Will too many Layer 2 scaling solutions hurt the ethereum ecosystem?

With too many Layer 2 projects planned in the marketplace, Ether users will lose many of the benefits that Layer 2 solutions would bring.

The biggest problem with Ether is the inability to scale, and many protocol companies are actively responding with many Layer 2 (second tier) scaling solutions on the market. Despite all the proposals at hand, Ether users will lose many of the benefits that a Layer 2 solution would bring because the project is planned to be too fragmented.

It’s no secret that the scaling problem of Ethernet has long been a problem. Current transactions on Uniswap can cost more than $50 and take a minimum of 15 minutes. The current size of Ether is not conducive to long-term growth for a blockchain that hopes to become a multi-billion settlement layer. If the scale problem is not addressed soon, users will continue to be lost. One of the most common solutions is the Layer 2 expansion platform, which allows users to quickly and inexpensively transact on Ether as expected and agreed upon.

There are three major Layer 2 solutions available today, with more to be developed. polygon, which has been available for almost a year, uses Plasma scaling technology and a sidechain for fast and low-cost transactions. optimism and Arbitrum were both released and made available this summer. Starkware, xDAI and OMGX have also made significant contributions to these solutions, by using Rollups to achieve the same ideal trading environment as the ethereum blockchain.

Will too many Layer 2 scaling solutions hurt the ethereum ecosystem?

On the surface, it seems that having many Layer 2 scaling options is good because users can choose their preferred trading platform. But in fact, all of these scaling options are flawed and may even disrupt the ethereum ecosystem in the short term.

As Layer 2 scaling continues to be built, many popular dApps (decentralized applications) have been forced to side a solution to be the first to implement Layer 2. For example, Aave has signed a smart contract with Polygon on the blockchain, Uniswap and Maker DAO will use Optimism, while Sushiswap and Chianlink are working with Arbitrum. Many smaller projects have also made their choices, and these are divided between Polygon, Optimism, and Arbitrm. Of these three, Optimism has a slight numerical advantage, but it is still not enough to stand out among all the Layer 2 scaling solutions. Although it is possible to build a project on multiple solutions, it still takes one Layer 2 solution to be at the helm at the beginning, and it takes weeks to vote on a new Layer 2 solution.

Will too many Layer 2 scaling solutions hurt the ethereum ecosystem?

It would be an obvious solution if a protocol such as Uniswap implemented all Layer 2 scaling solutions together, but it would not solve all the problems. If Uniswap were to use both Optimism and Arbitrum, Uniswap’s liquidity would be split between the two, which would mean a decline in user transactions for each of the two solutions, a loss of a good trading experience, and a possible impact on users’ asset prices. For dApps like Aave, the fragmented liquidity could lead to economic inefficiencies by preventing both borrowers and lenders from getting the best rates, leaving even less reason for people to move from traditional financial instruments to DeFi.

In addition, users who want to move funds from Aave’s Polygon to Uniswap’s Optimism would have to deposit funds from the main Ethernet network to Polygon, then transfer them from Ploygon back to the main network, and then from the main network to Optimism. This approach can easily cost $100 and does not realize any of the benefits created by the Layer 2 solution.

The ethereum community resembles a community of tribal cultures, with some users using only Optimism and others using Arbitrum or Polygon. Due to the high fees on the mainnet, the ethereum community has been forced to form this tribal style community, where users can choose their favorite dApps solution. In the long run, Ethernet 2.0 needs to tone down the high fees of the mainnet to solve the problem of user fragmentation, but it won’t be possible in about a year’s time.

One solution would be to interoperate bridges between Layer 2s, but this would still be difficult to achieve on a technical level without the support of the mainnet fees. The most likely scenario is that the exchanges Coinbase and Binance launch centralized services that allow users to move from one Layer 2 to another. Even this approach does not completely solve the above problems. Some users who are unwilling or unable to create KYC-compliant accounts will still not be able to trade without high fees.

Will too many Layer 2 scaling solutions hurt the ethereum ecosystem?

Ideally, only one or two Layer 2 scaling solutions would be needed to dominate the scaling of Ether, and each solution would each have compelling DeFi applications that allow users to move from one to the other without regularity. This will all depend on market forces and the decisions of the developers of Ether dApps.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/will-too-many-layer-2-scaling-solutions-hurt-the-ethereum-ecosystem/
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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