{"id":562403,"date":"2023-03-11T17:16:07","date_gmt":"2023-03-11T14:16:07","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/ethereum-layer-2-solutions-may-focus-less-on-token-incentives-in-the-future\/"},"modified":"2023-03-11T17:16:07","modified_gmt":"2023-03-11T14:16:07","slug":"ethereum-layer-2-solutions-may-focus-less-on-token-incentives-in-the-future","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/ethereum-layer-2-solutions-may-focus-less-on-token-incentives-in-the-future\/","title":{"rendered":"# Ethereum layer-2 solutions may focus less on token incentives in the future"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_84 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a26e0e678874\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a26e0e678874\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-1'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/ethereum-layer-2-solutions-may-focus-less-on-token-incentives-in-the-future\/#%E2%80%9D_Ethereum_layer-2_solutions_may_focus_less_on_token_incentives_in_the_future_%E2%80%9C\" >&#8221; Ethereum layer-2 solutions may focus less on token incentives in the future &#8220;<\/a><ul class='ez-toc-list-level-2' ><li class='ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/ethereum-layer-2-solutions-may-focus-less-on-token-incentives-in-the-future\/#Shifting_focus_from_token_models_to_user_experience\" >Shifting focus from token models to user experience<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h1><span class=\"ez-toc-section\" id=\"%E2%80%9D_Ethereum_layer-2_solutions_may_focus_less_on_token_incentives_in_the_future_%E2%80%9C\"><\/span>&#8221; Ethereum layer-2 solutions may focus less on token incentives in the future &#8220;<span class=\"ez-toc-section-end\"><\/span><\/h1>\n<p><img decoding=\"async\" src=\"https:\/\/images.cointelegraph.com\/images\/840_aHR0cHM6Ly9zMy5jb2ludGVsZWdyYXBoLmNvbS91cGxvYWRzLzIwMjMtMDMvMzA4MTMzYWMtNDEyOS00MDFkLWFhYTUtODMxMjY5MjI0MjUxLmpwZWc=.jpeg\" \/><\/p>\n<div class=\"post-content\" data-v-48054ca8>Layer-2 networks continue to gain momentum as the Ethereum ecosystem advances. For example, data from analytics provider Token Terminal found that layer-2 scaling solution Polygon had 313,457 daily active users as of Jan. 17, 2023 \u2014 a 30% increase in activity since October 2022.\u00a0<\/p>\n<p>Moreover, the Polygon ecosystem recently announced the launch of its beta version Zero-Knowledge Ethereum Virtual Machine. As a result, Polygon\u2019s native token, Polygon (MATIC), maintains a bullish narrative.<\/p>\n<p>While notable, some believe layer-2 networks offering token incentive models may soon become obsolete. For instance, Jesse Pollak \u2014 head of protocols and Base core contributor at American crypto exchange Coinbase \u2014 told Cointelegraph at ETHDenver 2023 that there are currently no plans to associate a token with Base, the Ethereum layer-2 network recently launched by Coinbase. He said:<\/p>\n<blockquote><p>\u201cWe think about tokens as a powerful incentive tool that can change user and developer behavior. At the same time, we have seen situations unfold over the last few years where tokens have been used as an incentive mechanism with a lack of product fit for the underlying chain. Tokens have also resulted in nefarious or risky situations in the past.\u201d<\/p><\/blockquote>\n<p>According to Pollak, Base is a layer-2 solution that allows developers to easily build <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/download-scripts-themes-apps\/\" data-internallinksmanager029f6b8e52c=\"9\" title=\"Download Scripts &amp; Themes &amp; Apps\" target=\"_blank\" rel=\"noopener\">app<\/a>lications without requiring an incentive mechanism. \u201cOur product will stand on its own. It will be very easy for developers to use to build applications and distribute those to real human beings,\u201d he said. <\/p>\n<h2><span class=\"ez-toc-section\" id=\"Shifting_focus_from_token_models_to_user_experience\"><\/span>Shifting focus from token models to user experience<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Focusing on ease of use and distribution are important points, as Pollak pointed out that many of today\u2019s decentralized applications have been used solely for trading cryptocurrencies. \u201cTrading is not enough to make cryptocurrency the future of the economy. At Base, we are making it easy for developers to build useful applications that people actually want to use,\u201d he added. <\/p>\n<p>Pollak explained that Base is investing in core infrastructure, such as Ethereum Improvement Proposal 4844, which will make the network secure and low-cost compared with other layer-2 networks. \u201cIt costs about 10\u201315 cents to conduct transactions on layer-2s. We aim to bring that down,\u201d he mentioned.<\/p>\n<p>While Base launched its testnet in February, Pollak shared that the Base mainnet launch will take place in the coming months. Moreover, while no plans exist for Base to offer a native token, several ecosystem participants have already expressed interest in building on Base. <\/p>\n<p><strong><em>Recent:\u00a0Next stop Shanghai \u2014 Ethereum\u2019s latest milestone approaches<\/em><\/strong><\/p>\n<p>For example, Konstantin Richter, chief operating officer and founder of Blockdaemon \u2014 a blockchain infrastructure provider \u2014 told Cointelegraph at ETHDenver 2023 that Blockdaemon will serve as an official infrastructure partner for Base. Richter shared that he thinks Base shouldn\u2019t have a token associated with the network, as he believes proof-of-stake (PoS) is an entirely broken system. \u201cBlockdaemon runs more PoS nodes than anyone else, and I can tell you that proof-of-stake only works when token prices go up,\u201d he said.<\/p>\n<p>Richter further explained that Blockdaemon plans to use the Base network to determine how to allow network participants to run nodes while possibly earning a fixed U.S. dollar fee. \u201cThis may result in a different type of PoS mechanism, possibly around commitment of compute rather than a staked percentage of tokens that may not serve the network well,\u201d he said. Richter added that such a model could result in a better user experience. He said:<\/p>\n<blockquote><p>\u201cThis could be the biggest paradigm shift within the cryptocurrency ecosystem since the invention of PoS. We are moving away from incentive models that reward users for using a product. We are now focused on ease of functionality and low fees.