I believe I’m not the only one who has noticed the “uncanny” interest in layer 2s. It’s like developers were given a manual on which was written “launch a layer 2 or don’t launch at all.” You can tell with the high influx of layer 2 networks which launched this year alone. Currently, the majority of layer 2s are built on the Ethereum blockchain.

Scroll, Arbitrum, zkSync Era, Optimism, Polygon zkEVM, Immutable X, Linea, Mantle, to mention but a few. Now this article isn’t really about new projects launching as layer 2s but old crypto projects launching their own layer 2s. I can explain.

Coinbase’s Layer 2 Network - Base

On the 9th of August, Coinbase (a popular US-based crypto exchange) launched its own layer 2 blockchain called Base. Base is an Ethereum layer 2 network built with the aim of improving developers’ ability and ease of running dApps on Ethereum.

It is a fully EVM-equivalent layer 2, meaning it makes slight changes to the current state of Ethereum in order to fasten the speed at which it generates zk proofs. You can read more on the different types of zkEVMs here

According to the website, the goal of Base is to onboard 1 billion users to cryptoeconomy. The popular layer 2 has grown significantly in the past few months. As at the time of writing (November 18th), Base has $284.91m in TVL and over 50,000+ active addresses daily, according to DeFiLlama.

Shiba Inu’s Layer 2 Network - Shibarium

I kid you not. That famous meme token now has its own layer 2 blockchain. Shiba Inu grew in popularity in 2021 after a massive pump which made people millionaires and probably billionaires. Although the token has been criticized, along with other meme tokens, to be just pump and dump schemes, but apparently, Shiba Inu is proving to be more than just that.

On 16th of August, Shiba Inu launched its own layer 2 blockchain called Shibarium. The layer 2 runs on top of the Ethereum ecosystem. It was developed with the aim of increasing Shiba’s TPS and lowering transaction costs. $BONE is the native utility token to be used on the new layer 2 blockchain.

Shibarium’s launch started on a rocky path as users’ transactions got stuck in pending state. However, the issue was resolved two days later and the network has been up and running since then.

As at the time of writing, Shibarium has $683,262 in TVL which significantly declined from its $1.47m in TVL as at August 30th.

BNB Chain’s Layer 2 Network - opBNB

A month after Base launch, another crypto exchange opted to launch its own layer 2 blockchain. Binance (one of the most popular crypto exchanges used globally), responsible for BNB Chain, a blockchain network launched its own layer 2 blockchain on September 13th. Called opBNB, this layer 2 was developed as a scaling solution for BNB Smart Chain but is compatible with Ethereum. It was built on the Optimism OP stack, hence the prefix, op.

As at the time of writing, opBNB has $2.09m in TVL.

It is worth mentioning that the exchange also launched zkBNB on mainnet a year before opBNB launched. On September 8th 2022, Binance announced the launch of zkBNB, a layer 2 rollup built using zk proofs. The launch might not have made headlines like opBNB’s mainnet launch but it sure entered the zero-knowledge race.

Kraken Layer 2 Network - plans reportedly underway

Kraken is reportedly exploring and diving into the layer 2 tech. Earlier this month, an article by CoinDesk stated that Kraken was looking to partner with leading layer 2 blockchain, Polygon, to help with launch of its own layer 2 blockchain.

Even Cardano’s founder, Charles Hoskinson expressed his interest in this via a tweet he made a few days after the news got out.

OKX’s Layer 2 Network - X1

Just 4 days ago, the sixth most popular crypto exchange based on spot trading according to a list curated by CoinGecko, announced that it will be launching its own layer 2 network.

OKX’s team, on November 14th, announced that mainnet for their layer 2 blockchain - X1 will go live in the 1st quarter of 2024. However, the testnet has been launched and users can now interact with the new network’s features and functionalities.

Layer 2s are springing up and becoming preferred options for processing transactions and storing tokens. It is no wonder why layer 2s like Arbitrum and Optimism surpass popular and already established layer 1 blockchains like Bitcoin, Solana, Cardano, Avalanche in TVL.

The first main subject of discussion in this article is why crypto projects are launching their own layer 2 networks or are launching as layer 2s. The reasons for this can be funneled into these 3:

To reduce the costs of transactions: A few days ago I wanted to run a small transaction on Ethereum network worth $15 and I was required to pay $10 for gas fee. It really didn’t make sense having to pay a $10 gas fee for a $15 worth transaction when I can have that same transaction carried out for less than $1 gas fee on Arbitrum or any other Ethereum layer 2.
To increase TPS: the use of layer 2s help the main blockchain be able to process more transactions than they normally would.
Exploring the possibilities: this one’s based on my opinion though. Many projects are either launching as layer 2s or launching their own layer 2 networks, no one wants to be left out, so why not explore?

The 2nd main subject of discussion, however, is why majority of these projects are opting to be layer 2s on Ethereum as compared to other blockchains.

To get better insights on this, I seeked the expertise of Pascal Abams, a friend, a crypto researcher, on-chain analyst and a NODO content expert as well. Here’s his amazing take on this.

Me: Based on your technical knowledge, why do you think majority of these projects are opting to be layer 2s on Ethereum rather than being layer 2s on other blockchains?

Pascal:

1. It's not technologically feasible to begin with. Like other blockchains are monolithic by nature - execution, consensus, DA, and settlement happen on the same layer.

For Optimism to become an L2 on Solana, for example, Solana has to allow for execution to be able to happen off the L1. Most L1s don't have the capability yet, although they can enable it if they want to.

Other L1s can handle thousands of TPS, so there's really no need for an L2 to begin with, so I get the point of other L1s not pursuing a modular scaling thesis. Ethereum actually started out as a monolithic chain. but transitioned into a modular chain by allowing for execution to happen off the L1. Every L1 can do this btw, allow for execution to happen off the L1.

2. It's Ethereum. That's where the mind share and liquidity is. L2s fragment liquidity to an extent. To counteract that, you need enough liquidity on the L1 to make up for that. You don't want to fragment liquidity on your L2 and still not have enough liquidity on the underlying L1.

Ethereum is also the most secure. Imagine if your L2 grew bigger than your underlying L1, that's a security risk to the L2.

Ethereum is the most secure, has the most liquidity and mind share. Also has the most lindy effect.

3. Talking about lindyness. Ethereum has survived the longest. Imagine building an L2 on Fantom because it was the hot thing then. You want to build on something that will stand the test of time and Ethereum has proven that.

I bet these answers our question on why Ethereum is that one blockchain with multiple layer 2s built on it.