Your Company Probably Doesn’t Need Its Own L2

More and extra firms are interested in the thought of launching their very own Ethereum layer 2 community. Most of them shouldn’t trouble. There’s already a staggering variety of them — over 150. Quite just a few of those are centralized and linked to a single enterprise and a number of other firms resembling Robinhood have lately introduced plans to launch their very own layer 2 networks.

The points of interest for launching an Ethereum layer 2 community are important, particularly when in comparison with launching your individual layer 1 (basis layer) blockchain. Layer 1 networks should compete with networks like Ethereum and Solana in an already intensely aggressive and crowded market. Layer 2 networks that run on high of Ethereum additionally face an intensely aggressive market however can concurrently draw upon the energy of the Ethereum ecosystem, because of deep integration into Ethereum itself.

With Ethereum having turned 10 in July, it stays the dominant sensible contract blockchain and it’s the largest single residence for digital belongings, real-world belongings (RWA), stablecoins and decentralized finance functions. Ethereum’s share of the general decentralized finance ecosystem has been secure at about 50% for 3 years now. When layer 2 networks are included within the whole, it seems to be rising modestly.

The temptation to launch your individual Ethereum layer 2 community is simple to know — they seem like a helpful idea with nice economics. A layer 2 community on high of Ethereum presents a little bit of “best of both worlds” performance: you possibly can management your individual ecosystem inside your layer 2 however retain integration with and entry to the general Ethereum ecosystem. Centralized layer 2 networks can set their very own value buildings and have practically all the identical controls as a stand-alone personal blockchain resembling deciding who has entry to the community and what sort of information will probably be seen to others.

This comes with a value. Layer 2 networks should buy transaction processing house on the Ethereum mainnet to finalize their transactions (often called blob house) — however these prices are more likely to be decrease than these related to beginning a community from scratch and competing head-on with Ethereum. In reality, in line with Token Terminal, the prices of creating a layer 2 are remarkably low. For Base, a layer 2 community run by Coinbase, throughout June of 2025, the community generated $4.9 million in charge income and spent simply $50,000 on layer 1 settlement charges.

Indeed, the layer 1 settlement charges on Ethereum are so low they’ve set off a fiery debate throughout the community ecosystem about whether or not they’re too low, and that layer 2 networks characterize a switch of advantages from layer 1 stakeholders to layer 2 networks. It is probably going it will lead to some re-balancing of charges, however even a 10x enhance in charges will not be more likely to alter the essentially good worth proposition that comes with scaling with layer 2 networks.

Furthermore, the current announcement by Robinhood that they are going to be constructing their very own layer 2 community on Ethereum essentially validates the general layer 2 thesis inside Ethereum: layer 2 networks usually are not solely a very good scaling choice, in addition they allow a wide range of enterprise fashions that can entice a variety of firms to hitch the community.The layer 2 ecosystem is more likely to have a spread of individuals from the absolutely decentralized to the utterly centralized.

And this brings us to the important thing query: does your organization want its personal layer 2 community? Chances are, you don’t. The actual worth proposition of a blockchain ecosystem is the flexibility to work in cooperation with others with none one celebration controlling the community. If you’re a producing firm, for instance, you wish to work together with your suppliers and clients on a degree enjoying subject together with your rivals. Blockchains let everybody take part with out favoring anybody participant. In the long term, working collectively on a degree enjoying subject is less expensive and preferable to attempting to combine into completely different techniques managed by every certainly one of your key clients or suppliers.

While some layer 2 networks look very worthwhile proper now, that is solely true when you can generate good transaction quantity. Many of the layer 2 networks working are doing little to no enterprise as they wrestle to distinguish themselves in a crowded market. According to L2Beat, most of those networks have lower than $1mm in TVL bridged in from Ethereum and are averaging lower than one consumer operation per second.

So when does an organization want its personal layer 2 community? My speculation is that this works finest for companies that may combination important transaction quantity into the community and whose clients do not need the means or the person quantity to make their very own direct connection to Ethereum. Right now, that largely means monetary companies companies which have hundreds or hundreds of thousands of retail clients, from Coinbase to Kraken to Robinhood. More companies will certainly comply with. Having a layer 2 community may be seen, sooner or later, the best way we checked out having a seat on the New York Stock Exchange. Brokerage companies would need them, however a automotive maker wouldn’t discover worth in it.

Three questions can be helpful in figuring out if a agency ought to launch its personal Ethereum layer 2 community: first, is the corporate capable of combination a big quantity of its personal transactions or purchasers in comparison with different networks? Second, is transacting on-chain central to the corporate’s core enterprise mannequin (e.g., are you an middleman, particularly a monetary one which presently transacts on conventional monetary rails). Lastly, does your layer 2 method provide a differentiated worth proposition in comparison with the various different community choices on the market? If you possibly can say sure to all three choices, it is a doable path ahead.

For most different sorts of companies, they might discover the optimum worth proposition to be connecting on to Ethereum, or one of many different open layer 2 networks. It will probably be less expensive and extra personal than going by an aggregator who will be capable of mark up your transaction prices and see your transaction circulation and less expensive than operating your individual community.

I believe, nonetheless, that earlier than we’re executed, fairly just a few companies that haven’t any must run their very own layer 2 will launch one anyway for a similar causes many companies launched personal chains previously.

No matter how reliably they’ve failed, the attraction of personal blockchains was at all times arduous to counter. The attract of “controlling your destiny” and “taxing the ecosystem” was arduous to withstand. Public chains, with their openness, interoperability, and permissionless nature can look scary to enterprise customers who would favor extra management.

To the identical patrons who needed personal chains, centralized layer 2 networks seem like a midway home that will appear interesting. Unlike personal chains, I don’t assume they’re all doomed to fail, however I do suspect just a few will succeed. History retains repeating itself – largely as a result of we’re not excellent at being attentive to it. Here we go once more.

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