\u201d<\/p><\/blockquote>\n<p>Yet it remains questionable how exactly Base will attract users and developers to the platform without a token incentive model. Given Coinbase\u2019s vast understanding of institutions and decentralized finance (DeFi), Richter doesn\u2019t think this should be an issue: \u201cI prefer to work with Base given Coinbase\u2019s understanding of institutions and DeFi. It\u2019s remarkable that a public Fortune 500 company is committed to putting transactions transparently on Base.\u201d <\/p>\n<p>While it\u2019s too soon to predict future outcomes, it\u2019s important to note that Arbitrum, another Ethereum layer-2 network, also functions without a native token. This has certainly not stopped users from interacting with the Arbitrum network. According to data from the analytics website <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/l2beat.com\/scaling\/tvl\">L2Beat.com<\/a>, Arbitrum has about $3.35 billion total value locked, making up about 54% of the market share on Ethereum. <\/p>\n<p>However, rumors have been circulating that Arbitrum may initiate a token airdrop in the future. While this may or not be the case, it demonstrates Arbitrum\u2019s ability to determine product market fit before launching a token. Gil Rosen, president of the Stanford Blockchain Accelerator, told Cointelegraph at ETHDenver 2023 that finding product market fit is about ensuring projects acquire the right customers whose value is accretive to the ecosystem, which often isn\u2019t the case with tokens. \u201cEarly projects that launch tokens are often locked into tokenomics models before finding product market fit and then are unable to pivot dynamically,\u201d Rosen said. <\/p>\n<p>\u201cDeFi Dad,\u201d a partner at digital asset investment firm Fourth Revolution Capital, told Cointelegraph that he believes the main driver behind layer-2 tokens is to ensure decentralized control over layer-2 networks. <\/p>\n<p>For example, he explained that the upcoming launch of zkSync\u2019s Zero-Knowledge Ethereum Virtual Machine would use a PoS mechanism to allow zkSync tokenholders to act as stakers.<em> <\/em>\u201cLayer-2 tokens are necessary for building the decentralized future,\u201d he said.<\/p>\n<blockquote class=\"twitter-tweet\">\n<p lang=\"en\" dir=\"ltr\">Thanks to our community and the entire ecosystem for an energizing ETHDenver 2023. For the remainder of the week, we\u2019ll share highlights from ETHDenver around ZK scaling and building a future-proof zkEVM. First topic, hyperscalability.<\/p>\n<p>1\/7 <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/t.co\/qOVSQ475a2\">pic.twitter.com\/qOVSQ475a2<\/a><\/p>\n<p>\u2014 zkSync \u220e (@zksync) <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/twitter.com\/zksync\/status\/1633526442960236547?ref_src=twsrc%5Etfw\">March 8, 2023<\/a><\/p><\/blockquote>\n<p><script async src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/p>\n<p>DeFi Dad thinks a layer-2 network without plans to implement a native token could be successful if users are willing to sacrifice decentralization and censorship resistance in the short term.\u00a0<\/p>\n<p><strong><em>Recent:\u00a0Banks with crypto services require new Anti-Money Laundering capabilities<\/em><\/strong><\/p>\n<p>He said, \u201cBase could be successful as a network for transacting with a user\u2019s crypto. However, make no mistake; Base will be a layer-2 (at least for the foreseeable future) that makes trade-offs. As DeFi users, we tend to deprioritize security and censorship resistance until we really need it.\u201d<\/p>\n<p>With this point in mind, Rosen mentioned that he believes token models will remain for many decentralized projects with large developer and user communities, but these will launch later. \u201cA project may launch a token when the networks themselves are more mature and have found product market fit.\u201d <\/p>\n<p><template data-name=\"subscription_form\" data-type=\"defi_newsletter\"><\/template><\/div>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong>\n<\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">News<\/a> articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/general\/\" target=\"_blank\" rel=\"noopener\">General category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"https:\/\/cointelegraph.com\/news\/ethereum-layer-2-solutions-may-focus-less-on-token-incentives-in-the-future\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8221; Ethereum layer-2 solutions may focus less on token incentives in the future &#8220; Layer-2 networks continue to gain momentum as the Ethereum ecosystem advances. For example, data from analytics provider Token Terminal found that layer-2 scaling solution Polygon had 313,457 daily active users as of Jan. 17, 2023 \u2014 a 30% increase in activity&#8230;<\/p>\n","protected":false},"author":1,"featured_media":562404,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/images.cointelegraph.com\/cdn-cgi\/image\/format=auto,onerror=redirect,quality=90,width=1200\/https:\/\/s3.cointelegraph.com\/uploads\/2023-03\/308133ac-4129-401d-aaa5-831269224251.jpeg","fifu_image_alt":"","footnotes":""},"categories":[1],"tags":[79806,133065,141201,74894,74956,74983,110221,74868,74891,80667,108918,95119,113408,74876,78261,74355,4965],"class_list":["post-562403","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-analysis","tag-arbitrum","tag-base","tag-blockchain","tag-coinbase","tag-decentralization","tag-decentralize","tag-defi","tag-ethereum","tag-event","tag-event-recap","tag-layer2","tag-polygon","tag-proof-of-stake","tag-tech-analysis","tag-adoption","tag-technology"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/562403","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=562403"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/562403\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/562404"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=562403"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=562403"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=562403"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}