The Layer 2 Wars - The Daily Gwei #424
The winning move is to play - but nicely.
To the pleasant surprise of many, the Offchain Labs team pushed a major update to the Arbitrum network yesterday which has reduced gas fees and made it the cheapest generalized layer 2 currently live on Ethereum. This comes off the back of Optimism’s recent fee reductions as part of the OVM 2.0 upgrade and some other optimisations. It seems like the layer 2 wars are now finally getting started.
These “layer 2 wars” aren’t going to be violent, won’t result in negative outcomes for users and won’t destroy Ethereum’s economy. What these wars will do is encourage rollup teams to be very aggressive with optimisations and improvements to their networks which will result in a better experience for all users. I mean, why would a rollup team want to be known as being the most expensive to use? That’s an easy negative narrative for people to latch onto in order to discredit the network - and you’ll see a lot of this negativity once there are tokens involved (as is natural in the crypto ecosystem).
It’s not just fees that these networks are optimising for either - it’s also ease of development, infrastructure stability and decentralization. Obviously it needs to be as easy as possible for developers to deploy their code/apps to a network and that’s a major reason why we’ve seen EVM-based chains take off so quickly - especially those with good documentation. This is something that generalized rollup teams need to get right if they want to even dream of competing for the top layer 2 spot. Rollup teams also need to ensure that their infrastructure is stable so that users aren’t having poor experiences (like what we’ve seen on some alt-L1’s) and this stability will also help with decentralization of the network later on.
Finally, I do hope that while layer 2 teams are competing with eachother for all the same things everyone in this ecosystem is competing for (capital, talent, users etc), that it’ll be healthy competition. I’d hate to see the toxicity and tribalism that we’ve seen between layer 1 networks be ported over to layer 2’s/rollups but it may be inevitable once they have tokens. Though I’m going to assume that everyone who owns one or more of these layer 2 tokens will also own ETH so it’s actually a net positive for their ETH position for all layer 2’s to blossom.
In the end, Ethereum wins no matter which layer 2 solutions become dominant, but I think it’s still important to ensure that Ethereum culture is preserved no matter the layer. This way, the layer 2 solutions truly become part of Ethereum not just in the technological sense but also the social one as well - and to be honest I consider the social aspect of Ethereum to be much more important then the technological one - after all, it’s humans all the way down.
Have a great day everyone,
Anthony Sassano
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All information presented above is for educational purposes only and should not be taken as investment advice.