Thoughts on investing in the “Layer 2 extension” project for ethereum

Layer 2 extensions” is a broad term that includes what the industry calls Layer 2 extensions, sidechains and public chains that support Ethernet virtual machines, that is, projects that can share the load of Ethernet.

Thoughts on investing in the "Layer 2 extension" project for ethereum

In a recent issue of Q&A, a number of readers asked about investing in Layer 2 extensions. I wrote about investing in Layer 2 extensions in my previous article in March, and I’ll share this experience with you again in more detail this time.

First of all, I would like to clarify that what I mean by “Layer 2 extensions” here is in a broad sense, which includes what the industry calls Layer 2 extensions, sidechains and public chains that support Ethernet virtual machines, in short, projects that can share the load of Ethernet.

I first paid attention to the second layer extension project in 2019.

The overall market environment at that time was still a big bear market. But in the midst of the big bear market, Cryptocurrency managed to pull off a wave of IEO boom, in which many coins had a 5x or even 10x increase as soon as they went live on Cryptocurrency. I wrote several articles about these coins that had such a rise as soon as they went online, arguing that their rise bubble was too big, and that even if the project itself was good, the risk was too high to buy at that price, so it was not recommended to rush in, but rather to observe first and wait until the price of the coins you like is low before you start.

Two of these coins caught my attention, one is Celer and the other is Matic (also known as Polygon today), because these two projects are rare among the many projects online at that time that are dedicated to solving specific problems of Ether. What is the problem of Ether that they are trying to solve? It was the problem of scaling performance and reducing transaction fees.

But in those days, the public in the circle had the following questions about the performance of Ether and transaction fees.

1, the price of Ether was only less than $300 back then, so the fee was negligible and people could not feel the pain.

  1. At that time, there was no DeFi application with huge ecology like today. In that era, people used Ether for almost only one thing: transferring money. Even if there are performance and fee problems in such a simple application, it should be acceptable to put up with it, because it is not a high frequency application.
  2. In that era, people were still full of expectation for the Ethernet killer, especially EOS, and thought that even if there were performance and transaction fee problems in the future, EOS could be solved.

4, even if we want to solve the performance and transaction fee problems of Ether, V God also proposed Ether 2.0 at that time, which is the ultimate solution to solve these problems.

So with all these reasons, many people hardly see why projects like Celer and Matic are needed to solve the problems of ethereum transaction fees and performance. Thinking that the demand for such projects is hype.

So how did I see these issues at the time?

First of all, I was completely unimpressed with EOS for the reasons I’ve repeatedly written in my articles, I thought there was no future for such centralized blockchain public chains, let alone other so-called ethereum killers. This idea makes me rule out point 3.

Then, I firmly believe that Ether must be the king of public chain in the future, and it will definitely give birth to the application ecology that we can hardly imagine in that era, so its future will be congested again, and it will definitely have unreachable fees and low performance that is unbearable to the public. This idea makes me rule out point 2.

Furthermore, I firmly believe that after the bear market, the price of ethereum will definitely be more than $300 and will rise to a higher level than we can imagine, so when the price of ethereum rises, the problem of fees will definitely come to the fore (but frankly, I couldn’t imagine that it would rise to the price today in two years). This idea led me to rule out point 1.

Those three ideas above were not actually supported by obvious data in those days, but why did I think that way? I have to say, it comes from faith.

Some people say “there is no faith in the cryptocurrency world”, but I believe there are still people who have faith, and at the critical moment, whether there is faith or not will play a decisive role, it allows people to penetrate the fog and see the future.

Of those four questions, only the fourth point, I could not argue at that time. But I had a vague feeling that a situation would arise: that is, the ecology of ethereum would explode before ethereum 2.0 was launched? But this idea looked a bit absurd and mind-boggling at the time. When you talk about a bright future in a bear market, when everyone is desperate, most people will think you are either dumb or stupid.

I am not sure when the bull market will come, I am not sure when Ether will develop a huge application ecosystem, I am not sure if such projects will be useful before Ether 2.0 comes online, and more importantly, I am not sure if such projects will survive the bear market.

All these uncertainties made me not invest in these two projects immediately, but remembered them fondly.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/thoughts-on-investing-in-the-layer-2-extension-project-for-ethereum/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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