In this article, we focus on the economics of Proof of Work Layer 1 (PoW L1), Proof of Stake Layer 1 (PoS L1) and Proof of Stake Layer 2 (PoS L2) blockchains.

 Layer 1 

 Layer 2

Token Terminal: In-depth analysis of the economic models and operational principles of L1 and L2.

Layer-two networks you should be keeping an eye on.

Bankless Writer:&nbsp;<a href="https://twitter.com/WPeaster?ref=bankless.ghost.io" class="PlaygroundEditorTheme__link">William Peaster</a>Just one year ago, the forefront of Ethereum’s layer-two (L2) scaling solution scene was the “Big Four” — i.e. Arbitrum, Optimism, zkSync, and Starknet. As of this year, though, it’s safe to call it the “Big Five” per the arrival of the Polygon zkEVM. But what about the notable L2 frontiers beyond these major players?To answer that question, we’re digging into the top 5 upcoming L2s that currently just have testnets out but have big future potential!<ul class="PlaygroundEditorTheme__ul"><li value="1" class="PlaygroundEditorTheme__listItem">Goal: Learn about the next big wave of L2s</li><li value="2" class="PlaygroundEditorTheme__listItem">Skill: Intermediate</li><li value="3" class="PlaygroundEditorTheme__listItem">Effort: 1 hour to start</li><li value="4" class="PlaygroundEditorTheme__listItem">ROI: Advancing your L2 skill tree + potential airdrop opportunities</li></ul><hr>There’s good reason to be exploring L2s these days, because these scaling solutions are absolutely booming adoption-wise right now.In other words, lots of activity that was previously congesting Ethereum is now migrating to its leading L2s like Arbitrum and Optimism. With the tides shifting as they are, it’s never been clearer that the future of Ethereum will depend on a teeming, varied L2 ecosystem.<img class="PlaygroundEditorTheme__image editor-image" src="https://bankless.ghost.io/content/images/2023/04/image3-2.png" alt="" width="1555" height="864">At this point, you may have tried all of the big L2s that have live mainnets, but what about the next major wave of networks that are just starting to make moves?&nbsp;Let’s hone in on the 5 most exciting up-and-coming L2s that you should be tracking!<h2 class="PlaygroundEditorTheme__h2">1. 🔵 Base</h2><img class="PlaygroundEditorTheme__image editor-image" src="https://bankless.ghost.io/content/images/2023/04/image1-2.png" alt="" width="1999" height="1000">Coinbase recently&nbsp;<a href="https://www.bankless.com/unpacking-the-coinbase-l2-opportunity?ref=bankless.ghost.io" class="PlaygroundEditorTheme__link">introduced Base</a>, an optimistic-style L2 rollup that the crypto exchange juggernaut is building on Optimism's OP Stack with plans for a mainnet release later this year.Coinbase had previously considered launching an L1 blockchain similar to Binance Smart Chain but opted for an interoperable, Ethereum-based solution instead. That said, Base is aimed at becoming a permissionless L2 with a focus on decentralization and security. Coinbase will be the rollup’s sole sequencer at genesis, though the company plans to transition to a permissionless validator set over time.Through this L2, Coinbase plans to position itself as a premier gateway to onchain activity, one capable of plugging users directly into the world of Web3. With 110 million verified users, Coinbase is well-positioned to steward this L2 to success over time, and while there are currently no plans for a BASE token, it remains to be seen if that dynamic will stay the case forever.