TL; DR
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There are over twenty L2 chains being built on ETH, and each project is somehow convinced that they are not competing with the next (they are, and it is ‘winner takes the most’).
Full story
Think of the end of Terminator 3, how you find out that the war between humans and cyborgs had quietly begun earlier in the film…
But it took people the majority of the 1 hour and 49 minute viewing time to figure it all out?
The Ethereum layer-2 (L2) situation reminds me of that.
There are a ton of L2 blockchains being built on top of Ethereum, and each project is convinced (somehow) that they won’t compete with the next.
Instead, they’re doing it all for the greater good of Ethereum (this is called “Ethereum alignment”).
In reality, these L2 chains are at war with each other.
(Whether they realize/admit it or not).
Bold words, we know! So let’s support them. Starting with the ‘what’ of it all…
The Ethereum mainnet (also called the ‘layer 1’) is like a freight train (slow, expensive, but very secure/reliable), while L2 chains are like passenger trains (fast, cheap, but slightly less reliable/reliable) .
Both rely on the same set of rails (the Ethereum network) to operate, but serve different purposes.
…and no matter how romantic it may seem:
You won’t want to use a freight train (ETH) for personal transportation (everyday transactions) because it wasn’t designed for that! It’s just too slow/expensive.
(Think somewhere between $3-$3,000 in fees per transaction, depending on demand).
Okay, so why the ‘war’?
Well, right now there are like 20+ layer 2 chains competing for your money/attention/patronage.
Can you imagine a train system where twenty different passenger train companies compete for customers?
Imagine… keep that image in your mind…Ok I get it? Good.
Now let’s even things out more complex:
Imagine if the platform you boarded at determined which train company you would use – and that company had its own currency/ticketing system that didn’t function well at any of the other companies.
That meant that if you had to transfer at some point, it would result in transfer fees and a long wait.
Okay, okay, this analogy is getting way too intense.
But that’s kind of the point: the Ethereum L2 ecosystem is a mess right now, just like this fictional train system!
In the same way that Amtrak owns the majority of the US interstate passenger rail market, we believe we will inevitably see a dominant L2 takeover of Ethereum.
It won’t be a winner takes all, but instead: winner takes the most.
Do you want to know why?
Click here to read part 2…