Layer 2 Classification is Still a Long Way from Generalization
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Translator: Spike @ Contributor of PermaDAO
Reviewer: Viya @ Contributor of PermaDAO
Introduction
After many delays, Ethereum has finally completed the Shanghai upgrade, the pledge system of Ethereum has really begun to operate, and the next step of Ethereum has come to the Cancun era. Among the many EIPs in this upgrade, EIP-4844 is undoubtedly the most concerned. It will guide Ethereum into the first step of DankSharding, the Proto-DankSharding, and prepare for the subsequent comprehensive innovation.
The Shanghai upgrade is positive for various L2 and DeFi protocols, but at the same time, the progress of all kinds of L2 is full of problems and not completely satisfactory. In the next Cancun upgrade competition, there is bound to be a group of L2 to occupy a more mainstream market space.
The following phases of Ethereum Upgrade are "The Surge" and "The Scourge", which respectively own the goals of achieving 100K+ TPS and avoiding centralization caused by MEV and risks come from other protocols.
The Shanghai upgrade will address three key Ethereum issues, including fundamental changes to Ethereum in the EVM functionality, the withdrawal of ETH pledged on the beacon chain, and Layer 2 Gas fee reduction.
Once implemented, the EIP-4844 upgraded by Cancun will introduce the Blob mechanism, which will separate the current Ethernet main network data storage mechanism into Blob, and will not be stored permanently, but will be deleted after about a month to save valuable on-chain space. Therefore, the data availability of all kinds of L2 will get a qualitative improvement.
Based on the existing mainstream L2 market data, as all types of L2 become increasingly practical, we divide all types of L2 into three categories:
Classic L2, rely on their own to make profits
Custom L2 is both an L2 in itself and a specific product
RaaS: Mainly provides L2 startup services
Among them, classic L2 mainly relies on the agreement fee difference between L2 and L1 for profit, which is its most important profit model, and whether to issue tokens does not change the essential logic of this profit model. The drive of GMX and other leading products and the rise of token issuance promotion usage are the key factors to improve the profit model.
Customized L2, such as IMX, is based on the following logic: it is a customized L2 chain, but it is also a separate product type;
Finally, RaaS, OP Stack and Orbit are one of the most major players, whose logic lies in the full decoupling of Ethereum and L2, so more and more Dapps need to send their own chains, and L2 can bring their own autonomy without missing the security of the main network.
The most typical usecases of RaaS are opBNB and Base. Both sides are developed based on OP Stack, and behind them are central exchanges such as Binance and Coinbase respectively. After the central exchanges of FTX and Solana went bankrupt combined with the public chain model, the exchanges sold L2 chains by themselves. It can not only avoid regulatory problems, but also use the traffic of Ethereum, which is the current middle way.
Classic L2: The Path to Open Source and Throttle
Returning to the zkSync Era ecology, look at the data on Dune. In September, when Arbitrum just launched, the ETH pledge value was 370,000, while zkSync Era's current highest pledge volume was 3,894.
The current situation of zkSync Era is that there are many ecological applications, but few can be considered mainstream and high-quality. Only relying on more than 400 million dollars of financing behind it cannot support its future development, or there must be some high-quality application support. At present, there are indeed many projects ready for development. Perhaps we can look forward to the next step of Uniswap launching zkSync.
SyncSwap is still a long way from Arbitrum's GMX, and most of the current transaction data is from the address of the interactive zkSync Era airdrop. Of course, airdrop interactive data is also the source of data for most DeFi protocols, but for SyncSwap, a dominant company has begun to change some rules at will, which also shows that the project's attitude to users is casual. And SyncSwap's Loyalty Program reflects its swelling.
Here we don't distinguish the difference between ZK or OP departments, but mainly from the business model to classify, that is, these products are to build their own super dApp to achieve corner overtaking.
For example, GMX, the train runs fast, all by the front belt. Although all kinds of L2 tokens themselves do not produce actual value, they produce a huge increase in the amount of interaction between users under the lure of airdrops.
Pay enough for L1, keep enough for DApps, and keep the rest for yourself.
Open source: The more Dapps and users, the better. In essence, L2 is also a variation of traffic and platform economy, but in the name of "decentralization" to split off from Ethereum.
Throttling: By delaying the decentralization cycle of key components like the sorter, and the savings expected from EIP-4844, L2 is already cheap enough.
App L2: AppChain's Enemy for Life
App L2 can be either a customized product of a generic L2 or a customer of RaaS. In the early days, companies like dYdX were some of StarkEx's biggest customers, but in the future, more and more applications will choose to build their own L2.
RaaS: expanding business scope from L2's own perspective, providing a simpler L2 startup platform;
Application L2: seeking available L2 from the perspective of specific DApps, focusing on improving their own application performance;
The logic of application L2 is that it needs to retain most of its profit, and does not want to share with L2 in fees or Gas fees, and to do this, the premise is that its moat should be deep enough that users are willing to stay on DApps for a single scene or service.
