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Ethereum Layer-2 Network Rivalries: A Threat to the Ecosystem
Polygon Labs CEO Marc Boiron has expressed concerns regarding the intense competition among Ethereum Layer-2 networks and its detrimental impact on the second-largest digital asset by market capitalization.
Boiron emphasized the competition’s negative effects on Ethereum in a recent post on social media platform X. He highlighted how the ongoing rivalry among these networks has led to Ethereum cannibalizing itself repeatedly. According to Boiron, the networks are competing for developers, users, and liquidity within the Ethereum ecosystem instead of expanding outside of it. He pointed out that this strategy goes against basic principles of microeconomics and called for a reevaluation of the situation.
“Ethereum’s biggest problem is cannibalizing itself continuously via all L2s competing over devs, users and liquidity rather than competing outside of the Ethereum ecosystem. Microeconomics 101 would tell you this is a bad strategy. I don’t have the answer but it needs to be addressed.”
Many members of the crypto community echo Boiron’s sentiments, advocating for Layer-2 networks to target users outside the Ethereum ecosystem to achieve meaningful growth. Karthik Senthil, a venture partner at crypto hedge fund Lattice, emphasized the importance of expanding the user base beyond the existing Ethereum community.
“L2s only become successful if they meaningfully grow the pie and attract the 99% of stuff (web2 included) that’s outside Ethereum today. If we fight over the same people that are already here, no one is winning anything.”
Boiron also shared a post on social media urging Layer-2 networks to focus on long-term success and celebrate each other’s achievements. The post highlighted the value of collaboration over competition in ensuring the sustainable growth of the ecosystem.
“As fragmentation and chain abstraction will soon be solved, L2s should reshape their views on the value of siphoning apps from one L2 to the other. Soon a successful application on x-L2 will provide a percentage uplift in value to y-L2. Stealing applications is a cannibalization of that value.”
While some community members believe that the competition among Layer-2 networks poses a threat to Ethereum’s ecosystem, others argue that it could ultimately lead to enhancements within the ecosystem.
Popularity of Layer-2 Networks
Layer-2 networks have gained significant traction within the crypto ecosystem as they aim to improve Ethereum’s scalability. Data from L2Beat indicates that these networks collectively process 123 transactions per second, surpassing Ethereum’s mainchain by a factor of 10.7. Notably, Coinbase’s Base network and Arbitrum have recorded higher transaction speeds than Ethereum mainnet in recent days.
Furthermore, the number of active wallets using Layer-2 networks surpassed five million at the beginning of this month. The total value of assets locked on these platforms has exceeded $42 billion, indicating a growing trend towards adoption and utilization.
Overall, the competition among Ethereum Layer-2 networks presents both challenges and opportunities for the ecosystem’s future development. Collaboration and strategic planning are essential to ensure sustainable growth and success within the crypto space.
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