Author: Eric SJ, Independent Researcher
Source: X, @sjbtc9
In this article, Vitalik briefly discussed the current landscape of Layer 2 (L2) solutions. I noticed that despite Taiko’s reputation not being great within the community, it has been mentioned several times by him. Based on the phenomenon described in this article, it made me think that the final landscape of L2 may not be dominated by a few major solutions as previously envisioned, but rather move towards overall balance.
Therefore, as new L2 solutions continue to emerge, they certainly contribute to the diversification of the ecosystem. However, this phase may not be the most suitable track for secondary market investors. Why? In simple terms, “don’t go against the policies.”
Let me give you two examples:
1. The liquidity mining track has a “policy red line” of 33%. This is not only related to personal preferences but also to the argument of decentralization. Therefore, the scalability of liquidity mining is limited.
(On the other hand, the downstream tracks that handle the business do not have this red line restriction.)
2. As a fundamental business track for each chain, the DEX track is in a highly competitive landscape. According to incomplete statistics, there are over 1,300 DEXs, making it the most fiercely competitive track in the industry.
(Just imagine the limited room for error when choosing investments in this sector in the secondary market.)
L2 actually possesses the characteristics of the above two tracks:
(1) The guiding principle of a large user base – diversification.
(2) A large number of solutions, fostering healthy competition.
We cannot deny that some of Ethereum’s current development directions are influenced by individual or specific entities. Therefore, the multi-rollup landscape can be seen as a highly probable trend. By continuously expanding the execution layer, the Ethereum main chain can better fulfill its role as the consensus (security) layer. In the future, we will see a multi-rollup ecosystem with Ethereum mainnet consensus as the independent core, which includes applications on the original chain gradually transitioning towards application rollups (recently, ENS proposed expansion to L2).
Currently, there are nearly 200 L2 solutions that are either yet to be launched or already live. However, the market liquidity remains fixed. With the continuous expansion of lanes in a fixed traffic situation, there is a lot more room for traffic to choose from.
Therefore, based on the above logic, the upstream of Rollup construction may become the second half of the L2 competition cycle. For example, OP’s Super Chain Framework and ALT’s modular Rollup construction fall into this category (ARB’s Orbit plan is aimed at L3 and does not belong to this category).
With the improvement of upstream solutions, the launch of various personalized rollups in the future will complement the diversified ecosystem described by Vitalik. Therefore, for some emerging Rollups, it is no longer enough to consider if they are worth participating solely based on the differentiation needs that infrastructure can solve. It is also necessary to consider whether these Rollups have the competitive ability to break through in a homogenized market.
For example, when it comes to specific application rollups, the valuation logic should start from the perspective of the application business. However, for basic Rollups that are purely executed at the layer, market share competition should be given more consideration.
Attached image: The distribution of the top ten TVLs in ETH L2 already demonstrates the initial manifestation of this balanced and diversified phenomenon.
