Recently, Paradigm announced a $20 million investment in Ithaca to build a Layer 2 blockchain called Odyssey. Long-established DeFi project Uniswap has launched Unichain, while Kraken, the exchange that raised $120 million, is rolling out its own L2 public chain, Inkonchain. Additionally, traditional giant Sony announced the launch of a new Layer 2 network.

As the elimination battle among hundreds of Layer 2s remains unresolved, this new wave of well-backed Layer 2 solutions has further intensified the already chaotic competition. Ethereum’s fragmented liquidity now faces an even greater challenge, and debates over whether Layer 2 solutions are parasitic or symbiotic have become more polarized. However, from a longer-term perspective, this intensification of differences often signals an impending shift and adjustment. How will these new Layer 2 narratives settle, and what new changes will they bring? This article will provide a comprehensive analysis.

Before examining the new Layer 2 entrants, it is necessary to discuss both the positive and negative perceptions of Layer 2s and the underlying issues.

1. What is the fundamental problem?

The concepts of parasitism and symbiosis aren’t contradictory; they fundamentally reflect the dilemma of development. The Korean film Parasite sparked widespread discussion worldwide because it revealed one of society’s deepest mysteries: the boundaries of human nature are defined by the boundaries of wealth distribution. The issue of wealth or benefit distribution has long been the root of all societal issues, and this holds true in the blockchain world as well.

From this perspective, the so-called issue of fragmented liquidity in Layer 2s essentially boils down to insufficient and uneven distribution of user traffic. The perceived parasitism of Layer 2s is fundamentally due to their current lack of self-sustaining capabilities, inability to give back to the mainnet, and selective passivity.

In economic terms, the cost side for Layer 2 mainly involves fees paid to the mainnet for settlement operations and fees for renting Blob space, while revenue primarily comes from user-paid gas fees. In this economic model, Ethereum’s mainnet effectively outsources transaction execution to Layer 2, allowing the mainnet to focus on security and data availability while continuously upgrading to reduce costs.

The foundation of this economic model’s positive cycle lies in Layer 2 networks attracting more users through their own ecosystem development, thereby achieving economies of scale and giving back to the mainnet. In reality, however, aside from a few strong Layer 2s, most networks are seeing a decline in active users, sinking into stagnation rather than growth.

Looking deeper from an economic model and profit distribution perspective, it’s easy to understand why so many Layer 2 projects are rushing into this space. Every business endeavor has a clear profit motive, whether it’s on-chain margin trading, Ethereum’s massive traffic, or the wealth effect after token issuance—all of which make this sector highly attractive. However, differing attitudes toward profits divide these Layer 2s into the following types:

1. Follow-the-Crowd Lie-Flat Type: With low entry barriers to Layer 2 and profits to be gained, they think, “Why not join?” If the narrative fails, that’s the mainnet’s issue, not theirs, but they still demand their share of revenue. This type often includes users focused solely on extracting value, who, after taking advantage of the ecosystem, reveal their true intentions by saying “take the money and leave.” An example is Scroll.
2. Self-Reliant Independent Type: These are strong players looking for a share of profits. However, finding the mainnet unhelpful and unable to take the lead, they choose to pursue their own path. Examples include Optimism and Unichain.
3. Trailblazer Type: They bring their own user base and may not necessarily need the mainnet’s traffic, but they use it to support their path forward. Sony’s Soneium is an example.

As we analyzed in our article “Layer 2 in Data: Stalled Growth and the Start of the Elimination Game,” Layer 2 itself hasn’t been disproven. Current challenges arise from both unfavorable external conditions and Ethereum’s stagnant narrative, along with the trust depletion among users caused by the “lie-flat” Layer 2s mentioned above. When these factors converge—especially with a large portion of Layer 2s being mere “follow-the-crowd” types with no true intention to build—the criticism of them as parasitic is not unwarranted. Even more concerning, these types dominate the Layer 2 landscape. Just like the gut microbiome in the human body, if resistance is strong enough, an imbalance won’t cause much trouble, but when weakened, it can be the last straw.

While we need not deny Ethereum’s current weaknesses, it’s equally essential to retain confidence in Ethereum’s long-term future as a cornerstone of the blockchain world. The Layer 2 challenges are merely a historical turning point, and in the longer term, these follow-the-crowd Layer 2s are likely to become relics of the blockchain. The Ethereum ecosystem will emerge renewed after a phase of intense filtering and survival of the fittest.

From this analysis, we gain a more objective perspective on this divergence: parasitism is the current state, but symbiosis is the true future. Viewed through a developmental lens, the arrival of new Layer 2s is not necessarily a negative—it could even serve as a catalyst for accelerated elimination or transformative adjustments.

2. Newly entered L2

Each has its own ambition, but the central idea is user experience and applications.

