with or recommend that you or any third party rely on such information. The information available at ADVFN.com is for your general information and use and is not intended to address your particular requirements. In particular, the information does not constitute any form of advice or recommendation by ADVFN.COM and is not intended to be relied upon by users in making (or refraining from making) any investment decisions. Authors may or may not have positions in stocks that they are discussing but it should be considered very likely that their opinions are aligned with their trading and that they hold positions in companies, forex, commodities and other instruments they discuss.

Leave A Reply

 
Do you want to write for our Newspaper? Get in touch: newspaper@advfn.com