<h3 class="PlaygroundEditorTheme__h3">How to try Base</h3><img class="PlaygroundEditorTheme__image editor-image" src="https://bankless.ghost.io/content/images/2023/04/image8.png" alt="" width="920" height="722">Base is only live as a testnet right now. To try the network, you first need to add the&nbsp;Base Goerli Testnet&nbsp;to your wallet.The Coinbase Wallet browser extension supports the testnet by default, or you can find it in the Coinbase Wallet app through the “More Networks” and then “Testnets” tabs. For other wallets like MetaMask, you can use a service like ChainList to&nbsp;<a href="https://chainlist.org/chain/84531?ref=bankless.ghost.io" class="PlaygroundEditorTheme__link">quickly add the testnet</a>.Once you’re ready, you can practice bridging funds between&nbsp;<a href="https://chainlist.org/chain/5?ref=bankless.ghost.io" class="PlaygroundEditorTheme__link">Ethereum’s Goerli Testnet</a>&nbsp;to Base Goerli using the&nbsp;<a href="https://bridge.base.org/?ref=bankless.ghost.io" class="PlaygroundEditorTheme__link">Base Bridge</a>. If you need some Goerli ETH or Base Goerli ETH to get started, Coinbase offers a faucet system that will drip you a small amount every day. Besides bridging, software engineer and NFT innovator&nbsp;<a href="https://twitter.com/0xCygaar/status/1643684030561529856?ref=bankless.ghost.io" class="PlaygroundEditorTheme__link">cygaar has created a test NFT contract</a>&nbsp;on Base that you might also consider minting from.<img class="PlaygroundEditorTheme__image editor-image" src="https://bankless.ghost.io/content/images/2023/04/image9.png" alt="" width="1442" height="946"><hr><h2 class="PlaygroundEditorTheme__h2">2. ⛽ Fuel</h2>Fuel is an L2 being developed by Fuel Labs that is designed to leverage the increased bandwidth capacity that’s resulting from the ongoing shift in L1 blockchains&nbsp;<a href="https://www.bankless.com/ultra-scalable-ethereum?ref=bankless.ghost.io" class="PlaygroundEditorTheme__link">toward modular designs</a>.<img class="PlaygroundEditorTheme__image editor-image" src="https://bankless.ghost.io/content/images/2023/04/image5.png" alt="" width="1999" height="1050">The project is aimed at becoming the fastest and most efficient execution layer for the modular blockchain stack, while also being highly secure and flexible.Zooming in, Fuel's technology is built on three central pillars: parallel transaction execution, the Fuel Virtual Machine (FuelVM), and a user-friendly developer experience with Sway. Parallel transaction execution allows for better computation and transactional throughput, the FuelVM reduces wasteful processing and expands the potential design space for developers, while Sway provides a powerful dev experience.<h3 class="PlaygroundEditorTheme__h3">How to try Fuel</h3>The Fuel L2 is currently in its&nbsp;<a href="https://fuel-labs.ghost.io/announcing-beta-3-testnet/?ref=bankless.ghost.io" class="PlaygroundEditorTheme__link">Beta-3 testnet phase</a>. Accordingly, to try this scaling solution right now you would first need to follow these steps:<ul class="PlaygroundEditorTheme__ul"><li value="1" class="PlaygroundEditorTheme__listItem">Download the Fuel Wallet and follow the install instructions at&nbsp;<a href="https://wallet.fuel.network/docs/install/?ref=bankless.ghost.io" class="PlaygroundEditorTheme__link">https://wallet.fuel.network/docs/install/</a></li><li