Why am I telling everyone this? Because it could very likely affect your trading decisions!!!
If you don't understand, you must take a few minutes to look!
L1 (Layer 1)
L1 is very clear to everyone; this is a public chain, such as BTC, ETH, SOL, SUI, etc. Although few have survived now, 80% of the coins you hold are on these public chains.
So sometimes when choosing to hold a certain coin, you should understand whether the project's coin has developmental potential, because it is almost impossible for a coin with a market cap of 2 billion to appear on a public chain, whereas on a chain with a market cap of 100 billion, it is easy for such a project to emerge. So first clarify which chain your coin is actually on to better assess its potential value.
L2 (Layer 2)
L2 (Layer 2) refers to scaling solutions built on top of the base layer L1 of the blockchain. Its main purpose is to improve the throughput, transaction speed, and reduce costs of the blockchain while maintaining decentralization. L2 solutions enhance overall network efficiency by processing some or all transactions outside the main chain, thereby reducing the burden on the main chain.
The most distinct is the L2 on Ethereum.
L2 indeed provided significant help to public chains in the early stages, greatly reducing everyone's gas fees. Because of this, the scale of on-chain assets has been increasing. However, the greatest value of L2 is to reduce miner fees. If Ethereum itself continuously upgrades to lower gas fees, then the existence of L2 becomes a false proposition. Why do people say SOL is an Ethereum killer? Some researchers may find it difficult to see so-called Layer 2 networks on the SOL network, which is because the gas fees on SOL are low enough that there is no necessity for Layer 2 networks to appear.
I think that at the current stage, ETH's L2 itself faces two major problems:
1. In the early stages due to construction issues, most L2 networks are VC coins. At this stage, most are in the VC unlocking phase.
2. Does L2 still have the necessity to continue existing at this point?
Side chain
Let's not compare side chains directly; let's see what problems they solve?
1. Scalability: Improve transaction speed, reduce costs, and alleviate main chain congestion.
2. Interoperability: Achieve asset and data transfer between blockchain networks.
3. Flexibility: Support for different application needs (privacy, governance, high-frequency trading, etc.).
4. Privacy: Enhance data protection capabilities.
5. Reduce upgrade costs: Independent rapid experimentation without affecting the operation of the main chain.
6. Simplify cross-chain operations: Provide efficient cross-chain asset transfer capabilities through bridging technology.
7. Reduce user costs: Share the load of the main chain, providing lower transaction fees.
Everyone can see that the main problem to solve is:
Layer 1 network fees + cross-chain
So there is another question: Does the cross-chain bridge have any significance in existence?
These two suddenly have a competitive relationship, so you can't hope that both will survive into the future.
Cross-chain protocol
This is what everyone commonly refers to as cross-chain bridges, mainly for the transfer of assets between different public chains. However, there is a funny thing: centralized exchanges are natural cross-chain bridges, so I'm not really interested in the concept of cross-chain bridges right now. Of course, I believe that cross-chain bridges will become a core component of CEX in the future.