Title: The Changing Landscape of Layer 2: Towards a Balanced Ecosystem
Author: Eric SJ, Independent Researcher
Source: X, @sjbtc9
In this article, Vitalik’s perspective briefly discusses the current state of Layer 2 (L2) and how Taiko, despite its mixed reputation in the community, has been mentioned multiple times by him. Based on the phenomena described in this article, it appears that the final landscape of L2 may not be dominated by a few main L2 solutions as previously envisioned, but rather move towards overall balance.
As new L2 solutions continue to emerge, they undoubtedly contribute to the diversification of the ecosystem. However, this phase may not be the most suitable track for secondary market investors. Why? In short, it’s because “going against policies” can be risky.
Let’s consider two examples:
1. The liquidity mining track has a “policy red line” of 33%. This limit is not only influenced by personal preferences but also relates to the debate on decentralization. Therefore, the scalability of liquidity mining is limited. (On the other hand, downstream tracks that accommodate this business do not have such restrictions.)
2. As the fundamental business track for each chain, DEX operates in a highly competitive landscape. According to incomplete statistics, there are over 1,300 DEXs, making it the leading track in the industry. (Imagine the low tolerance for error when choosing to invest in this sector in the secondary market.)
L2 possesses the characteristics of the two aforementioned tracks:
1. The guiding principle of a large user base is diversification.
2. There are numerous solutions, leading to intense competition.
We cannot deny that some of Ethereum’s current development directions are influenced by personal or institutional preferences. Therefore, the multi-rollup approach can be seen as a highly probable trend. By continuously expanding the execution layer, Ethereum’s main chain can better fulfill its role as a consensus (security) layer.
Thus, we can envision a future where Ethereum’s main network consensus becomes the independent core of a multi-rollup ecosystem. Even the applications originally built on the main chain are gradually transitioning towards application rollups (recently, ENS proposed an expansion to L2).
Currently, there are nearly 200 L2 solutions, both launched and yet to be launched. However, market liquidity remains relatively fixed. In such circumstances, as the number of lanes expands, the available space for traffic flow increases significantly.
Based on the logic above, it can be deduced that the upstream of Rollup construction may become the latter half of this L2 competition cycle. For example, OP’s superchain framework and ALT’s modular Rollup construction fall into this category (ARB’s Orbit plan is focused on L3 and does not belong to this category).
As upstream solutions mature, the launch of various personalized rollups will complement the diversified ecosystem described by Vitalik. Therefore, for some emerging rollups, it is no longer sufficient to consider whether they are worth participating in solely based on their ability to address differentiated needs in infrastructure. It is also essential to consider their competitive capabilities within a homogenized market.
For instance, specific application rollups should be evaluated based on their valuation logic from the application business perspective. On the other hand, basic rollups that primarily focus on the execution layer need to think more about market share competition.
The attached image illustrates the distribution of the top ten TVLs (Total Value Locked) in ETH L2, showcasing the initial emergence of this balanced and diversified phenomenon.