value="2" class="PlaygroundEditorTheme__listItem">Go to the Fuel Beta-3 Faucet and get Test ETH at&nbsp;<a href="https://faucet-beta-3.fuel.network/?ref=bankless.ghost.io" class="PlaygroundEditorTheme__link">https://faucet-beta-3.fuel.network/</a></li></ul>Once you have this preliminary prep down, you can start exploring Fuel’s early app scene. To see the range of options available right now, I recommend checking out the “Ecosystem” tab at&nbsp;<a href="https://fuel.build/?ref=bankless.ghost.io" class="PlaygroundEditorTheme__link">fuel.build</a>. For a specific starting point you might consider&nbsp;<a href="https://fuellabs.github.io/swayswap/?ref=bankless.ghost.io" class="PlaygroundEditorTheme__link">SwaySwap</a>, the first decentralized exchange on Fuel.<img class="PlaygroundEditorTheme__image editor-image" src="https://bankless.ghost.io/content/images/2023/04/image7.png" alt="" width="1640" height="935"><h2 class="PlaygroundEditorTheme__h2">3. ➿ Linea</h2>Ethereum software giant ConsenSys recently launched a public testnet of its zero-knowledge Ethereum Virtual Machine (zkEVM),&nbsp;<a href="https://linea.mirror.xyz/6G30hwV2wPs_wPv0VEgHYaIdghMkIQaad-OI_0br1hM?ref=bankless.ghost.io" class="PlaygroundEditorTheme__link">now renamed to Linea</a>, after previously releasing a private testnet of the new L2 in January 2023.<img class="PlaygroundEditorTheme__image editor-image" src="https://bankless.ghost.io/content/images/2023/04/image2.jpg" alt="" width="1920" height="960">Linea aims to power a new generation of decentralized applications built on Ethereum, and notably the scaling solution will natively integrate with ConsenSys’s widely used MetaMask wallet and Truffle developer toolkit.<h3 class="PlaygroundEditorTheme__h3">How to try Linea</h3>You can use ChainList to easily&nbsp;<a href="https://chainlist.org/chain/59140?ref=bankless.ghost.io" class="PlaygroundEditorTheme__link">add support for the Linea Testnet</a>&nbsp;to your MetaMask, etc. Once that’s done, you can use&nbsp;<a href="https://goerli.hop.exchange/?ref=bankless.ghost.io#/send?token=ETH&amp;destNetwork=linea&amp;sourceNetwork=ethereum" class="PlaygroundEditorTheme__link">the Hop bridge’s Goerli deployment</a>&nbsp;to send some Goerli test ETH over to Linea to try out the up-and-coming L2. As for what to test, the aforementioned cygaar has&nbsp;<a href="https://twitter.com/0xCygaar/status/1641523379344928768?ref=bankless.ghost.io" class="PlaygroundEditorTheme__link">created an NFT contract</a>&nbsp;and&nbsp;<a href="https://twitter.com/0xCygaar/status/1642225683027079168?ref=bankless.ghost.io" class="PlaygroundEditorTheme__link">two ERC20s</a>&nbsp;on Linea that you can try tinkering with.<h2 class="PlaygroundEditorTheme__h2">4.📜 Scroll</h2>Scroll is a zkEVM that is one of the next-gen upstarts in Ethereum’s L2 scaling scene. The project’s architecture is made up of three main infrastructure components: the Scroll Node, the Roller Network, and the Rollup and Bridge Contracts.