Your Company Probably Doesn’t Need Its Own L2

Increasingly corporations are drawn to the thought of ​​launching their very own Ethereum Layer 2 community. Most of them mustn’t fear. There’s already a shocking variety of them – More than 150. Various these are centralized and linked to a single firm and varied corporations corresponding to Robinhood not too long ago introduced plans to launch their very own Layer 2 networks.

The sights for launching an Ethereum Layer 2 community are appreciable, particularly as compared with the launch of your personal layer 1 (Basis Layer) Blockchain. Low 1 -network should compete with networks corresponding to Ethereum and Solana in an already intensely aggressive and busy market. Layer 2 networks that run on high of Ethereum are additionally confronted with an intense aggressive market, however can on the similar time use the power of the Ethereum eco system, because of deep integration into Ethereum itself.

As a result of Ethereum grew to become 10 in July, it stays the dominant sensible contract blockchain and it’s the largest home for digital belongings, real-world belongings (RWA)Stablecoins and decentralized monetary purposes. The share of Ethereum within the whole decentralized monetary ecosystem has now been steady with round 50percentfor 3 years. When Layer 2 networks are included within the whole, this appears to rise modestly.

The temptation to launch your personal Ethereum Layer 2 community is straightforward to know – they appear like a helpful idea with a big economic system. A Layer 2 community on high of Ethereum provides a little bit of the performance “Better of Each Worlds”: You possibly can management your personal ecosystem in your layer of two, however preserve integration with and entry to the entire Ethereum eco -system. Centralized Layer 2 networks can set their very own worth buildings and nearly all have the identical controls as an impartial non-public blockchain, corresponding to deciding who has entry to the community and what sort of information is seen to others.

This comes with a prices. Layer 2 -Networks should purchase transaction processing area on the Ethereum Minet to finish their transactions (referred to as Blob House) -However these prices are most likely decrease than these associated to beginning a community fully once more and competing with Ethereum. In line with the token terminal, the prices for growing a layer 2 are in reality remarkably low. For BASE, a Layer 2 community run by Coinbase, in June 2025, the community generated $ 4.9 million in reimbursement revenue and solely spent $ 50,000 in settlement prices.

Certainly, the Layer 1 -settlement prices on Ethereum are so low that they’ve arrange a fiery debate inside the community ecosystem about whether or not they’re too low, and that Layer 2 networks characterize a switch of advantages of Layer 1 stakeholders to Layer 2 Networks. It’s possible that this may end in a lot of re-balance of reimbursements, however even a 10x improve in reimbursements will most likely not change the essentially good worth proposition related to scale with Layer 2 networks.

As well as, the latest announcement of Robinhood Validates that they are going to construct their very own Layer 2 community on Ethereum Basically The general layer 2 -thesis inside Ethereum: Layer 2 networks will not be solely a great scale choice, additionally they make a wide range of enterprise fashions that may contain a variety of corporations.

And this brings us to a very powerful query: does your organization want its personal layer 2 community? Chances are high that you’ll not do this. The true worth proposition of a blockchain ecosystem is the chance to work collectively in collaboration with others with no occasion driving the community. For instance, in case you are a manufacturing firm, you wish to work along with your rivals along with your suppliers and prospects on a degree enjoying area. Blockchains let everybody take part with out favoring a participant. In the long run, working collectively at a degree enjoying area is less expensive and the choice to attempt to combine above into totally different methods which can be managed by every of your most vital prospects or suppliers.

Though some Layer 2 networks at present look very worthwhile, that is solely true for those who can generate a great transaction quantity. Most of the energetic Layer 2 networks do little to no issues if they’ve bother distinguish themselves in a busy market. In line with L2Beat, most of those networks have bridged lower than $ 1 mm in TVL from Ethereum and have on common lower than one person surgical procedure per second.

So when does an organization want its personal layer 2 community? My speculation is that this works greatest for corporations that may gather a substantial transaction quantity within the community and whose prospects wouldn’t have the sources or the person quantity to make their very own direct connection to Ethereum. At current, this implies largely monetary service suppliers who’ve 1000’s or tens of millions of retail prospects, from coinbase to cracking to Robinhood. Extra corporations will definitely observe. Having a Layer 2 community could be seen sooner or later, the way in which we now have checked out a spot on the New York Inventory Alternate. They want brokerage corporations, however a automobile producer wouldn’t discover any worth in it.

Three questions can be helpful to find out whether or not an organization ought to launch its personal Ethereum Layer 2 community: is the corporate initially capable of gather a substantial quantity of its personal transactions or prospects in comparison with different networks? Secondly, within the chains within the heart of the corporate, transacts within the chains (For instance, you’re an middleman, particularly a monetary that’s at present being carried out on conventional monetary rails). Lastly, does your Layer 2 strategy supply a differentiated worth proposition in comparison with the numerous different community choices which can be accessible? For those who can say sure to all three choices, this can be a doable path forward.

For many different forms of corporations, they’ll discover that the optimum worth proposition connects on to Ethereum, or one of many different Open Layer 2 networks. It is going to be cheaper and extra non-public than going via an aggregator who is ready to mark your transaction prices and see your transaction movement and cheaper than operating your personal community.

Nevertheless, I believe that earlier than we’re prepared, fairly a number of corporations that don’t must run their very own layer 2 will nonetheless launch one for a similar the explanation why many corporations have launched non-public chains prior to now.

Irrespective of how dependable they’ve failed, the attraction of personal block chains was at all times tough to stop. The attract of “Management your vacation spot” and “taxing the ecosystem” was tough to withstand. Public chains, with their openness, interoperability and permissionless nature, can look scary for enterprise customers who’ve extra management.

For a similar consumers who needed non-public chains, centralized Layer 2 networks appear like a midway home which will appear enticing. Not like non-public chains, I do not assume they’re all doomed to fail, however I believe that only some will succeed. Historical past continues to repeat itself – particularly as a result of we’re not excellent at paying consideration. Right here we go once more.

Disclaimer: These are the non-public views of the writer and don’t characterize the views of EY.