Layer 1s Transitioning to Layer 2
From 2021 to 2022, Layer 1 blockchain platforms like Ethereum experienced significant congestion and high transaction costs, largely due to their Proof of Work (PoW) mechanisms. This led to slow transaction speeds and operational inefficiencies. In response, several new Layer 1 projects emerged, aiming to outperform and replace Ethereum by offering better performance and scalability.
However, the launch of Ethereum 2.0, which transitioned Ethereum from PoW to Proof of Stake (PoS), significantly altered the competitive landscape. Post-upgrade, it became evident that few, if any, Layer 1 platforms could rival Ethereumâs enhanced capabilities. By 2023, a notable shift occurred: many projects began transforming their models from Layer 1 to Layer 2 to leverage Ethereumâs robust ecosystem rather than compete against it directly.
Today, Ethereum retains a dominant position in the market. Transitioning to becoming Layer 2 solutions for Ethereum seems to be a more strategic move than directly competing with the Ethereum platform.
