Ethereum’s Evolving Role: L1 Renaissance and L2 Convergence
Ethereum is reasserting its position as a central hub for high-value decentralized finance (DeFi). The network’s Layer 1 (L1) currently boasts a Total Value Locked (TVL) significantly larger than its competitors. This resurgence is notable as some projects that previously operated as independent Layer 1s are now integrating with the Ethereum ecosystem as Layer 2s (L2s).
The Shift to Layer 2
Several prominent projects are choosing to leverage Ethereum’s robust security and established network effects by transitioning to Layer 2 solutions. This move can offer substantial benefits, including reduced operating costs and access to a broader user base.
Celo’s Cost-Saving Transition
Celo, a mobile-first blockchain, made a significant shift earlier this year. The project opted to close its independent validator network and re-establish itself as an Ethereum L2. This strategic change is projected to result in annual operating cost savings of approximately $7 million.
Ronin’s Return to Ethereum
Ronin, the blockchain behind the popular game Axie Infinity, also announced its plans to return to the Ethereum ecosystem by early 2026. This move comes years after network congestion initially prompted Axie Infinity to migrate off the Ethereum mainnet. Jeffrey “Jiho” Zirlin, co-founder of Sky Mavis, the company behind Ronin and Axie Infinity, noted that Ethereum has largely delivered on its scaling objectives, creating an environment conducive to Ronin’s re-integration.
High-Value DeFi Embraces Ethereum L1
While some projects move to L2s, high-value DeFi protocols like Synthetix continue to thrive directly on Ethereum’s L1. This demonstrates a dual trend within the ecosystem: L1 remains a core for established, high-value applications, while L2s offer scalable solutions for a wider range of projects.
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