Layer2 will eventually become a highly modular market that integrates ZK technology, OP framework, various DA solutions, various sequencer services, and various gas fee models. This article is sourced from Haotian and compiled, translated, and written by Blockbeats.
In the era of Layer2, how to save the fragmented liquidity?
Table of Contents
The Ethereum Kanon upgrade EIP4844 Proto-Danksharding proposal will bring “quality” boost to Layer2 Rollup projects
After the Kanon upgrade, the internal competition in the Layer2 market has intensified, and new players are challenging the existing OP+ZK pattern
Layer2 is gradually becoming modular, and orthodoxy will be challenged, and narrow Layer2 will be replaced by broad Layer2
Today, the price of the Ethereum Layer2 network Metis’ native token METIS reached $76, with a 7-day increase of 191.3%. In addition, the prices of tokens such as $OP and $ARB have also risen. The days of silence in the Layer2 market have finally been broken. At the same time, with the upcoming Kanon upgrade, how will the Layer2 landscape change?
Recently, Layer2 has finally broken the silence and gained attention. Tokens such as $OP, $ARB, and $METIS have performed well, resembling the showtime of the eve of the Kanon upgrade.
Why did the “internal competition” of Layer2 after the Kanon upgrade really begin? How will the market structure of Layer2 evolve? Next, I will share my views:
By introducing the Blob space data structure, the limitations of relying on calldata to store data in the past have been iterated, and the data availability of the Ethereum mainnet has been improved.
Compared with the full-node storage structure of calldata, Blob is designed as temporary storage for partial nodes. This can significantly increase the data limit submitted by Layer2 to the mainnet in a single transaction, expand its TPS, and improve data storage efficiency and cost. The improvement of DA capability is due to the one-month temporary storage to cope with the 7-day fraud proof time window of OP-Rollup.
As a result, the transaction volume submitted by Layer2 to the mainnet will increase significantly, and the cost distributed to individual users will also decrease significantly. Before the Kanon upgrade, Layer2 boasted about its TPS, but most of them were in the test environment. In reality, users felt the high gas fees, which made people feel that Layer2 did not live up to its name.
After the Kanon upgrade, Layer2 players no longer have the performance bottleneck of the mainnet, and they can no longer use the limitations of the mainnet as an excuse. TPS and gas fees, these hard indicators, will directly become tests and a key factor in reshaping the competition landscape of Layer2.
This is why I have repeatedly emphasized that the competition in Layer2 truly begins after the Kanon upgrade.
The decentralization of Sequencer has always been a focus of the market’s attention. However, it turns out that in the strong OP-Rollup track of Layer2, the decentralized Sequencer has become a “soft decentralization” of Stack alliance.
Whatsoever, despite criticisms of Optimism’s lack of decentralization, Optimism’s market success achieved through OP-Stack also seems to be able to reverse the situation. But can we say that OP-Rollup is the entirety of Rollup? Obviously not. The more reasonable market trend is that the success of OP-Stack will be further amplified, and there will naturally be other relay participants in the blank space of OP-Stack.
Recently, the provider of a decentralized Sequencer solution in Layer2, MetisDAO, has performed exceptionally well in the secondary market, with a 7-day increase of over 100% and a total value locked (TVL) of $540 million, which is close to zkSync. Why?
The core business logic is simple. Since OP-Rollup has not made progress in the decentralization of Sequencer, as a relay participant, proposing a reasonable decentralized Sequencer solution is its market space.
Because the decentralization of Sequencer is related to the credibility of transaction submission in Layer2 and the security of interaction with the mainnet. If we ignore this “foundation” issue, the TPS and gas fees after the Kanon upgrade seem to be “castles in the air.” I don’t deny Optimism’s success in the Stack strategy, but there will always be other disruptors to solve the decentralization problem of Sequencer.
Metis implements multiple Sequencer candidate nodes through POS staking. The nodes compete for block rewards through an election mechanism, and malicious behavior will be punished by slashing. This POS consensus binds each Sequencer as an interested party into a common interest community. The Metis Foundation uses token incentives and allocates 4.6 million METIS tokens to incentivize Sequencer mining and the deployment of new projects in the ecosystem.
Compared with Optimism, Metis has a relatively low market value and does not directly compete with OP. By focusing only on decentralized Sequencer, it can still open up a broad market.
Metis is just a recent outstanding example. In my opinion, after the Kanon upgrade, the market size of Layer2 will further expand, and emerging Layer2 providers will compete with OP and ZK for a share of the market, employing various strategies and opening up new horizons in the Layer2 track. Of course, more opportunities will also lie in these emerging Layer2 solutions.
In several previous articles, I mentioned that the core of Layer2 is Ethereum’s DA capability. If the full nodes of the mainnet do not participate in the verification of Layer2 data security, the mainnet will actually become a “bulletin board,” and Layer2 will not be able to inherit the security of the mainnet. Therefore, those that rely on Ethereum’s DA are narrow Layer2, and those that escape from Ethereum’s DA scope are broad Layer2. (Radically, they can even be considered not Layer2.)
But when the Layer2 market reaches a certain scale, the orthodoxy of pure Ethereum Layer2 may be broken. Just like the fraud proof of OP-Rollup has not faced practical battle-tested challenges and can be selectively ignored by the market. Technology is just part of the business logic, and the market and ecosystem have the final say. Just like how Optimism can always work miracles in the name of optimism.
This means that third-party DA solutions will invade Layer2 after the Kanon upgrade, including third-party DA solutions like @CelestiaOrg and shared Sequencer solutions like @EspressoSys. Although everyone is reluctant, the modular evolution of the business logic will gradually break the defense line that the Ethereum mainnet can hold.
The focus of the OP-Stack implementation is to achieve a shared Sequencer. The more OP strategic alliances there are in the future, the greater the benefits they can capture through the Sequencer, but the more multiple interests they will be involved in. This social consensus will become a new constraint beyond technology, and it will solidify Optimism’s position as a leader.
The focus of the ZK-Stack implementation is to achieve a shared Prover system. Its own DA capability and third-party DA capabilities such as Celestia, as well as the limited DA capability of the mainnet, will all belong to the strategic scope of ZK. Its development focus is the new multi-chain ZK interface of Layer3 Hyperchains, and who provides the DA is not the key.
Their interests determine that they don’t really care where the DA is. Only Ethereum itself cares about the DA. So faced with Celestia’s continuous seizure of the DA market, Vitalik calls for Plasma+ZK, but OP+ZK, busy with strategic expansion, doesn’t care about these. They only care about how big the Layer2 camp covered by their Stack strategy will be, after all, RaaS is the ultimate goal of Layer2.
In summary, the Layer2 track after the Kanon upgrade will be exceptionally exciting. Whether it is the emergence of new players or the expansion of the boundaries of Layer2 strategies, it will stimulate the “diversification” and prosperity of the Layer2 market.
Layer2 will eventually become a highly modular market that integrates ZK technology, OP framework, various DA solutions, various sequencer services, and various gas fee models.