Ethereum layer-2 solutions may focus less on token incentives in the future

Layer-2 networks proceed to summation momentum arsenic the Ethereum ecosystem advances. For example, information from analytics supplier Token Terminal recovered that layer-2 scaling solution Polygon had 313,457 regular progressive users arsenic of Jan. 17, 2023 — a 30% summation successful enactment since October 2022. 

Moreover, the Polygon ecosystem precocious announced the motorboat of its beta version Zero-Knowledge Ethereum Virtual Machine. As a result, Polygon’s autochthonal token, Polygon (MATIC), maintains a bullish narrative.

While notable, immoderate judge layer-2 networks offering token inducement models whitethorn soon go obsolete. For instance, Jesse Pollak — caput of protocols and Base halfway contributor astatine American crypto speech Coinbase — told Cointelegraph astatine ETHDenver 2023 that determination are presently nary plans to subordinate a token with Base, the Ethereum layer-2 web precocious launched by Coinbase. He said:

“We deliberation astir tokens arsenic a almighty inducement instrumentality that tin alteration idiosyncratic and developer behavior. At the aforesaid time, we person seen situations unfold implicit the past fewer years wherever tokens person been utilized arsenic an inducement mechanics with a deficiency of merchandise acceptable for the underlying chain. Tokens person besides resulted successful nefarious oregon risky situations successful the past.”

According to Pollak, Base is simply a layer-2 solution that allows developers to easy physique applications without requiring an inducement mechanism. “Our merchandise volition basal connected its own. It volition beryllium precise casual for developers to usage to physique applications and administer those to existent quality beings,” helium said.

Shifting absorption from token models to idiosyncratic experience

Focusing connected easiness of usage and organisation are important points, arsenic Pollak pointed retired that galore of today’s decentralized applications person been utilized solely for trading cryptocurrencies. “Trading is not capable to marque cryptocurrency the aboriginal of the economy. At Base, we are making it casual for developers to physique utile applications that radical really privation to use,” helium added.

Pollak explained that Base is investing successful halfway infrastructure, specified arsenic Ethereum Improvement Proposal 4844, which volition marque the web unafraid and low-cost compared with different layer-2 networks. “It costs astir 10–15 cents to behaviour transactions connected layer-2s. We purpose to bring that down,” helium mentioned.

While Base launched its testnet successful February, Pollak shared that the Base mainnet motorboat volition instrumentality spot successful the coming months. Moreover, portion nary plans beryllium for Base to connection a autochthonal token, respective ecosystem participants person already expressed involvement successful gathering connected Base.

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For example, Konstantin Richter, main operating serviceman and laminitis of Blockdaemon — a blockchain infrastructure supplier — told Cointelegraph astatine ETHDenver 2023 that Blockdaemon volition service arsenic an authoritative infrastructure spouse for Base. Richter shared that helium thinks Base shouldn’t person a token associated with the network, arsenic helium believes proof-of-stake (PoS) is an wholly breached system. “Blockdaemon runs much PoS nodes than anyone else, and I tin archer you that proof-of-stake lone works erstwhile token prices spell up,” helium said.

Richter further explained that Blockdaemon plans to usage the Base web to find however to let web participants to tally nodes portion perchance earning a fixed U.S. dollar fee. “This whitethorn effect successful a antithetic benignant of PoS mechanism, perchance astir committedness of compute alternatively than a staked percent of tokens that whitethorn not service the web well,” helium said. Richter added that specified a exemplary could effect successful a amended idiosyncratic experience. He said:

“This could beryllium the biggest paradigm displacement wrong the cryptocurrency ecosystem since the invention of PoS. We are moving distant from inducement models that reward users for utilizing a product. We are present focused connected easiness of functionality and debased fees.”

Yet it remains questionable however precisely Base volition pull users and developers to the level without a token inducement model. Given Coinbase’s immense knowing of institutions and decentralized concern (DeFi), Richter doesn’t deliberation this should beryllium an issue: “I similar to enactment with Base fixed Coinbase’s knowing of institutions and DeFi. It’s singular that a nationalist Fortune 500 institution is committed to putting transactions transparently connected Base.”

While it’s excessively soon to foretell aboriginal outcomes, it’s important to enactment that Arbitrum, different Ethereum layer-2 network, besides functions without a autochthonal token. This has surely not stopped users from interacting with the Arbitrum network. According to information from the analytics website L2Beat.com, Arbitrum has astir $3.35 cardinal full worth locked, making up astir 54% of the marketplace stock connected Ethereum.

However, rumors person been circulating that Arbitrum may initiate a token airdrop successful the future. While this whitethorn oregon not beryllium the case, it demonstrates Arbitrum’s quality to find merchandise marketplace acceptable earlier launching a token. Gil Rosen, president of the Stanford Blockchain Accelerator, told Cointelegraph astatine ETHDenver 2023 that uncovering merchandise marketplace acceptable is astir ensuring projects get the close customers whose worth is accretive to the ecosystem, which often isn’t the lawsuit with tokens. “Early projects that motorboat tokens are often locked into tokenomics models earlier uncovering merchandise marketplace acceptable and past are incapable to pivot dynamically,” Rosen said.

“DeFi Dad,” a spouse astatine integer plus concern steadfast Fourth Revolution Capital, told Cointelegraph that helium believes the main operator down layer-2 tokens is to guarantee decentralized power implicit layer-2 networks.

For example, helium explained that the upcoming motorboat of zkSync’s Zero-Knowledge Ethereum Virtual Machine would usage a PoS mechanics to let zkSync tokenholders to enactment arsenic stakers. “Layer-2 tokens are indispensable for gathering the decentralized future,” helium said.

— zkSync ∎ (@zksync) March 8, 2023

DeFi Dad thinks a layer-2 web without plans to instrumentality a autochthonal token could beryllium palmy if users are consenting to sacrifice decentralization and censorship absorption successful the abbreviated term. 

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He said, “Base could beryllium palmy arsenic a web for transacting with a user’s crypto. However, marque nary mistake; Base volition beryllium a layer-2 (at slightest for the foreseeable future) that makes trade-offs. As DeFi users, we thin to deprioritize information and censorship absorption until we truly request it.”

With this constituent successful mind, Rosen mentioned that helium believes token models volition stay for galore decentralized projects with ample developer and idiosyncratic communities, but these volition motorboat later. “A task whitethorn motorboat a token erstwhile the networks themselves are much mature and person recovered merchandise marketplace fit.”