L2 rollup Wars Heats Up! ETH vs. SOL: Which Will Trigger a New L2 Solution Wave?

In an epic shift in blockchain strategy during the 2021 bull market, numerous Layer 1 (L1) blockchains tried to challenge Ethereum's dominance. None succeeded, which led to a shift from direct competition to collaboration.

2021 saw a blockchain strategy shift with L1s attempting to challenge Ethereum's dominance. However, none succeeded, leading to a pivot from direct competition to collaboration, with Solana playing a key role in this change.

Most L1 tokens lost over 90% of their value by 2022, noted Pavel Paramonov, blockchain researcher at Dewhale Capital. Despite claims of being faster or more secure than Ethereum, these blockchains failed to overtake Ethereum's standing. It's like trying to create a better wallet than MetaMask - users prefer to stick with what they know.

But looking deeper, the analyst found that Solana emerged as the most prominent non-Ethereum blockchain, unlike other non-EVM blockchains like NEAR, Cardano, Algorand, or Kadena. Despite issues like network outages and controversies, Solana stood out by focusing on user needs and technological advancement, charting a different path from other L1s.

Many blockchains, instead of competing with Ethereum, opted to build Layer 2 (L2) rollups on Ethereum. This strategy allowed them to tap into Ethereum's vast ecosystem while nurturing smaller economies. Simple tools like Conduit, AltLayer, and Optimism's OP Stack have made it easier to create these rollups.

However, the variety of L2 rollups led to liquidity fragmentation, with each roll-up serving a different purpose - Optimism for scaling, Arbitrum for DeFi, Base for SocialFi, and Metis for DAOs. This fragmentation drew mixed reactions from the Ethereum community and is more of a social than a technical problem.

Ever since the roll-up happened, there have been two main competitors - ETH and SOL. Ethereum is a "sandbox" where various rollups and projects are created by developers. Developers often pay more attention to generating liquidity for these rollups rather than improving the applications. Solana, on the other hand, has been more focused on creating high-quality applications, like Jupiter Exchange for swapping and Phantom for wallets.

The analyst further noted that Solana's current state is reminiscent of Ethereum's past challenges. Issues like high transaction fees and network limitations led to the creation of Ethereum L2 solutions. Solana faces similar issues with its architecture, including transaction failures due to bot attacks and an inefficient fee mechanism. While creating L2s on Solana isn't necessary now, it could become relevant as the network evolves.

It will be interesting to see if Solana sparks an L2 battle in the future, like Ethereum, triggering a new wave of L2 solutions. Stay connected with us to witness this epic clash.

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