2.1 Unichain

Recently, the most talked-about Layer 2 project is undoubtedly Uniswap’s Unichain, the DeFi leader. It has received both criticism and praise, but as analyzed earlier, for a native DeFi leader that already has built-in traffic, launching its own Layer 2 makes perfect sense from a business logic standpoint.

Uniswap, the largest DeFi platform on-chain, currently has over 1 million daily active users. In terms of trading volume, it holds more than 40% of the total market, double that of the second-largest platform. It processes nearly $700 billion in trades on Ethereum each year. For Uniswap, the key challenges it faces are expanding its market position and share, as well as increasing protocol revenue and token value. The solution to both of these challenges lies in improving user transaction experience, reducing trading fees, and further strengthening its competitiveness.

When analyzing trading fee structure, there are several key variables and corresponding beneficiaries.

Roughly speaking, traders pay an average of around 60 basis points in transaction costs. With an average trading volume of $700 billion, the annual fees from this alone amount to approximately $4.2 billion.

If you are a Uniswap or UNI token holder, two thoughts naturally arise: First, could this $4 billion+ be distributed to UNI token holders instead of Ethereum stakers? Second, can the fees be reduced further to expand the scale? Following this line of thinking, Unichain was naturally born. From an interest-driven perspective, many project decisions become very clear. Unichain specifically builds on the following mechanisms to achieve these goals:

Instant transactions: Unichain is primarily built on the Op Stack and developed a feature in collaboration with Flashbots called Verifiable Block Building. This divides each block into four sub-blocks (Flashblocks), further accelerating state updates and reducing block time, with overall block creation time reduced to 0.25 seconds. At the same time, Unichain uses Trusted Execution Environments (TEE) to separate transaction ordering and block building. This allows for prioritization in ordering while taxing MEV (Maximal Extractable Value) and internalizing MEV revenue. The combination of TEE and Flashblocks strikes a balance between transaction speed and security but also places high demands on the network and technology.

Reducing costs and increasing decentralization: Unichain’s validation network is decentralized, consisting of node operators. To become a validator, one must stake UNI tokens and earn rewards based on the amount staked. Block verification is selected based on UNI staking weight. In other words, Unichain uses a combination of centralized validation and verifiable blocks to increase transaction transparency, while moving the transaction execution to Unichain itself significantly lowers transaction costs.

Cross-chain liquidity: On this front, Uniswap is implementing an “intent-centered” interaction model. In other words, through an intent model, user demands are directly transformed into system intentions, and the system autonomously selects paths to execute, completing cross-chain interactions. This intent-centered approach truly enables seamless cross-chain operations, effectively reducing liquidity fragmentation and minimizing risks associated with manual operations.

In summary, with Uniswap as the leader, the launch of Unichain not only demonstrates its technical understanding but also highlights its ambition to become the liquidity center of the entire DeFi ecosystem, further enhancing its value capture ability and the value of UNI tokens.

2.2 Ithaca

On October 11, Paradigm announced a $20 million investment in Ithaca, aimed at building a Layer2 blockchain called Odyssey. Multiple executives were assigned to key positions, with Paradigm’s CEO serving as the chairman and the CTO as the CEO, showing the company’s significant commitment to the project.

Odyssey is built using Reth, OP Stack, and Conduit. Reth is an Ethereum execution node client launched by Paradigm, mainly written in Rust. Its key features include better memory safety and concurrency performance. Odyssey is built using the Reth SDK, which enhances its throughput, lowers write latency, and increases scalability. Another notable feature is the integration of Ethereum’s upcoming upgrades, Pectra and Fusaka, directly into Odyssey. These upgrades focus on account abstraction, improved operational efficiency, and reduced gas costs.

Additionally, Odyssey offers a user-friendly experience. Users can create wallets directly using existing Google or Apple key tools, and can log into and use the testnet without needing a wallet, gas tokens, or bridging/RPC interactions.

As Ithaca claims, Odyssey truly feels like a futuristic Layer2. Not only does it integrate features from Ethereum’s roadmap ahead of time, but it also allows for early access to functions like account abstraction. This demonstrates Paradigm’s ambition to accelerate the development of the Ethereum ecosystem by bringing these features to users and developers sooner, thus encouraging early participation from both ecosystems and developers.

2.3 Sonic

In August of this year, Fantom officially rebranded as Sonic Labs and launched the S token. The token will be used for airdrops, staking, incentive programs, and more.

As a veteran public chain, Fantom’s core technology is driven by an advanced version of the DAG (Directed Acyclic Graph) with the high-performance aBFT (asynchronous Byzantine Fault Tolerance) consensus mechanism, Lachesis. It was initially designed to solve the blockchain trilemma, and because of this mechanism, Fantom is known for its speed and cost advantages. In 2019, it launched the EVM-compatible Opera mainnet, which became a major player in the subsequent DeFi boom. Especially after Andre Cronje, a leading figure in DeFi, joined the foundation, Fantom reached its peak. However, with the exit of Cronje, the token price dropped sharply. Additionally, with the emergence of newer technologies from projects like Solana, Fantom’s growth was further suppressed.

