Author: Pavel Paramonov
Compiled by: TechFlow
Solana is the cause of the mess with Ethereum L2 rollups.
During the 2021 bull run, we witnessed a race among L1 blockchains to claim the title of “Ethereum Killer.”
Yet no one was winning the race. The founders realized, “If you can’t beat them, join them.”
The reason for this shift is Solana.
From the beginning of 2022 to the end of the year, the native coins of most L1 blockchains lost more than 90% of their value.
All blockchains are trying to solve the blockchain trilemma, claiming they are faster and more secure than Ethereum.
However, no one really wins this competition because competing with the giants is difficult.
Imagine starting from scratch and trying to build a competing wallet to @MetaMask. You might have a better UX/UI, better features, and better flows.
But most people will still choose MetaMask, just because they are used to it.
Solana becomes the only non-EVM blockchain that users care about.
You can’t say the same about other non-EVM blockchains like @NEARProtocol, @Cardano, @Algorand, or @kadena_io.
The pattern in 2021 is like this
The current TPS on these chains does not exceed 10 when talking about real users.
Solana also has some well-known problems:
Multiple closures
The “connection” with SBF and FTX
@okx delists USDC and USDT on Solana
@DeGodsNFT bridge to Ethereum
There are a lot more
However, it is the only team that truly cares about users, technology, and the future.
@aeyakovenko and the team took all of this feedback and were able to address all of the issues and basically just keep moving forward against all odds.
Solana didn’t win the L1 battle, but instead explored a different path that hadn’t been taken before, thanks to @0xMert_ and @SuperteamDAO and other core contributors.
Blockchains cannot compete for liquidity in the L1 space, so they decided to benefit from it rather than compete.
Why compete with Ethereum when you can benefit directly from it?
Deploying L2 generally means benefiting from the Ethereum economy while having your own economy.
If you are a rollup, it is easier to attract liquidity because you are built on a native chain with hundreds of millions of TVL.
At the same time, creators have the ability to create their own native tokens and have their own small economy within this large ecosystem.
Additionally, it’s easier than ever to create a rollup: you have multiple solutions, @conduitxyz , @alt_layer , and of course @Optimism ’s OP Stack.
The chaos of liquidity fragmentation on L2 is actually social fragmentation.
Each L2 has its own focus:
- @Optimism focuses on scalability. - @arbitrum focuses on DeFi. - @base focuses on SocialFi. - @MetisL2 focuses on DAOs.
Isn't that good? Of course not!
Each rollup is unique and has the opportunity to have its own identity, but sometimes the same people who complain loudly about liquidity fragmentation are the same people.
As @eawosikaa pointed out at the ethCC meeting, people mainly attend side events because they are more likely to find like-minded people there.
However, I think it’s important to present yourself as more than just a zksync enthusiast, but to be open to other cultures, ideas, and thoughts.
We are playing in the same sandbox (Ethereum).
On Ethereum, people build rollups. On Solana, people build applications.
If I had to compare the current state of these two ecosystems, I would paint a picture like this.
Currently, there is no real competition between Ethereum and Solana as these blockchains simply serve different purposes.
Ethereum has become a big sandbox where kids (developers) build sandcastles (rollups).
More and more developers are focusing on deploying the same dapp to multiple rollups.
I think this could become a problem as some developers focus more on bringing liquidity to their app rather than building a truly great app.
Solana is the same sandbox, but the sandcastles here are applications, and they are far more beautiful at the moment.
There's no better exchange experience than using @JupiterExchange .
There's no better wallet experience than @phantom.
There are even native liquidity providers for non-native assets, such as @CloneProtocol.
@jito_sol was able to create the best liquid staking experience on Solana, including MEV rewards, which was not possible before.
But things are not that simple.
Solana’s current phase is similar to Ethereum’s previous phase.
The reason people started migrating to L2 and creating new L2s is because of the limitations of native links.
Some people still remember 2021 when you had to pay a fee of $200-300 to make an exchange.
Ethereum itself cannot handle that much throughput, so a solution is needed to increase throughput and reduce fees to make the network usable.
Solana is able to handle the activity it has today, but there are some limitations in Solana’s architecture:
Block leaders were bombarded with bot spam, causing transactions to fail.
Failed transactions waste computing units and network bandwidth.
The fee mechanism has neither incentive efficiency nor incentive compatibility.
To solve these problems, you don’t actually need to create an L2 on Solana.
In my opinion, creating an L2 on Solana makes sense in two scenarios:
Either the network can't handle the volume of transactions even after all the adjustments, or it can, but the fees are high enough.
Create an application chain to leverage Solana’s liquidity while still being able to own a portion of your own economy within your chain.
Perhaps in the future we will see L2 competition on Solana similar to what we currently see on Ethereum.
There are no clear winners here. In the end, cooperation often trumps competition.
