The Layer-2 community continues to realize momentum because the Ethereum ecosystem grows. For instance, information from analytics supplier Token Terminal discovered that layer-2 scaling answer Polygon had 313,457 every day lively customers as of January 17, 2023 – a 30% enhance in exercise from October 2022.
Moreover, Polygon Ecosystem not too long ago introduced the launch of a beta model of its Zero-Information Ethereum Digital Machine. Because of this, Polygon’s unique token, Polygon (MATIC), maintains a bullish narrative.
Though vital, some imagine that layer-2 networks providing a token incentive mannequin might quickly grow to be out of date. As an illustration, Jesse Pollack – head of protocol and base core contributor at American crypto alternate Coinbase – informed Cointelegraph at ETHDenver 2023 that there are at present no plans to affiliate the token with the Ethereum layer-2 community base at present launched by Coinbase. He mentioned:
“We consider tokens as a strong incentive instrument that may change person and developer conduct. On the identical time, we have now seen conditions over the previous few years the place tokens are used as an incentive mechanism with a scarcity of appropriate manufacturing for the underlying chain. Tokens have additionally led to dangerous or harmful conditions up to now.”
In line with Pollack, Base is a layer-2 answer that permits builders to simply construct functions with out the necessity for an incentive mechanism. “Our product will stand by itself. It is going to be very simple for builders to construct functions and deploy them to actual people,” he mentioned.
Shifting focus from token fashions to person expertise
Ease of use and a concentrate on distribution are key points, as Pollack identified that a lot of at this time’s decentralized functions are used solely for buying and selling cryptocurrencies. “Commerce just isn’t sufficient to make cryptocurrency the way forward for the financial system. At Base, we’re making it simpler for builders to construct helpful apps that individuals really need to use,” he added.
Pollack defined that Base is investing in core infrastructure, akin to Ethereum Enchancment Proposal 4844, that may make the community safer and cheaper than different layer-2 networks. “Transactions on Layer-2 value round 10-15 cents. We goal to deliver it down,” he talked about.
Whereas Base launched its testnet in February, Pollack shared that the Base mainnet launch will occur within the subsequent month. Moreover, whereas no plans exist for Base to supply a local token, many ecosystem members have already expressed curiosity in constructing on Base.
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For instance, Constantin Richter, chief working officer and founding father of BlockDaemon – a blockchain infrastructure supplier – informed Cointelegraph at ETHDenver 2023 that BlockDaemon will function the official infrastructure accomplice for the bottom. Richter shared that he believes Base mustn’t have a token related to the community, as he believes Proof-of-Stake (PoS) is a totally damaged system. “Blockdaemon runs extra PoS nodes than anybody else, and I can inform you that proof of stake solely works when token costs go up,” he mentioned.
Richter additional defined that BlockDemon plans to make use of the bottom community to resolve easy methods to enable community members to run nodes whereas probably incomes a hard and fast US greenback charge. “This might lead to a distinct sort of PoS mechanism, presumably round a computational dedication quite than a stacked proportion of tokens that do not serve the community properly,” he mentioned. Richter added that such a mannequin may lead to a greater person expertise. He mentioned:
“This might be the most important paradigm shift within the cryptocurrency ecosystem because the invention of PoS. We’re shifting away from an incentive mannequin that rewards customers for utilizing a product. We at the moment are targeted on ease of operation and decrease charges.”
Nonetheless it stays questionable how the token will appeal to base customers and builders to the platform with out an incentive mannequin. Given Coinbase’s establishments and huge understanding of decentralized finance (DeFi), Richter does not suppose this needs to be a difficulty: “I want working with Base given Coinbase’s establishments and understanding of DeFi. It’s vital {that a} public Fortune 500 firm is dedicated to transacting transparently on a base.”
Whereas it’s too quickly to foretell future outcomes, it is very important observe that Arbitrum, one other Ethereum layer-2 community, additionally operates with out a native token. This actually didn’t forestall customers from interacting with the Arbitrum community. In line with information from analytics web site L2Beat.com, Arbitrum has about $3.35 billion in whole worth locked up, which is about 54% of the market share on Ethereum.
Nonetheless, rumors are circulating that Arbitrum might launch a token airdrop sooner or later. Whereas this may occasionally or might not be the case, it demonstrates Arbitrum’s means to find out product market match earlier than launching the token. Gil Rosen, president of the Stanford Blockchain Accelerator, informed Cointelegraph at ETHDenver 2023 that reaching product market match is about ensuring the venture will get the correct prospects with the correct worth for the ecosystem, which is usually not the case with tokens. “Early initiatives that launch tokens are sometimes locked into the Tokenomics mannequin earlier than discovering a product market match after which unable to dynamically pivot,” Rosen mentioned.
“DeFi Dad,” a accomplice at digital asset funding agency Fourth Revolution Capital, informed Syntelegraph that he believes the principle driver behind layer-2 tokens is to make sure decentralized management over the layer-2 community.
For instance, he defined that the upcoming launch of zkSync’s zero-knowledge Ethereum digital machine will use a PoS mechanism to permit zkSync token holders to behave as stakers. “Layer-2 tokens are important for constructing a decentralized future,” he mentioned.
Due to our group and full ecosystem for an enthusiastic ETHDenver 2023. For the remainder of the week, we’ll share highlights from ETHDenver round ZK scaling and constructing a future-proof zkEVM. First matter, hyperscalability.
1/7 pic.twitter.com/qOVSQ475a2
— zkSync (@zksync) March 8, 2023
DeFi fathers imagine {that a} layer-2 community with out plans to implement native tokens can succeed if customers are keen to sacrifice decentralization and censorship resistance within the quick time period.
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He mentioned, “Base will be profitable as a community for coping with person crypto. Nonetheless, make no mistake; The bottom will likely be layer-2 (at the very least for the foreseeable future) which creates a trade-off. As DeFi customers, we are likely to ignore safety and censorship resistance till we actually want it.”
With this level in thoughts, Rosen talked about that he believes the token mannequin will stay for a lot of decentralized initiatives with massive developer and person communities, however that it’s going to take off later. “A venture can launch a token when the community itself is extra mature and the product is market match.”
