We all know that the main selling point of layer 2’s on Ethereum is the great gains in scalability that they give users though I think this sells layer 2’s very short. This is because they also provide other major features such as near-instant transaction confirmation with delayed finality, they allow for more expressive development (not limited to Solidity and the EVM), and best of all - layer 2’s can outsource their security to Ethereum’s layer 1.

sassal.eth 🦇🔊🐼 @sassal0x

It's probably time for Cardano to just become an Ethereum-based rollup

November 3rd 2021

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So what does it actually mean to “outsource security to Ethereum”? Well, put simply, it means that layer 2 constructions don’t have to worry about coming to consensus on the transactions that they process and execute as they simply outsource that job to Ethereum layer 1. This goes back to the modular design that I’ve written about a lot lately where layer 2’s are the execution/compute part of the stack and Ethereum layer 1 is both the consensus/security and (optionally) the data availability layer. Of course, layer 2 networks will need to decentralize their sequencers and validators over time, but this is very different (and much easier to do) than creating and maintaining a decentralized consensus/security layer.

So on that note, I think that the era of layer 1’s is over and going forward we’re most likely not going to see any more of them deployed. Instead, we’ll only see purpose-built chains like Celestia and Polygon Avail that are built purely for data availability and we may see some one-off layer 1 deployments that will most likely amount to nothing. I believe that the coming years will be dominated by layer 2 networks that take advantage of Ethereum’s security, community and network effect in order to quickly scale up usage and adoption. The beauty of this is that layer 2 networks don’t have to worry about the consensus/security layer at all - all they need to do is pay Ethereum layer 1 gas fees to store proofs and/or data in order to secure themselves - then they can focus all of their attention on improving the execution/compute process of their network.

There’s currently a popular idea floating around that layer 1’s will eventually turn themselves into a layer 2 on Ethereum because it just makes more sense. Now, while I agree with this view, I highly doubt the bigger layer 1 ecosystems would even entertain the idea of doing this - after all, they are pure Ethereum competitors and if they were to become a layer 2 they basically admit defeat to Ethereum. This is analogous to a king of a competing nation giving up his crown and swearing allegiance to a new king - it’s just not going to happen (at least, not willingly). The funny thing is that these other layer 1 ecosystems would actually greatly benefit from becoming a layer 2 not just at the technical layer but also the social layer - they could still keep their token, their community, their apps and whatever else - but by becoming a layer 2 they’d inherit the entire Ethereum ecosystem and also not have to worry about the consensus/security layer.

Some of you reading this may think that I’m taking too much of an “Ethereum maximalist” view but I just think what I’ve outlined here is simply the most pragmatic view. If a layer 1’s goal is to be as decentralized and secure as possible, then why not leverage the most decentralized and secure chain as the consensus layer instead of trying to bootstrap one from scratch? On top of that, if a new layer 1 is being spun up to get around the limitations of Solidity and the EVM they can simply do this at layer 2 as well - I really don’t see any drawbacks to launching as a layer 2 instead of a layer 1 at the technical layer. Though, of course, the social layer is a big part of this and Ethereum competitors love to pump themselves up by saying they are “better” than Ethereum. By becoming a layer 2, they give away this marketing point and it may hurt their tokens value accrual so I can understand why they’d want to stay as a layer 1 (even though I think this strategy is pretty much dead now).

I’m looking forward to seeing which layer 1 pivots to being a layer 2 first but at this point I don’t think I could name any that I’d consider a likely candidate. There are plenty of smaller layer 1 networks out there that could pivot but really, they’d be competing with both native layer 2 solutions and some of the bigger layer 1 networks so it may not even be worth the effort for them. In any case, it’s going to be interesting to watch the next few years play out - the layer 2 era is truly upon us.

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.