Do we really need L3?

In the past year, blockchain technology has developed rapidly in the fields of Layer 1 (L1) and Layer 2 (L2), resulting in significant revenue changes. Some blockchain platforms have successfully achieved profitability, while others are still losing money. . The recently emerged Layer 3 (L3) concept has introduced deeper scalability and customization capabilities to the blockchain industry.

However, do we really need L3?

Layer 1 blockchain where profits and losses coexist

Ethereum is currently the most well-known and revenue-generating L1 platform in the blockchain field, with annual revenue of $2.22 billion. However, it actually suffered a net loss of $15 million as new tokens were issued faster than revenue. This reflects the rise of L2, with much transaction activity gradually moving to the L2 layer, resulting in fewer fees being paid to Ethereum.

In comparison, Tron has generated revenue of US$1.4 billion with its stablecoin business, especially its wide application in high-inflation countries such as Argentina and Turkey, demonstrating strong profitability. Although Solana made a breakthrough in technology and achieved revenue of $157 million, its net loss was still as high as $2.53 billion due to high technology costs. Avalanche has attracted attention for its network expansion plan and layout in the gaming field, but it still suffered a net loss of US$860.6 million.

Layer 2 blockchain with relatively stable profits

In the L2 space, some platforms excel. Base was the highlight, bringing in $66.6 million and netting $42 million less than a year after launch. This is thanks to its implementation of EIP-4844, which reduces transaction costs and avoids token distribution fees. Another notable L2 platform, Arbitrum, managed to generate $61.14 million in revenue and net $21.8 million despite its fees falling significantly in the second quarter.

At the same time, although the zkSync Era is not as large as the previous two, it generated US$53.3 million in revenue and netted US$17.5 million, demonstrating its profit potential under zero-knowledge proof technology.

Driven by BRC20 and NFTs, the Bitcoin ecosystem started off well, with multiple airdrops available just for holding “blue chip” NFTs. However, after the launch of Runes, things started to go downhill.

The situation in other L1/L2 ecosystems is relatively bleak:
- Injective’s dApp quality is insufficient and airdrops are almost negligible.
- Starknet’s STRK airdrop failed to trigger a “wealth effect” in the ecosystem. Despite the high DeFi Spring rewards, protocol airdrops have been quite disappointing.
- SEI performs well in the NFT field, but is clearly lacking in DeFi dApps and airdrops.
- The SUI ecosystem has high-quality dApps, but the airdrops are not generous, and the unlocking of SUI puts considerable pressure on prices.
- The Cosmos ecosystem is bogged down by internal strife, airdrops have dried up, and they must get back on their feet from recent security breaches.
- The Arweave community expected a higher AO distribution rate by holding AR tokens, but the final result was only 36%.
- Optimism, due to airdrops and high operating costs, although it generated revenue of $44.6 million, had a net loss of $239 million, exposing its high operating costs.

Opportunities and challenges of Layer 3

As L2 gradually became saturated, the concept of L3 naturally became more and more hyped. The purpose of L3 is to provide higher customizability and scalability on top of the existing L2 layer, allowing developers to design exclusive application chains (AppChains) according to specific application requirements. This architecture is considered to further reduce costs and Improve transaction efficiency.

However, L3 also faces many challenges:
1. First, L3’s high degree of customizability may raise concerns about the stability of the ecosystem. Developers can design their own gas fee mechanism in L3, which may lead to ecological division between different chains and thus affect the overall stability.
2. In addition, L2 technology is still not fully mature. For example, Arbitrum was criticized for RPC failures during airdrops, and zkSync faced compatibility and stability issues. These factors make the launch timing of L3 unclear.

Will the launch of L3 weaken the ecological advantages of L2 and further challenge its value capture ability? This is a core issue in the blockchain industry. L3 brings higher technical possibilities, but it also triggers discussions about ecological fragmentation and economic risks.

Current status of Layer 3 technology development

Recently, some blockchain projects have actively invested in the research and development of L3. The Integrity Verifier tool launched by StarkWare allows developers to verify executed programs on Starknet, laying a technical foundation for the development of L3 application chains. Lens Protocol also launched the L3 expansion solution Momoka, and the L3 chain Nautilus Chain launched by Zebec is also a development worthy of attention.

However, Ethereum founder Vitalik also pointed out that although the development of multi-layer networks is a reasonable trend, the actual application of L3 still requires further observation and verification. With current L2 adoption not yet fully stable, the risks of rushing L3 may outweigh the potential benefits.

Conclusion

The public chain is still developing rapidly, and the income status of L1 and L2 is different. These internal catalysts depend on the favorable macro environment and the inflow of ETF funds. Our current market is not strong enough to attract a new wave of retail investors. But if the market rebounds, DeFi degen’s strategy needs to be re-evaluated and should focus on innovative ecosystems that continue to build and generously reward users.

While the concept of L3 is compelling, its practical application and future direction still need to be carefully weighed. Technological innovation is important, but how to find a balance between pursuing innovation and maintaining ecological stability will be a key challenge in the future development of blockchain. The emergence of L3 has brought unlimited possibilities to the industry, but it also requires higher technical wisdom and risk management.

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