This post is taking part in the Lens x Kiwi Writing Contest.
What if the key to unlocking blockchain’s full potential isn’t just about scaling faster but building smarter, more collaborative relationships between L2s and L1?
Blockchain technology is evolving faster than ever, and one of the most exciting frontiers driving its scalability and real-world usability lies in Layer 2 (L2) scaling solutions. While L2s are celebrated for their ability to lighten the load on Layer 1 (L1) networks, the real magic happens when these layers work together in harmony.
The number of active addresses that interact with a single or multiple L2s in a week has increased from 233,095 in the first week of September 2022 to 7,418,108 as of the first week of September 2024. When we consider individual chains, Base dominates the L2 landscape, with over 5 million weekly active addresses in September 2024, which is almost 60% of the total.
In this post, we’ll explore how L2 networks can foster synergy with L1 and among themselves to create a collaborative ecosystem that drives innovation, increases security, and maximizes economic and social outcomes. We’ll also look at specific steps they can take to build these relationships and the latest data and developments that support these approaches.
1. Leveraging Interoperability to Enable Seamless Transfers
A critical aspect of creating a more collaborative relationship between L1 and L2 is facilitating seamless data and asset flow across different layers. While different L2 solutions have unique architectures, it's essential to deploy mechanisms that ensure smooth interaction with L1 and L2 networks.
L2-L1 Cross-Chain Bridges
Cross-chain bridges are one of the most promising innovations for increasing interoperability between L1 and L2s. For instance, Optimism and Arbitrum, two popular rollup-based L2 solutions, use Ethereum’s mainnet for data security and availability but allow faster transactions by processing them off-chain.
A well-designed bridge between L2 and L1 can reduce network latency, minimize gas fees, and increase the speed of transfers, thereby offering a better overall user experience.
At the time of writing, the L2-L1 cross-chain bridges still need to achieve a satisfactory balance between speed and efficiency while ensuring their security. For example, a cross-chain bridge platform called Orbit Chain was hacked in January 2024, resulting in the loss of assets worth around $81 million.
However, zk-rollups-based initiatives are leading to improvements, allowing L2 to build even more secure bridges while reducing the reliance on L1 for validation. As L2 solutions continue to evolve and develop, strengthening these bridges will enable better interaction and collaboration with L1.
L2-L2 Bridges
L2 networks also need to build bridges with one another, as isolated L2 networks defeat the purpose of scalability if they cannot interact seamlessly. An interesting development in this space is the rise of multi-chain protocols like Hop Protocol and Connext, which are building infrastructure for transferring assets between various L2s.
By providing a better experience across multiple L2 solutions, these Web3 projects help ensure that users don’t have to confine themselves to a single L2 to perform certain functions. L2-L2 bridges can achieve an ideal state where users and developers can seamlessly shift between multiple L2s, increasing collaboration within the L2 ecosystem and driving positive-sum outcomes.
2. Enhancing Decentralization and Security
The promise of blockchain is deeply rooted in decentralization and security, but L2s must balance these core values with scalability. Collaborating with L1 to ensure decentralization and security without compromising on performance is key to building user trust and adoption.
ZK-Rollups: Reducing Load on L1 While Enhancing Security
Zk-rollups are one of the most promising tools for this balance. Unlike optimistic rollups, which assume transactions are valid unless challenged, Zk-rollups generate cryptographic proofs that ensure transactions are valid. This reduces the need for trust in intermediaries, making them more secure and allowing faster finality when transferring assets to L1.
Vitalik Buterin has emphasized zk-rollups as the 'endgame' for Ethereum scalability. Zk-rollups also offload much of the computation from L1s, reducing network congestion and gas fees. This efficiency makes them a powerful tool for enhancing collaboration between L2s and L1, allowing L2s to process transactions without compromising on security aspects.
Fraud Proofs and Decentralized Validators
In addition to zk-rollups, fraud proofs used in optimistic rollups play a crucial role in security. They allow L1 to challenge suspicious transactions processed by L2, ensuring that no malicious activity goes unchecked.