<img class="PlaygroundEditorTheme__image editor-image" src="https://bankless.ghost.io/content/images/2023/04/image6.png" alt="" width="1357" height="782">The&nbsp;Scroll Node&nbsp;constructs L2 blocks from user transactions, commits them to the Ethereum base layer, and manages message passing between L1 and L2. It consists of three modules: Sequencer, Coordinator, and Relayer. The&nbsp;Roller Network&nbsp;generates zkEVM validity proofs, ensuring transactions are executed correctly. Lastly, the&nbsp;Rollup and Bridge Contracts&nbsp;provide data availability and allow users to move assets between Ethereum and Scroll.By leveraging Scroll's infra, developers will be able to execute native EVM bytecode in an advanced L2 environment while maintaining strong security guarantees from the Ethereum base layer.<h3 class="PlaygroundEditorTheme__h3">How to try Scroll</h3><img class="PlaygroundEditorTheme__image editor-image" src="https://bankless.ghost.io/content/images/2023/04/image4.png" alt="" width="1338" height="890">In February 2023, the Scroll team launched the&nbsp;<a href="https://scroll.io/blog/alphaTestnet?ref=bankless.ghost.io" class="PlaygroundEditorTheme__link">Alpha Testnet of its zkEVM</a>. To try the testnet you can go to&nbsp;<a href="https://scroll.io/alpha?ref=bankless.ghost.io" class="PlaygroundEditorTheme__link">https://scroll.io/alpha</a>&nbsp;and use the provided “Connect Wallet” button to add support for Scroll to your wallet. Once this is done, you can test sending Goerli ETH across the&nbsp;<a href="https://scroll.io/alpha/bridge?ref=bankless.ghost.io" class="PlaygroundEditorTheme__link">Scroll Bridge</a>, which is a fork of Hop.<hr><h2 class="PlaygroundEditorTheme__h2">5. 🪘 Taiko</h2><img class="PlaygroundEditorTheme__image editor-image" src="https://bankless.ghost.io/content/images/2023/04/Screen-Shot-2023-04-25-at-2.53.17-PM.png" alt="" width="1500" height="714">Taiko is another in-development zkEVM that aims to scale Ethereum by eventually supporting all EVM opcodes in its L2 architecture. Taiko is being designed to be able to run Ethereum smart contract code without any changes, allowing developers to readily migrate their existing apps to the L2 without having to implement new code.Technically, Taiko consists of three main parts: its zkEVM system for proof generation, the L2 rollup node for managing the rollup chain, and the protocol on L1 for rollup protocol verification.<h3 class="PlaygroundEditorTheme__h3">How to try Taiko</h3>The Taiko team recently&nbsp;<a href="https://twitter.com/taikoxyz/status/1647684931735396352?ref=bankless.ghost.io" class="PlaygroundEditorTheme__link">deprecated the L2’s Alpha-2 Testnet</a>&nbsp;after the latest round of testing. For now, then, there’s no live testnet to trial for Taiko, but keep an eye on the project’s comms going forward to learn when this in-progress zkEVM will have its next testnet window open!<h2 class="PlaygroundEditorTheme__h2">Zooming out</h2>In conclusion, the Ethereum L2 ecosystem is rapidly expanding beyond the "Big Five" L2s, with new, promising scaling solutions on the horizon.The up-and-coming L2s highlighted in this article—Base, Fuel, Linea, Scroll, and Taiko—demonstrate the growing diversity of approaches here and the potential for enhanced scalability, efficiency, and user experience within the Ethereum network.As these projects advance through their testnet phases and into production, they are likely to play a pivotal role in shaping the future of Ethereum, driving adoption, and enabling a more flourishing, interconnected ecosystem. Keep an eye on these L2s and consider exploring their testnets to stay ahead of the curve and potentially capitalize on future L2 airdrop opportunities!

