Layer 2 (L2) Rollups Are the Future, Ethereum L1 (ETH) Bulls Believe

Providing the framework required for decentralized apps (dApps) and smart contracts, Ethereum’s Layer 1 (L1) network has become a pillar of the blockchain space.

Despite being a pillar of the blockchain industry, Ethereum's Layer 1 (L1) network might not be able to expand to meet the rising demand for on-chain transactions, according to data from Token Terminal.

As a result, many believe that Layer 2 (L2) roll-ups will play a crucial role in the future of blockchain technology. This view aligns with the increasing demand for crypto apps, which are expected to seek greater control over their technology and economics.

For instance, L2 solutions, which aim to expand Ethereum's capacity by processing transactions off-chain while still benefiting from Ethereum's security, appear to be the logical next step for most applications.

Here's what Ethereum L1 (ETH) bulls believe:

- No single chain can scale to meet the massive global demand to transact onchain

- Crypto apps that reach the mainstream will want more control over their tech & economics

- As a result, L2 rollups are the way to go for most apps

- However,… pic.twitter.com/HRHCZmuCsV

— Token Terminal (@tokenterminal) October 22, 2024

The present generation of L2 roll-ups is still in its “honeymoon phase,” where they face minimal market or regulatory pressure to fully decentralize. However, as these L2s mature, they will need to decide whether to build or purchase their decentralization.

Constructing a decentralized system, especially one that surpasses the resilience of Ethereum's L1, is a costly and lengthy undertaking.

Over a decade of development has culminated in Ethereum's decentralized and robust validator set, a process that continues to unfold with the involvement of Ethereum core developers.

Hence, most L2s will likely opt to purchase decentralization from a subset of Ethereum's L1 validators instead. These validators, who have been instrumental in preserving the integrity of the Ethereum network, could command significant price power in these negotiations.

As Ethereum advances and its core developers introduce new proposals and carry out EIP-1559-esque developments, such as applying a burn mechanism to the fees collected by these L1 validators, their role in the decentralization efforts of L2s will continue to grow.

In other news, Arbitrum has maintained its lead in the Layer 2 race, but a rising competitor is emerging. As CNF reported earlier, Base, a Layer 2 blockchain from Coinbase, has quickly gained attention in terms of Total Value Locked (TVL) and user activity.

While Arbitrum still holds its ground, Base has surpassed it in daily transaction volume, particularly in micropayments and meme token trading, indicating a surge in user adoption. This development could potentially shift the current L2 landscape as more users flock to the platform for its fast and cheap transactions.

At the time of writing, ETH is trading at $2,528.49, down 2.16% in the past 24 hours and 2.91% in the past 7 days.