How much Ethereum layer 2 is too much?

Ethereum's Denkun upgrade has sparked an explosion of Cambrian Layer 2s, but industry insiders say there are too many.

There are 73 layer-2 blocks listed on L2beat, 82 in the pipeline.

Adrian Brink, co-founder and CEO of intent-based blockchain Anoma, believes this is 10 times more than the industry needs.

“We only need one-tenth of the crops we're looking at now,” he told Cointelegraph.

Brink says that infrastructure is now delivering infrastructure without use cases, outpacing user-centric applications by a certain margin.

“We have to find applications to run on all these things, and this is the biggest challenge,” he said.

Vitaly Dervod, CEO and founder of Constant Exchange Composability Labs, also sees additional challenges arising from the proliferation of L2.

“We're too many right now,” Dervod said. The more L2s we build, the less interoperability we have, which creates other problems around the infrastructure.

Dervod said that although each project aspires to grow and develop the ecosystem, the cumulative effect is detrimental to the wider industry.

“Developers may have good intentions when they build the next super-fast, low-gas-fee, and easy-to-use blockchain, but in the long run it's counterproductive because it creates a more fragmented ecosystem.”

What went wrong?

The issues raised by Brink and Dervod suggest that the industry is in danger of going off course.

“We have to take into account that a lot of the demand for new infrastructure is coming from the masses,” Dervod said.

Dervod points out that this is not unusual in crypto – it has happened before.

“For example, ZK time [zero-knowledge] Tech is becoming more up-to-date, we've seen an increase in the number of ZK-rollups, but whether they really need them or not is another question,” said Dervod.

“I think we need to really explore new use cases that enable new kinds of applications,” Brink said.

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Brink believes adoption will miss out on those new use cases, and in fact, worries about that issue as infrastructure is being overwhelmed by the booming airdrop farming movement.

“I'm very skeptical of the actual usage numbers,” said Brink, adding that the current promotional model creates a mini-boom-bust cycle: “A points program happens, a token is distributed, usage drops to zero.” It seems unlikely to me that this is a good long-term structure for the industry.

Incentivized airdrops have proven to be effective in spurring onchain activity from the crypto community, but often cause problems later on.

In June, LayerZero issued the ZRO token following an extended Sybil – duplicate tag – hunt. The company has said publicly that most airdrop hunters have “no interest” in the long-term prospects for a project. The value of the token has dropped by 17% since the issuance.

“Airdrop farming in general may not be sustainable, but airdrop farming in particular is just about the same thing but a slightly different color that won't fly for long,” he said.

No one comes without blockchain use cases.

Concerns about the proliferation of L2s are only one side of the equation. If too much energy is being applied to infrastructure, something else may be being neglected.

Dervod says it's time to focus on consumers and create something truly compelling.

“While strong infrastructure is critical, infrastructure is not what attracts people to new technologies. Blockchain's true value lies in its ability to solve real-world problems and create new opportunities,” Dervod said.

“Without compelling use cases, a broad audience won't care about blockchain,” he added. “Interesting use cases drive demand for infrastructure improvements. We need to start with the use cases and then develop the infrastructure, not the other way around.

Get real value

Not everyone agrees that L2s are oversupplied. Some believe there is room for everyone.

Among them are Elena Sinelnikova, founder of the Layer-2 project Metis and the non-profit educational platform Cryptochix.

“Each L2 project has its own vision and purpose and if it is focused on it, it can be successful,” she said.

Metis seeks to differentiate itself from the pack by offering a “decentralized series.” Sinelnikova says that the conventional series model “represents a single point of failure and concentrates on transaction revenue,” while Metis “uses multiple sequences operated by independent parties.”

Brink believes that L2s can prove themselves if they find specific applications. Skeptical of the current set of Layer-2s, Brink predicts that one day we'll see Layer-2s in the “hundreds of thousands” because we'll need “hundreds of thousands of independent systems that can interact with each other.”

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“L2s are good,” Brink said, but not “if they do the same thing” as Layer 1, just “a little faster.”

Diversity is key. Dervod adds, “Different L2s serve certain use cases better than others. For example, some L2s are focused on gaming while others facilitate crypto trading, such as Fuel, the upcoming L2.

It's a matter of layer-2s and their skeptics needing something more than speed to make it worthwhile.

“Without real use cases, all this infrastructure is being built for the sake of it and it's becoming a very expensive experiment,” Dervod said.