Do We Really Need L3?
Over the past year, blockchain technology has rapidly developed in the fields of Layer 1 (L1) and Layer 2 (L2), bringing significant changes in revenue. Some blockchain platforms have successfully achieved profitability, while others are still operating at a loss. The recent emergence of the Layer 3 (L3) concept has introduced deeper scalability and customization capabilities to the blockchain industry.
However, do we really need L3?
Coexistence of Profit and Loss in Layer 1 Blockchains
Ethereum is currently the most well-known and highest-grossing L1 platform in the blockchain industry, with annual revenue reaching 2.2 billion USD. However, due to the issuance of new tokens exceeding the revenue, it actually incurred a net loss of 15 million USD. This reflects the rise of L2, as many transaction activities have gradually shifted to the L2 layer, resulting in reduced fees paid to Ethereum.
In contrast, Tron, with its stablecoin business, particularly its extensive application in high-inflation countries such as Argentina and Turkey, achieved revenue of 1.4 billion USD, demonstrating strong profitability. Despite technological breakthroughs, Solana generated revenue of 157 million USD, but due to high technical costs, it still incurred a net loss of 2.53 billion USD. Avalanche, on the other hand, attracted attention due to its subnetwork expansion plan and foray into the gaming sector, but still incurred a net loss of 860.6 million USD.
Stable Performance of Layer 2 Blockchains
In the L2 field, some platforms have performed well. Base is a standout, generating revenue of 66.6 million USD within a year of its launch, with a net profit of 42 million USD. This is attributed to the implementation of EIP-4844, which reduced transaction costs and avoided token distribution expenses. Another notable L2 platform, Arbitrum, despite a significant decrease in fees in the second quarter, still successfully generated revenue of 61.14 million USD, with a net profit of 21.8 million USD.
Meanwhile, zkSync Era, although not as large in scale as the previous two, generated revenue of 53.3 million USD, with a net profit of 17.5 million USD, demonstrating its profit potential under zero-knowledge proof technology.
With the promotion of BRC20 and NFT, the Bitcoin ecosystem initially performed well, with multiple airdrops for holding “blue chip” NFTs. However, everything began to decline after the launch of Runes.
The situation of other L1/L2 ecosystems is relatively bleak:
– Injective’s dApp quality is insufficient, and airdrops are almost negligible.
– Starknet’s STRK airdrop failed to succeed in triggering the “wealth effect” in the ecosystem. Despite the high DeFi Spring rewards, the protocol’s airdrop was quite disappointing.
– SEI performed well in the NFT field, but was clearly lacking in DeFi dApps and airdrops.
– The SUI ecosystem has high-quality dApps, but airdrops are not generous, and SUI’s unlock has put considerable pressure on prices.
– The Cosmos ecosystem is in crisis due to internal disputes, and airdrops have dried up. They must rise again from the recent security vulnerabilities.
– The Arweave community expected that holding AR tokens would result in a higher AO allocation rate, but the end result was only 36%.
– Despite generating revenue of 44.6 million USD, Optimism incurred a net loss of 239 million USD due to airdrops and high operating costs, exposing its high operating cost problem.
Opportunities and Challenges of Layer 3
As L2 gradually saturates, the concept of L3 has naturally gained attention. The purpose of L3 is to provide higher customizability and scalability above the existing L2 layer, allowing developers to design application chains (AppChains) tailored to specific application needs. This architecture is believed to further reduce costs and improve transaction efficiency.
However, L3 also faces many challenges:
1. Firstly, the high customizability of L3 may raise concerns about the stability of the ecosystem. Developers in L3 can design their own gas fee mechanisms, which may lead to ecological fragmentation between different chains, thereby affecting overall stability.
2. In addition, L2 technology is not yet fully mature. For example, criticisms arose due to RPC failures during airdrops on Arbitrum, and zkSync faced compatibility and stability issues. These factors make the timing of L3’s launch less clear.
Will the launch of L3 weaken the ecological advantages of L2 and further challenge its value capture capability? This is a core issue in the blockchain industry. L3 brings higher technical possibilities, but also sparks discussions on ecological fragmentation and economic risks.
Current Technological Development of Layer 3
Recently, some blockchain projects have been actively involved in the development of L3. StarkWare’s Integrity Verifier tool allows developers to verify executed programs on Starknet, laying the technical foundation for the development of L3 application chains. The Lens Protocol has also launched the L3 expansion plan Momoka, and Zebec’s L3 chain Nautilus Chain is also a noteworthy development.
However, Ethereum founder Vitalik pointed out that although the development of a multi-layer network is a reasonable trend, the actual application of L3 still needs further observation and verification. In the current situation where L2 applications are not yet fully stable, the risk of pushing L3 prematurely may outweigh its potential benefits.
Conclusion
Public chains are still developing rapidly, and the revenue situations of L1 and L2 differ. These internal catalysts depend on favorable macro environments and the influx of ETF funds. Our current market is not yet attractive enough for a new wave of retail investors to enter. However, if the market rebounds, DeFi degen strategies need to be re-evaluated, focusing on building continuously and innovatively and generously rewarding users in the ecosystem.
While the concept of L3 is eye-catching, careful consideration is needed for its actual application and future direction. Technological innovation is important, but finding a balance between pursuing innovation and maintaining ecological stability will be a key challenge in the future development of blockchain. The emergence of L3 has brought infinite possibilities to the industry, but also requires higher technical wisdom and risk management.