Bankless: Is Layer2 Cannibalizing Ethereum?

Original title: Are L2s Ethereum?

Original author: Jun, Bankless

Original translation: Deng Tong, Golden Finance

Ethereum has been in a tough spot lately.

In a downturn, critics have been quick to point out that ETH has underperformed SOL, while attributing this largely to L2’s market share and user churn.

This claim has sparked a crucial debate: Is L2 Ethereum? The answer, like most things in crypto, is a perfect mix of confusion and simplicity. So let’s take a closer look at both sides of this argument and explore the relationship between Ethereum and L2.

Symbiosis or separation?

From the outset, L2s have been a core component of Ethereum’s rollup-centric roadmap. They were envisioned as an extension (both technical and cultural) of Ethereum, designed to expand its functionality and attract a wider user base.

At their core, L2s are deeply connected to Ethereum. They share Ethereum’s DNA — relying on ETH as currency, benefiting from Ethereum’s security guarantees, and leveraging it for data storage and settlement. It’s like a startup leveraging its parent company’s infrastructure and brand recognition, a win-win for both parties.

The symbiotic relationship between L2s and Ethereum is undeniable. L2s thrive on Ethereum’s infrastructure and security, while Ethereum benefits from increased ETH activity and demand, making it a better store of value.

By offering lower fees and faster transaction times, L2s make it easier for developers to build different types of applications. Look at the explosion of memecoin on Base, or the rise of SocialFi platforms like Farcaster creating new markets for users.

Beyond that, L2s are becoming a major hub for DeFi activity, and the asset ETH is at the heart of this ecosystem. Look at the numbers: Arbitrum, Optimism, Base — these chains are dominated by assets tied to ETH.

Vampire Attack?

However, one of the main arguments against a rollup-centric approach to Ethereum scaling is the assumption that L2s might not continue to rely on Ethereum. Sure, L2s and Ethereum look like a happy family right now. But what if L2s build their own empire and abandon Ethereum altogether? No longer relying on Ethereum for security, no longer needing ETH for gas, and not even needing Ethereum’s block space.

This “L2 runaway” fear is legitimate. Technically, they could build independent ecosystems with their own validators so they could have the entire modular blockchain stack. So, is this the future — a messy breakup between L2 and Ethereum? Not necessarily.

Creating a new ecosystem or launching another L1 blockchain is a complex and resource-intensive endeavor. Bootstrapping a validator set is a major undertaking, and building a new L1 could result in running into the same scalability challenges Ethereum currently faces. If L2 was going to go down these paths, they would likely have done so from the start.

A recipe for a split?

Instead, L2 builders are playing a different game. Their primary focus is scaling transactions, attracting developers, incentivizing them to build applications for different use cases, and onboarding new users to crypto, while Ethereum handles security and decentralization issues.

But that doesn’t mean there aren’t foreseeable problems with the way the L2 landscape evolves. It’s a weird paradox. On the one hand, the proliferation of L2s is a testament to the success of the Rollup-centric roadmap. But on the other, it’s a source of fragmentation.

We can all agree that there are probably too many L2s. Too many imitators. Too little differentiation. It’s like a thousand startups chasing the same market, all promising the same thing. That’s not healthy.

What we need are L2s that matter. L2s that offer something unique, something different. Security, application diversity, GTM strategies — these are the areas where we need to see real innovation.

Let’s not forget the bigger picture. As Ethereum scales using these L2s, we need to make sure it still feels like Ethereum. We need to avoid falling into the trap of fragmentation, with everyone pulling in their own direction.

L2s need to be seamless. Teams are launching technology stacks to develop a unified chain network that shares resources and provides users with a more seamless and faster experience - Superchain, AggLayer, Elastic Chain, Orbit Chains are all promising initiatives in this direction.

But we must be wary of "echo chambers". These chain zones should not become isolated universes. A healthy L2 ecosystem is one where chains work together, not in isolation. We need bridges, not moats.

We need collaboration. We need communication. We need education. We need incentives. We need to build shared infrastructure and standards to facilitate seamless connectivity between L2s. Only in this way can we truly win together.

Summary

You can say L2 is not Ethereum. You can argue that L2 is not even an extension of Ethereum. But you can't deny that L2 enhances the utility of Ethereum and ETH.    

The "L2 vs. Ethereum" debate is a false dichotomy. This is not a zero-sum game. At the end of the day, Ethereum and L2 are in the same boat. Let's build a future where Ethereum and L2 thrive as a symbiotic whole and drive the crypto ecosystem forward.

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