To improve this process, L2s can decentralize the validators responsible for issuing fraud proofs, reducing the risk of manipulation. Decentralized networks like Optimism are making strides in this area by incentivizing validators to monitor transactions and challenge any irregularities, thereby contributing to a more collaborative and secure environment.
3. Optimizing User Experience: Reducing Friction and Gas Fees
User experience is one of the biggest challenges to widespread web3 adoption. To foster a more collaborative relationship with L1 and among themselves, L2s must focus on reducing friction for their users, including lowering transaction fees and simplifying onboarding processes.
Reducing Gas Fees Through Compression Techniques
While Ethereum’s gas fees have decreased due to the adoption of L2 solutions, they can still spike during periods of high demand. L2s can work together with L1 to adopt compression techniques that further reduce fees.
For example, zk-rollups achieve lower gas fees by bundling many transactions together and only submitting the proof to Ethereum, which significantly reduces the computational load on L1. This method not only reduces fees but also makes the L2 ecosystem more attractive for new users, particularly in gaming, DeFi, and NFTs.
Simplified Onboarding and Wallet Experience
Collaboration between L2 networks is essential for improving user onboarding. Projects like MetaMask have introduced features allowing users to switch between different L2 networks more easily, but further improvements can be made.
If L2s collaborate to create a unified onboarding experience with shared standards, users could switch between networks without having to worry about specific wallets or tokens for each L2. Other popular wallets are also moving in this direction, allowing seamless wallet integration across multiple chains.
4. Collaborative Governance and Incentive Alignment
Governance is at the heart of blockchain collaboration. L2s need to collaborate with L1 and each other to create governance models that incentivize network participation and alignment of long-term goals.
Shared Governance Models with L1
A more collaborative approach to governance would involve L2s sharing their governance structures with L1. For instance, Optimism has introduced its "Optimism Collective," a two-tier governance model, which allows its community to have more input into how the network develops.
This type of shared governance could be extended across L2 ecosystems, where L1 has a say in the direction of L2 protocols, ensuring alignment with the broader Ethereum roadmap.
Economic Incentives for Cross-Layer Collaboration
To maximize positive-sum games, L2s can create economic incentives that encourage collaboration between networks. For example, L2s can introduce fee-sharing models where both the L1 and L2 benefit from transaction fees.
Mechanisms like these incentivize both L1 and L2 to improve scalability and security. Additionally, by distributing rewards across multiple L2 networks, developers and validators could be encouraged to build interoperable dApps that benefit the entire ecosystem rather than isolated networks.
5. Promoting Open-Source Standards and Development
Finally, a collaborative ecosystem is one that prioritizes open-source development. By encouraging L2 solutions to adopt open-source standards, both L1 and L2 can benefit from shared innovation, faster development cycles, and improved security through community-driven audits.
EVM Compatibility and Open-Source Tooling
Many L2s are already leveraging Ethereum’s Virtual Machine (EVM) for compatibility. Ensuring that new L2 solutions remain EVM-compatible will make it easier for developers to migrate between platforms and build cross-L2 applications without needing to learn new programming languages.
Additionally, L2s like Polygon and Arbitrum have embraced open-source development, allowing developers to build on their platforms with minimal barriers. By continuing to prioritize open source, L2s can promote collaboration and reduce fragmentation in the Ethereum ecosystem.
Community Audits and Collaborative Security Efforts
A collaborative security effort between L1 and L2, such as bug bounty programs and shared audits, can significantly reduce vulnerabilities. For instance, the Ethereum Foundation runs security audit grants that could be expanded to include L2 projects.
These collaborative efforts, with the community's support, would allow both L1 and L2 to share knowledge and reduce the risk of high-profile security incidents, which could undermine trust in the entire ecosystem.
Final Thoughts
L2 solutions have tremendous potential to unlock scalability, lower costs, and improve user experience without compromising security. However, their true potential lies in how they collaborate with L1.
By focusing on interoperability, decentralization, improved user experiences, collaborative governance, and open-source development, L2s can build a more connected and creative blockchain ecosystem that maximizes positive-sum outcomes for all participants.