Optimism

Arbitrum

5 Upcoming L2s to Watch

Ethereum's Scaling Solutions and Unit Economics

Layer2

Are L2s Complementary to ETH?

Five major catalysts in 2023 that will bring Ethereum and its L2s closer to mass adoption

You're not ready for what's to come to the Ethereum ecosystem. Five major catalysts in 2023 that will bring Ethereum and its L2s closer to mass adoption.<a href="https://twitter.com/eigenlayer" class="PlaygroundEditorTheme__link">@eigenlayer</a> mainnet launch Eigenlayer is one of the most innovative projects I've discovered in a while. It's can be seen as a <a href="https://twitter.com/search?q=%24ETH&amp;src=cashtag_click" class="PlaygroundEditorTheme__link">$ETH</a> re-staking solution. Using Eigenlayer, Ethereum validators will be able to secure multiple networks/ protocols at the same time.A good way to measure the security of a PoS chain is to look at the total value of coins locked by validators. The higher it is, the more an attack would cost. Ethereum is one of the most secure L1 because of this, hence protocols may be interested in renting security from it.In short, Eigenlayer is building a marketplace where ETH node operators can opt to provide services for additional fees. They will even be able to validate networks such as side chains or even non-EVM networks. Bad behavior will be punished by slashing their staked ETH.Any project from L1s and L2s to even oracles and bridges could leverage Eigenlayer's technology. Mantle, an upcoming Ethereum L2 with a modular design, is one of the projects that will use EigenLayer's Data Availability solution. Eigenlayer mainnet is expected to launch in Q3.2. Ethereum Shanghai Upgrade The upcoming Ethereum upgrade has sparked a huge interest in liquid staking derivatives. Shanghai will enable <a href="https://twitter.com/search?q=%24ETH&amp;src=cashtag_click" class="PlaygroundEditorTheme__link">$ETH</a> staking withdrawals along with other small changes. Yet this will likely not cause a huge <a href="https://twitter.com/search?q=%24ETH&amp;src=cashtag_click" class="PlaygroundEditorTheme__link">$ETH</a> sell-off as many expect.<img class="PlaygroundEditorTheme__image editor-image" src="https://pbs.twimg.com/media/FsUQPpuXsAAPww_?format=jpg&amp;name=small" alt="Image" width="inherit" height="inherit">The upgrade will feature a withdrawal queue, preventing everyone to withdraw their staked ETH at once. More than that, less than 50% of <a href="https://twitter.com/search?q=%24ETH&amp;src=cashtag_click" class="PlaygroundEditorTheme__link">$ETH</a> stakers seem to be in profit. So a massive <a href="https://twitter.com/search?q=%24ETH&amp;src=cashtag_click" class="PlaygroundEditorTheme__link">$ETH</a> sell-off is unlikely. The Shanghai Upgrade is expected to take place in April 2023.3. Optimism Bedrock Upgrade Arbitrum Nitro Upgrade significantly reduced gas fees on Arbitrum and helped it gain more popularity. Now it's Optimism's turn. Optimism Bedrock was introduced in May 2022. It's described as the cheapest &amp; fastest roll-up architecture.Once it goes live, users should expect average transaction fees on Optimism to be reduced and faster deposits. More than that, it will enable Optimism to incorporate ZK proofs, which are considered more secure. Launch: Q2 20234. Arbitrum Stylus Upgrade Did you think that the team behind Arbitrum has been working only on launching <a href="https://twitter.com/search?q=%24ARB&amp;src=cashtag_click" class="PlaygroundEditorTheme__link">$ARB</a> this year? That's far from true, and the next massive upgrade for Arbitrum is called Stylus.Stylus will allow the deployment of programs written in the most popular programming languages. That's right - Arbitrum will be the first L2 to support multiple programming languages such as Rust, and C++. On top of that, it will also make Arbitrum more scalable. Launch: 20235. zkEVMs The first zkEVMs' mainnet launches are finally happening. zkEVMs are Ethereum scaling solutions that are EVM-compatible/equivalent and use ZK proofs to verify transactions. Developers can directly deploy Ethereum smart contracts on these scaling solutions.ZK rollups are considered to be more secure &amp; efficient than Optimistic rollups. <a href="https://twitter.com/zksync" class="PlaygroundEditorTheme__link">@zksync</a> and <a href="https://twitter.com/0xPolygon" class="PlaygroundEditorTheme__link">@0xPolygon</a> have launched the first zkEVMs' mainnets, but this is just the beginning. Consensys and Taiko are also expected to launch the mainnets of their zkEVMs later this year.6. Proto-danksharding Proto-Danksharding is another major Ethereum upgrade that's expected to be ready later this year. It will introduce a new kind of transaction type to Ethereum, which will drastically lower transaction fees on L2s.This will make Ethereum L2s even more scalable and make them more accessible to retail investors. This upgrade was initially scheduled to launch on the same day as Shanghai Upgrade. But as the staking withdrawals are the main priority, it was postponed for the fall.I'm personally most excited about the Proto-danksharding upgrade. A $0.3 transaction fee for using L2s is still much. For Ethereum L2s to become accessible to everyone, the fees have to be &lt;$0.05.

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