Unveiling the Value Derivation of Layer-2 Blockchains: A Comparison of L2 Business Models and Effectiveness

With the rapid emergence of Layer-3 (L3) blockchains, crypto enthusiasts are eager to understand how Layer-2 (L2) blockchains plan to derive value. In this article, we delve into the revenue models of prominent L2 blockchains like Arbitrum, zkSync, StarkNet, and Polygon, all of which are built on the Ethereum network. Additionally, we explore the rise of L3 blockchains, offering solutions to some L2-related challenges, and the benefits they provide, such as customizable chains with enhanced privacy, fees, tokens, permissions, and governance.

L2 Blockchains: Enhancing L1 Solutions

L2 blockchains were specifically designed to address the limitations faced by Layer-1 (L1) blockchains, with Ethereum being an early adopter of L2 technology. Prominent L2 blockchains, including Arbitrum, zkSync, Polygon, Optimism, and StarkNet, have chosen Ethereum as their foundational platform.

The Emergence of L3 Blockchains

As the cryptocurrency landscape constantly evolves, so does its technology. The emergence of L3 blockchains aims to tackle specific challenges encountered in L2 blockchains. Furthermore, L3 blockchains offer users the flexibility to create dedicated chains tailored to their unique requirements, encompassing features like enhanced privacy, custom fees, specialized tokens, permissions, and governance mechanisms.

Revenue Models of L2 Blockchains

Each L2 blockchain adopts a distinct revenue model to sustain its operations and attract users.

Arbitrum, zkSync, and StarkNet: These L2 blockchains primarily function as settlement layers. Their role involves facilitating secure and efficient transaction settlements, ensuring the smooth operation of decentralized applications (dApps).
Polygon’s MATIC Staking: Polygon, in addition to being an L2 blockchain, allows users to generate revenue through MATIC staking. Deploying an L3 blockchain on Polygon entails staking tokens as a prerequisite to accessing the infrastructure.

Comparing L2 Business Models and Effectiveness

Researchers at Messari have diligently analyzed and compared the business models and effectiveness of various L2 blockchains. Among them, Optimism’s Superchain stands out as the most efficient. However, in terms of value capture, Arbitrum’s Orbit emerges as the frontrunner, surpassing Superchain and other L2 competitors. Notably, this evaluation is based on data from April 2023, indicating that rankings might have evolved since.

Recent Developments in L2 Blockchains

Arbitrum Orbit: Last month, Offchain Labs, the development team behind Arbitrum, unveiled a suite of new tools aimed at facilitating seamless development on Arbitrum Orbit. Additionally, L3 blockchains built on Orbit can settle on any of Arbitrum’s public L2 blockchains, such as Arbitrum One, Arbitrum Nova, and Arbitrum Goerli.
zkSync’s ZK Stack: To encourage developers interested in creating Layer 2 and Layer 3 networks on Ethereum, zkSync released the “ZK Stack.” This comprehensive guide assists developers in building ZK-powered L2s and L3s.
Optimism’s OP Stack: Similar to zkSync’s ZK Stack, Optimism offers the “OP Stack,” providing valuable support to developers seeking to establish L3 blockchains on its platform.

Conclusion

In conclusion, L2 blockchains like Arbitrum, zkSync, StarkNet, and Polygon play a vital role as deployment layers for the evolving L3 blockchains. Each L2 blockchain has its unique revenue model, with Polygon distinguishing itself through MATIC staking. Messari’s comparative analysis of L2 business models highlights the efficiency of Optimism’s Superchain and the value capture potential of Arbitrum’s Orbit. As the crypto space continues to evolve, further advancements and refinements in L2 and L3 technologies are expected, shaping the future of decentralized finance and blockchain applications.

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Source: coinedition.com