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Ethereum Layer-2 Rivalry Threatens Ecosystem Growth, Says Polygon CEO

Polygon

The intense competition between Ethereum’s layer-2 scaling solutions is emerging as a major concern for the Ethereum ecosystem, according to Polygon Labs CEO Marc Boiron.

Boiron, in an April 7th social media post, highlighted the risk of “cannibalization” within the Ethereum ecosystem due to the competition between layer-2 networks. He argues that instead of attracting new users and developers from outside the Ethereum space, layer-2s are currently fighting over existing users and resources within Ethereum.

“Ethereum’s biggest problem is cannibalizing itself continuously via all L2s competing over devs, users and liquidity rather than competing outside of the Ethereum ecosystem. Microeconomics 101 would tell you this is a bad strategy. I don’t have the answer but it needs to be addressed,” stated Boiron.

This sentiment appears to be shared by some crypto community members. Karthik Senthil, a venture partner at crypto hedge fund Lattice, emphasized the need for layer-2s to focus on expanding the overall user base, including those outside the Ethereum ecosystem.

“L2s only become successful if they meaningfully grow the pie and attract the 99% of stuff (web2 included) that’s outside Ethereum today. If we fight over the same people that are already here, no one is winning anything,” said Senthil.

Boiron further re-posted a social media message advocating for collaboration among layer-2 networks. The message argues that a successful application on any layer-2 network would ultimately benefit the entire ecosystem, and “stealing applications” hinders this collective growth.

However, not everyone agrees that competition between layer-2s is detrimental. Some community members believe it can ultimately strengthen the Ethereum ecosystem by fostering innovation and driving efficiency.

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The Rise of Layer-2 Solutions

Layer-2 networks are designed to address Ethereum’s scalability limitations by processing transactions off-chain before settling them on the main Ethereum blockchain. This approach significantly increases transaction throughput compared to the Ethereum mainnet.

The popularity of layer-2 solutions has surged in recent years. According to L2Beat, layer-2 networks collectively process over 123 transactions per second, exceeding Ethereum’s mainnet by more than tenfold. Leading layer-2 networks like Arbitrum and Coinbase’s Base have even surpassed Ethereum’s mainnet in daily transaction volume.

Furthermore, the number of active wallets interacting with layer-2 solutions surpassed five million earlier this month. The total value locked (TVL) on these platforms has also climbed above $42 billion, indicating significant user adoption and potentially further growth in the future.

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