This significant technical upgrade by Fantom has sparked market attention for two main reasons. First, Andre Cronje’s return brings a strong user influx due to his influence as a leader in the DeFi era. Second, there is substantial room for improvement in Ethereum’s scalability and performance. Cronje claims that Sonic will surpass parallel EVMs. The specific upgrades include:

Introduction of the new Fantom Virtual Machine (FVM): The main feature here is the conversion of EVM bytecode into FVM format, which reduces execution time by parallel processing and compressing data.

Carmen Data Storage Solution: Previously, the state data for smart contracts on Fantom was stored in StateDB, and the EVM executed these contracts, updating the database. This upgrade redesigns the database, introduces an indexing system, and avoids RPL encoding and MPT pruning, significantly reducing both time and space usage. The new storage solution is similar to an operating system’s virtual memory, reducing RPC storage costs by nearly 90%.

Consensus Mechanism Upgrade: The existing Lachesis mechanism has been further optimized to reduce redundant information, improve decision-making efficiency, and shorten transaction confirmation times.

According to the test data shared by Michael Kong during his speech, the network can now handle 4,500 transactions per second, an 8-fold improvement, while block space usage has been reduced by 98%. In theory, Sonic can process 400 million transactions per day, roughly four times the current daily transaction volume of VISA.

If the Sonic upgrade performs as indicated by the experimental data, from the perspective of the Ethereum ecosystem, it will become an L2 with high concurrency and top-tier TPS, surpassing most existing L2 projects. Additionally, the foundation will establish an incubator through Sonic Labs, investing heavily to support ecosystem projects. Currently, there are over 300 projects involved, and if the subsequent operations are handled well, the overall development momentum is worth looking forward to.

2.4 Soneium

Soneium is an Ethereum L2 launched by tech giant Sony, primarily built on the Op Stack and will be integrated into the Optimism Superchain network.

From the limited available information, the overall architecture is expected to be similar to Optimism, with DA mainly relying on the Ethereum mainnet, although indexing may be primarily controlled by the project team. Execution and settlement details remain unclear.

After more than half a month of development, the ecosystem is already taking shape with over 60 projects. The cooperative applications will focus on entertainment, Web3 gaming, and NFT services. Additionally, due to Sony’s previous collaboration with Astar Network, it is expected that the Astar zkEVM will transition to Soneium, with token migration to follow.

From the project’s long-term vision, it primarily aims to leverage Sony’s global distribution channels and capabilities in Web2 to bridge the gap between Web2 and Web3. A relatively clear goal for Soneium is to develop features similar to Story Protocol to protect creators’ intellectual property. Considering Sony’s strong presence in the gaming industry, such a strategic plan isn’t surprising. However, what excites the market is the involvement of a traditional tech giant like Sony in the crypto space, which has generated a lot of anticipation.

Currently, the testnet is growing rapidly, with the total number of wallet addresses surpassing 2.2 million and over 14 million transactions processed, showing a promising data growth.

Overall, this is an attempt by a traditional tech giant. The data from the testnet reflects market anticipation, but it is still unclear whether there are plans for a token issuance or the specific roadmap moving forward.

3. Summary and outlook

The true value will emerge after the storm, and breakthroughs in applications are the future! As mentioned at the beginning of this article, Ethereum’s coin price is weak, its ecological narrative is lackluster, and liquidity fragmentation is a real issue. The continued decline in coin price has exacerbated the negative feedback loop in the market. However, even so, it is clear that the new L2 entrants still rely heavily on Ethereum.

From the product strategies and intentions of these new L2s, we can observe an important trend: while there may be disagreements over the revaluation of Ethereum’s value, a transformation in value distribution is already happening. These new L2s either possess disruptive technological capabilities, come with their own traffic advantages, or have high potential in linking Web2 scenarios. Their goal is not to replace Ethereum, but rather to figure out how to capture a bigger slice of the pie within the current constraints.

This may represent a breakthrough in Ethereum’s L2 ecosystem. Projects need to have a clear advantage in one of the following areas: technology, traffic, or ecosystem. Otherwise, they will struggle to make any significant impact in the market. Furthermore, a clear trend among these new projects is the focus on developing applications that enhance user experience, rather than simply emphasizing infrastructure. This is a significant shift in light of the current overabundance of Ethereum infrastructure.

For the many “laying flat” L2s, whether these new entrants are the catfish, the sharks, or just the fish meat remains unclear in the current environment. If we consider the longer-term history of human endeavors, even the greatest ventures cannot escape cyclical patterns. The journey from the bottom to the peak will always involve trials by fire, but it remains uncertain whether today’s star players will have a voice in the next cycle. What we can be sure of is that elimination will never stop, and development will not stagnate.

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