Layer-2 networks proceed to achieve 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% improve in exercise since October 2022.
Furthermore, the Polygon ecosystem not too long ago introduced the launch of its beta model Zero-Information Ethereum Digital Machine. Because of this, Polygon’s native token, Polygon (MATIC), maintains a bullish narrative.
Whereas notable, some consider layer-2 networks providing token incentive fashions might quickly turn into out of date. For example, Jesse Pollak — head of protocols and Base core contributor at American crypto change Coinbase — instructed Cointelegraph at ETHDenver 2023 that there are at the moment no plans to affiliate a token with Base, the Ethereum layer-2 community not too long ago launched by Coinbase. He mentioned:
“We take into consideration tokens as a strong incentive device that may change consumer and developer habits. On the similar time, we’ve got 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 response to 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 will likely be very straightforward for builders to make use of to construct purposes and distribute these to actual human beings,” he mentioned.
Shifting focus from token fashions to consumer expertise
Specializing in ease of use and distribution are essential factors, as Pollak identified that lots of at present’s decentralized purposes have been used solely for buying and selling cryptocurrencies. “Buying and selling is just not sufficient to make cryptocurrency the way forward for the financial system. At Base, we’re making it straightforward for builders to construct helpful purposes that individuals truly need to use,” he added.
Pollak defined that Base is investing in core infrastructure, equivalent to 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 intention to carry 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 members 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 — instructed 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 wholly damaged system. “Blockdaemon runs extra PoS nodes than anybody else, and I can let you know 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 how one can enable community members to run nodes whereas probably incomes a set U.S. greenback price. “This will lead to a distinct sort of PoS mechanism, probably round dedication of compute fairly than a staked proportion of tokens that will not serve the community effectively,” he mentioned. Richter added that such a mannequin might lead to a greater consumer expertise. He mentioned:
“This may very well be the largest paradigm shift inside 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 suppose this ought to be a difficulty: “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 essential to notice that Arbitrum, one other Ethereum layer-2 community, additionally features with no native token. This has definitely not stopped customers from interacting with the Arbitrum community. In response to 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.
Nonetheless, rumors have been circulating that Arbitrum might provoke a token airdrop sooner or later. Whereas this will likely 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, instructed Cointelegraph at ETHDenver 2023 that discovering product market match is about guaranteeing tasks purchase the correct prospects whose worth is accretive to the ecosystem, which frequently isn’t the case with tokens. “Early tasks 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, instructed Cointelegraph that he believes the principle 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.
Due to our group and the complete 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 subject, hyperscalability.
1/7 pic.twitter.com/qOVSQ475a2
— zkSync ∎ (@zksync) March 8, 2023
DeFi Dad thinks a layer-2 community with out plans to implement a local token may very well be profitable if customers are prepared to sacrifice decentralization and censorship resistance within the brief time period.
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He mentioned, “Base may very well be profitable as a community for transacting with a consumer’s crypto. Nonetheless, make no mistake; Base shall be a layer-2 (at the least 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 tasks with giant developer and consumer communities, however these will launch later. “A mission might launch a token when the networks themselves are extra mature and have discovered product market match.”
