The Blockchain Concept of Interconnected Layer 2 Chains

The blockchain ecosystem is experiencing an unprecedented proliferation of Layer 2 solutions, with crypto giants like Uniswap launching their own chain–Unichain.

The blockchain ecosystem is experiencing an exciting era with the rapid proliferation of Layer 2 (L2) solutions, driven by crypto giants like Uniswap launching their own chain called Unichain. Onboarding and retaining users is a critical aspect for any L2 blockchain. Both Coinbase and Kraken, Tier 1 centralized exchanges, have an advantage by tapping into their already established user bases of 8.8M and 10M in 2024, respectively, as shared by BitDegree.

According to L2Beat, an analytics platform focused on L2s, there are over a hundred L2 networks with various development stages and business positioning. This surge raises important questions about necessity, sustainability, and the future of blockchain scaling. Ethereum’s Duncun upgrade also challenged many L2s with a significant drop in network fees, making Ethereum more affordable. Now, the L2 race is all about attracting the right business.

Unfortunately, this flood of new L2s is a double-edged sword. Sure, we are all for advocating for blockchain innovation, but without a thought-through business focus, we might be headed for a shake-out where smaller players either need to partner up or accept the label of a ghost chain. Ultimately, the winning chains will crack the code on truly impactful strategies—whether through specialized purpose, targeting a niche, or just making things dead simple for users.

The EVM Dominance

Ethereum's dominance has established the Ethereum Virtual Machine as the de facto standard for chain development. Vitalik Buterin, Ethereum's co-founder, envisions a future where L2s play a crucial role in scaling the network while maintaining its decentralized ethos. In 2022, he proposed a scheme for L2 classification on the Ethereum Magicians website, with Stage 1 being referred to as minimum viable decentralization. He recently highlighted its importance in his X post.

The cultural impact of Ethereum and its L2s can't be understated with various ecosystems attracting participants from degens and regens, all the way to financial institutions. This has led to a rich ecosystem of L2 solutions, each bringing unique value propositions to the table, leveraging their business USPs and connections. At the end of the day, for a chain to be successful, business capability outweighs technical settings, with Base being a good example as an L2 that exceeded Optimism’s 5.8B of Total Value Locked with their $8.2B, even though Base itself is launched on Optimism's technology stack.

2023 KEY EVENTS RECAP: PART II: Deep Dive Into New L2s, NFT Trends, And More! Several distinct motivations drive the creation of new L2 networks that we observe right now across the industry. Following up on a major success behind Coinbase’s chain as per financial statement on Token Terminal, Kraken, another highly sought-after centralized exchange has announced their own L2 called “Ink”. CEXs are tapping into millions of already onbo