In the early days of dYdX (StarkEx, 2021), one was a one-time development "processing fee", the other was a continuous participation profit sharing, and provided continuous technical services.
Now, Base (OP Stack, 2023). Base itself is Layer 2, but it is also a customized application-oriented L2, which is a product of a different era from OP, which develops the whole system by itself.
Similar to the difference between virtual machines and containers, whether it directly hosts dApp or continues to build a usage environment for dApp, dYdX directly builds an application on StarkEx, only needs to consider the configuration of StarkEx, and Base continues to abstract different virtual machine subsystems for higher-level applications to call resources.
RaaS: The Rising Star
The profit source of RaaS can be oriented to business users and provide enterprise-level customized services, while application-oriented L2 needs to consider whether it can be profitable or not. Base is backed by exchanges and can import its own traffic into it, while more complex DeFi products are difficult to build their own L2, and more exist in the mode of multi-chain deployment.
Source: Messari
Ethereum is the "only" settlement layer and data availability layer;
Any dApp should use its own Layer 2 or Layer 3 services;
It's more cost-effective to seek out existing shelf products than to develop your own;
It is simple to imagine that after the future infrastructure is mature, more institutions and projects will choose to issue their own L3 network, such as governments or traditional financial institutions, which can not only meet the compliance regulations but also share all the infrastructure of the strongest Ethereum ecosystem.
In particular, concepts such as RWA are currently adapted based on the Ethereum public chain, and in the future, they will be gradually migrated to Rollup, and the B-end customization service will also usher in an outbreak period.
General L2: SCP Theory and everPay Practice
In addition to all kinds of Ethereum ecology, there are two other products that are similar to L2 in the market, namely cross-chain bridge and general L2. The role of cross-chain bridge is to communicate with all kinds of public chains. If the funds deposited are extensive enough, even the cross-chain bridge itself can be combined with enough liquidity.
And the other paradigm is the general L2 everPay, which is built on the Arweave storage public chain. With the help of SCP (Storage-based Consensus Paradigm) theory, it combines transactions and liquidity on the chain, and the result is perpetuated on Arweave. With the perpetuation feature of Arweave, The SCP paradigm can not only be permanently stored without worrying about the expansion problem, but also any transaction results can be stored permanently without using the mechanism of time-limited storage.
everPay, a real-time financial protocol, has been launched, which provides users with a payment and settlement experience close to Web2 on the premise of ensuring credibility, and does not need to be limited to the EVM ecological public chain. Any public chain can be docked with everPay, and the transaction experience brought by fully decouple is no different from the traditional financial system.
everPay can be understood as an L0-level payment protocol, and it can be defined as a universal L2 and cross-chain bridge, on which further ecosystems can be built, such as cross-chain real-time decentralized exchange network PermaSwap and revenue-sharing NFT auction system. Are dApp applications based on everPay protocol.
With 0 Gas and second payment speed, it is not an exaggeration to say that everPay is the ideal paradigm of centralized transaction experience overlaid with secure and trusted decentralized technology, and any transaction data is always stored in Arweave permanent storage protocol.
At present, the transaction volume of Arweave is nearly 4 times that of the end of 2022, but 99% of the Fee is still used to pay the storage fee. No matter how much the growth is, there is no need to change the mechanism design. In other words, the growth of transaction volume will not cause the fluctuation of Gas Fee, which essentially squeezes the living space of MEV. Sorting and packing are run entirely on a decentralized native mechanism. According to Arweave founder Sam, "Arweave will never raise Gas fees, and the Arweave network wants to be an on-chain data source that never goes down!"
In terms of supporting currencies, everPay can not only support ERC-20 and other Token types, but also Arweave's native PST (Profit Sharing Token) format. It can even issue native tokens, such as ACNH, an offshore RMB stablecoin issued in cooperation with Asian Digital Bank. After the launch of Permaswap, about 500,000 ACNH tokens have been traded.
Final Words
The investigation of Rollup types starts from the most well-known L2 products, such as Arbitrum/zkSync/OP, and then goes deeper into the more grand RaaS. It is similar to the life of everything in the era of public blockchain, but all kinds of L2 are more like the civil war of Ethereum, and the final winner is still the Ethereum ecosystem.
Moreover, the demand of products such as dYdX itself has not received enough attention. If RaaS is to truly develop, its user population is obviously more important, which is the basic prerequisite for discussing its profit model. Unlike specific products such as wallets, RaaS obviously does not have personal use value.
Unlike the network effects of L2, it is difficult for a single super dApp to grow on its own to meet the needs and operating costs of the public blockchain, while Base is the first large-scale attempt after the exchanges in the public blockchain track.
After the upgrade of Ethereum in Shanghai, the fragmentation of L2 ecological mobility has become increasingly prominent, and the exchange between L2 has become increasingly important. Unified L2 cross-chain products and protocols are still worth looking forward to, and whether they will be built by RaaS products or by Cosmos suites is also worth looking forward to.
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