Dilemma and breakthrough: The current status of Ethereum L2 and the rise of new L1

Author: Samuel QIN, OKG Research‍‍‍‍

"What happened to Ethereum?" This topic has been frequently mentioned in recent industry events, and there are also many voices of short selling in the market. From the hotbed of innovative applications in the crypto industry to saline-alkali land, Ethereum seems to be dissociating from industry hotspots and past values. Since the heyday of DeFi Summer, Ethereum's expansion problem has always been with it. High handling fees, transaction congestion and other problems have become increasingly obvious, and there is an urgent need for the scalability of the public chain.

*OKG Research, Data source: Ethereum Gas Consumption from 200101～241024 from https://www.oklink.com/data/

Since the launch of OP and ZK, two major expansion schools around Ethereum, have all appeared on the scene, using the Ethereum main chain to ensure their own security. Judging from the current data of several major Layer2 public chains, TPS has been significantly improved and L2 transaction fees have dropped significantly.

*OKG Research, Data Source: https://l2beat.com/scaling/activity

*OKG Research, Graph Source: https://www.growthepie.xyz/fundamentals/transaction-costs

However, the two mainstream expansion routes have not really led to a large-scale growth in Ethereum users. From the perspective of daily activity, it has stabilized from 2021 to 2024. On the contrary, relying on L2 has also exacerbated the further dispersion of liquidity and further separation of users in the Ethereum ecosystem. Some L2s have attracted more ecological users under the support of specific tracks, and the competition with the main chain has become more and more obvious.

OKG Research, Data Source: https://tokenterminal.com/ Active Users from 240101~241031

Such competition has also aggravated the separation of interests between L2 and the main network. Before the deployment of EIP 4844, L2 needed to send transaction data permanently stored in the form of call data to the main chain, and it needed to pay a high gas fee to Ethereum, which accounted for about 70% to 80% of the entire L2 payment fee. After EIP 4844 is launched, transaction data only needs to be placed in the block-carrying blob, and it can be automatically deleted after a period of time after the verification is completed, which greatly reduces the storage cost.

*OKG Research, Graph from https://hackmd.io/@luozhu/SyleCcpti

From the chart of Rent Paid to L1, it can also be found that the fees that L2 needs to pay to Ethereum show a clear downward trend. At the same time, since L2 assumes the role of transaction execution, this part of the MEV income cannot be transmitted to the main chain. Therefore, the rights and interests of the PoS stakers of the main chain itself will obviously be weakened by the reduction in fees.

*OKG Research, Data Source: http://growthepie.xyz Rent Paid to L1

In addition, from the perspective of transaction finality, the interoperability between different types of L2 is very weak, and the interaction often needs to be realized through the Ethereum main chain, which makes the friction cost of user-chain interaction high and the user experience is relatively limited.

This seems to have lost the original vision of using L2 to achieve the integration of Ethereum expansion, but instead aggravated the separation between L2. Despite significant improvements in scalability and transaction fees, the liquidity of the L2 network is divided into multiple sub-networks, and the friction cost of users transferring funds between L2s is high. Various L2s need to copy and paste the existing narratives and applications of Ethereum, lacking a new track that can truly "break the circle", which limits their ability to attract new user groups with featured applications.

The new public chain can avoid this situation in its own technical architecture design. Compared with the existing L2 solutions, the new L1 public chain can better solve the performance bottlenecks currently faced by public chains, such as Aptos and Sui, through a new consensus mechanism, modular design, and optimization of user experience.

These Layer 1 public chains have improved not only their scalability capabilities and cheaper on-chain interaction costs through unique consensus algorithms and high-performance node networks, but also try to attract users from different public chain ecosystems through high cross-chain compatibility and support more application scenarios. In particular, for the support of consumer-level applications, try to integrate more diverse consumer-level application scenarios instead of just financial scenarios. These new features will help promote the popularization of blockchain technology and drive the participation of more industries.

However, the new L1 needs to quickly establish its own developer community and user base, which often requires a lot of marketing and incentives, increasing initial costs. They also face the pressure of building a developer ecosystem and user community, and need to balance the performance, decentralization level and security level on the chain. For example, downtime, crash and block stop are also engineering tests that need to be faced in stress testing.

With the competitive development of L2 and new L1 public chains, the expansion of the public chain ecology is accelerated. Users urgently need an aggregated "portal" to quickly access the Web3 network, but it is not difficult to see from the previous description that the technical architectures adopted by different chains are also different, requiring a strong technical background to provide technical analysis and access services for different chains.

In the future, cross-chain migration and aggregation will become the norm in the blockchain industry, and users will be able to get better interactive experience and transaction security in more choices. As a chain world built by data, multi-chain browsers are important tools for industry participants to gain insight into the chain world, which will include industry participants in different dimensions such as project parties, developers, and C-end users. However, the monetization methods of general eco-browsers are limited, which depends to a certain extent on the support of the ecological foundation, and the ecological position also determines that ordinary eco-browsers are often in the form of single chains. Eco-browsers can help users to explore vertically to a certain extent, but with the increase in the number of public chains, the lack of platforms that can aggregate multi-chain data horizontally obviously cannot meet the needs of current users. Looking at the current multi-chain browsers, the display form is more inclined to single display. Users cannot intelligently locate which public chain they are on through simple address search, which leads to the separation of on-chain data presentation and the inability to aggregate relevant information through a unified platform. The friction cost of switching also requires users to synchronously manage account information distributed on various platforms, and it is impossible to accurately aggregate discrete on-chain information.

At the same time, a highly modular technical architecture customized for the mainstream public chain ecology (EVM compatible chain, Cosmos ecological chain, UTXO, etc.); combined with user needs and market hotspots, more customized heterogeneous chain access is also urgently needed by users. However, considering the technical cost of public chain access, there is also a certain primary and secondary relationship between different chain data.

The aggregated multi-chain browser represented by OKX Web3 Explorer is trying to aggregate multi-chain information, combining its own positioning of common development with various industry ecosystems, and openly and equally accessing various types of public chains. Users can access various types of data from 50+ public chains through the same account and portal, which greatly reduces the burden of users in multi-chain information aggregation.

The integrated entrance is also the best way to widely reach active users. By providing users with basic information about each chain, it can stimulate users' curiosity to a certain extent, encourage users to try to switch to a variety of public chain ecosystems, and promote the integration of different ecological liquidity and ecological applications.

In the long run, the trend of multi-chain integration will promote the technological progress and application expansion of the blockchain industry, and promote the development of an open and collaborative ecosystem. This will not only facilitate users' exploration of Web3, but will also lay a solid foundation for a more open and inclusive on-chain world as a whole.