Layer-2 networks proceed to realize momentum because the Ethereum ecosystem advances. For instance, knowledge from analytics supplier Token Terminal discovered that layer-2 scaling resolution Polygon had 313,457 each day energetic customers as of Jan. 17, 2023 — a 30% enhance in exercise since October 2022.
Furthermore, the Polygon ecosystem lately introduced the launch of its beta model Zero-Information Ethereum Digital Machine. Consequently, Polygon’s native token, Polygon (MATIC), maintains a bullish narrative.
Whereas notable, some imagine layer-2 networks providing token incentive fashions could quickly develop into out of date. For example, Jesse Pollak — head of protocols and Base core contributor at American crypto change Coinbase — advised Cointelegraph at ETHDenver 2023 that there are presently no plans to affiliate a token with Base, the Ethereum layer-2 community lately launched by Coinbase. He mentioned:
“We take into consideration tokens as a strong incentive device that may change person and developer habits. On the similar time, we’ve seen conditions unfold over the previous couple of years the place tokens have been used as an incentive mechanism with a scarcity of product match for the underlying chain. Tokens have additionally resulted in nefarious or dangerous conditions previously.”
In keeping with Pollak, Base is a layer-2 resolution that enables builders to simply construct purposes with out requiring an incentive mechanism. “Our product will stand by itself. It is going to be very simple for builders to make use of to construct purposes and distribute these to actual human beings,” he mentioned.
Shifting focus from token fashions to person expertise
Specializing in ease of use and distribution are necessary factors, as Pollak identified that lots of in the present day’s decentralized purposes have been used solely for buying and selling cryptocurrencies. “Buying and selling just isn’t sufficient to make cryptocurrency the way forward for the economic system. At Base, we’re making it simple for builders to construct helpful purposes that folks truly need to use,” he added.
Pollak defined that Base is investing in core infrastructure, resembling Ethereum Enchancment Proposal 4844, which can make the community safe and low-cost in contrast with different layer-2 networks. “It prices about 10–15 cents to conduct transactions on layer-2s. We goal to convey that down,” he talked about.
Whereas Base launched its testnet in February, Pollak shared that the Base mainnet launch will happen within the coming months. Furthermore, whereas no plans exist for Base to supply a local token, a number of ecosystem individuals have already expressed curiosity in constructing on Base.
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For instance, Konstantin Richter, chief working officer and founding father of Blockdaemon — a blockchain infrastructure supplier — advised Cointelegraph at ETHDenver 2023 that Blockdaemon will function an official infrastructure companion for Base. Richter shared that he thinks Base shouldn’t have a token related to the community, as he believes proof-of-stake (PoS) is a completely damaged system. “Blockdaemon runs extra PoS nodes than anybody else, and I can inform you that proof-of-stake solely works when token costs go up,” he mentioned.
Richter additional defined that Blockdaemon plans to make use of the Base community to find out learn how to enable community individuals to run nodes whereas presumably incomes a hard and fast U.S. greenback charge. “This will likely end in a unique kind of PoS mechanism, presumably round dedication of compute moderately than a staked share of tokens that won’t serve the community properly,” he mentioned. Richter added that such a mannequin might end in a greater person expertise. He mentioned:
“This could possibly be the most important paradigm shift throughout the cryptocurrency ecosystem because the invention of PoS. We’re shifting away from incentive fashions that reward customers for utilizing a product. We are actually targeted on ease of performance and low charges.”
But it stays questionable how precisely Base will appeal to customers and builders to the platform with no token incentive mannequin. Given Coinbase’s huge understanding of establishments and decentralized finance (DeFi), Richter doesn’t assume this needs to be a problem: “I choose to work with Base given Coinbase’s understanding of establishments and DeFi. It’s outstanding {that a} public Fortune 500 firm is dedicated to placing transactions transparently on Base.”
Whereas it’s too quickly to foretell future outcomes, it’s necessary to notice that Arbitrum, one other Ethereum layer-2 community, additionally features with no native token. This has actually not stopped customers from interacting with the Arbitrum community. In keeping with knowledge from the analytics web site L2Beat.com, Arbitrum has about $3.35 billion complete worth locked, making up about 54% of the market share on Ethereum.
Nevertheless, rumors have been circulating that Arbitrum could provoke a token airdrop sooner or later. Whereas this may increasingly or not be the case, it demonstrates Arbitrum’s skill to find out product market match earlier than launching a token. Gil Rosen, president of the Stanford Blockchain Accelerator, advised Cointelegraph at ETHDenver 2023 that discovering product market match is about making certain initiatives purchase the appropriate clients whose worth is accretive to the ecosystem, which frequently isn’t the case with tokens. “Early initiatives that launch tokens are sometimes locked into tokenomics fashions earlier than discovering product market match after which are unable to pivot dynamically,” Rosen mentioned.
“DeFi Dad,” a companion at digital asset funding agency Fourth Revolution Capital, advised Cointelegraph that he believes the primary driver behind layer-2 tokens is to make sure decentralized management over layer-2 networks.
For instance, he defined that the upcoming launch of zkSync’s Zero-Information Ethereum Digital Machine would use a PoS mechanism to permit zkSync tokenholders to behave as stakers. “Layer-2 tokens are needed for constructing the decentralized future,” he mentioned.
Because of our group and all the ecosystem for an energizing ETHDenver 2023. For the rest of the week, we’ll share highlights from ETHDenver round ZK scaling and constructing a future-proof zkEVM. First matter, hyperscalability.
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— zkSync ∎ (@zksync) March 8, 2023
DeFi Dad thinks a layer-2 community with out plans to implement a local token could possibly be profitable if customers are prepared to sacrifice decentralization and censorship resistance within the quick time period.
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He mentioned, “Base could possibly be profitable as a community for transacting with a person’s crypto. Nevertheless, make no mistake; Base will probably be a layer-2 (not less than for the foreseeable future) that makes trade-offs. As DeFi customers, we are inclined to deprioritize safety and censorship resistance till we actually want it.”
With this level in thoughts, Rosen talked about that he believes token fashions will stay for a lot of decentralized initiatives with giant developer and person communities, however these will launch later. “A venture could launch a token when the networks themselves are extra mature and have discovered product market match.”
