Layer 2 (L2) summer is finally here, with new L2 platforms sprouting into existence every day it feels like. Yet, amidst this frenzy of innovation, one fundamental challenge persists for developers: Understanding the differences among various L2s and determining the most suitable chain for deployment.
The prospect of poring over extensive developer documentation to understand the differences between L2 platforms is a daunting thought. Also, skimming through online discussions laden with technical intricacies, such as the decentralization of rollup sequencers, L2 revenue models, and the prospective launch of L3 solutions, also is no help. What's more, these conversations often evolve into passionate tribal debates among fan boys of various L2 chains, adding yet another layer of complexity to the decision-making process for an unbiased developer.
Then there are the baits of L2 chains, which are wielding a powerful incentive: money, through builder programs. While this could be a tempting offer for developers, basing your decision solely on this could have fatal flaws. Once chosen, switching is not as easy as one might think. Just recently, the NFT project DeGods was struggling to unite the community after yet another chain transition, leaving holders confused and annoyed.
As a new developer entering this rapidly developing landscape, the technical jargons and intricate debates might be far from what you initially envisioned participating in. Your goal is clear, you just want to "BUIDL" (term referred to only developing no matter what). The question then becomes: how do you, as an unbiased developer, embark on the journey of choosing the right L2 platform to deploy on?
As a developer of dApps (decentralized applications), you will often find yourself at a crossroads where development meets business strategy. One of the most crucial decisions you must make is selecting the right Layer 2 (L2) solution to deploy your dApp. This decision shouldn't be taken lightly, as it has significant implications for the success and sustainability of your project. At its core, this choice revolves around two key considerations: the specific needs of your users and the characteristics of the L2.
To better illustrate this dynamic, let's imagine each L2 as a unique neighborhood, each with distinct attributes. Just as some neighborhoods boast high-end features with grand villas, others might be challenging areas, where safety is a concern.
In this analogy, your dApp is like a business endeavor seeking to establish itself within one of these neighborhoods. Your users, the lifeblood of your venture, represent the residents or passersby in these neighborhoods. A harmonious alignment between the user base and the chosen neighborhood can lead to success, whereas a mismatch can lead to failure.
Consider the scenario of catering to a high-net-worth clientele. Trying to set up shop in an economically disadvantaged neighborhood could render your offerings irrelevant—no one cares, nor can they afford to buy your product. This situation indicates a failure to meet your customers' needs. Conversely, you should also avoid placing your new, flashy ice cream shop in a remote area where foot traffic is nearly non-existent. In this case, the L2 that hosts your dApp might not be suitable.
Drawing a parallel between establishing a real-world business and deploying a dApp, the importance of selecting the right "neighborhood" or L2 becomes abundantly clear. Success lies on your ability to understand your users' needs as effectively as a business understands its target demographic. At the same time, your understanding of the intricacies of the L2 landscape must be as sharp as that of a real estate developer assessing neighborhoods for investment potential.
In this section, we will dive deeper into your precise requirements for an L2 solution as well as the exact demands of your users, systematically evaluating each segment's significance. Please proceed through the following, assessing which subcategory hold the utmost importance for your dapp. The presented subcategories are more high level and you may uncover further subcategories through your exploration.
Put yourself in the shoes of your users. Envision their interactions with the platform. Ask yourself, "What is the value proposition I offer?" By simulating the user's perspective, determine which subcategories each user deems important and not so important.
Cheap Transaction Fees Do your users require cost-effective transaction fees? What is their tolerance level for fees?
Security of User Funds Do your users prioritize security? Is there significant value attached to interactions with your dapp?
Fast Settling Time Do your users value swift settling times? Can they afford to wait for a few seconds for their transactions to settle?
Ease of Withdrawal Do your users find it important to transfer assets to alternative protocols or blockchains?
Think of your project's objective and considering a range of factors that might need to be present for its success. Consider both project aspirations and user expectations towards the L2.
Need for Active Users On-chain Are you bringing your own users to the chain or do you cater to already exciting users on chain?
Average Net Worth of a User Do you cater to high net worth individuals?
Total Value Locked Does your dapp require a lot of liquidity to work?
On-Chain Infrastructure Does your dapp require other protocols or tools to function?
Off-Chain Infrastructure Do you require complex RPC nodes or third party apps?
Transactions Per Second How big will your dapp become, will you need millions of transactions per second?
Having found the crucial aspects to consider while selecting the optimal L2 solution for deployment, let's delve into the methods of actually narrowing down the scope. To help your decision-making process, I've gathered links to platforms and documentations that provide up to date overviews into each subcategory.
Transaction Fees: GrowThePie provides a straightforward dashboard that showcases the median transaction fees required for transactions to settle across various L2 solutions. This dashboard allows you to efficiently identify chains with prohibitively high costs and those that offer cost-effective blockspace.
Security of User Funds:L2 Beat offers a comprehensive overview of the potential risks associated with L2 solutions on a platform level. Easily determine if the L2 is decentralized or if it poses a risk to user funds.
Need for Active Users On-chainGrowThePie presents an great dashboard showing the amount of daily active users on each L2. Discover the biggest hubs of users and see the sustainability of their engagement.
Average Net Worth:Dune dashboards offer open-source insights. In this example, you can visualize both the quantity of assets and the number of individuals bridging into each L2. You can see the average user net worth using the data provided by this dashboard.
A Lot of money going aroundGrowThePie also provides a chart displaying the dollar amount of value stored on each L2. This visualization allows you to assess the liquidity distribution and monitor whether it's increasing or decreasing.
Infrastructure required on chainArtemis features an impressive dashboard that enables efficient filtering of blockspace activities across various chains. Utilize this dashboard to determine the deployment status of specific protocols and gauge the extent of their associated activities.
Infrastructure required off chain: Alchemy offers a comprehensive database that presents all RPC providers for each chain. This resource facilitates the rapid identification of L2 solutions with robust off-chain infrastructure support.
Transactions per secondIn L2 Beat, there's a dedicated column showcasing the maximum recorded daily transactions count per second. Use this column to assess whether your dapp has sufficient room to scale in accordance with the capacity of the underlying L2 solution.
Navigating the intricate landscape of L2 solutions can be a daunting task, but I hope that my guide has offered you valuable insights and assistance. This field advances rapidly, and developers like you are essential in constructing a better world. I aspire for this guide to have been useful in your developmental journey. If you have any additional questions or require further guidance, please do not hesitate to get in touch.
Acknowledgment
Thanks to the DeFi Talents program! (https://web3-talents.io/defi-talents), a 18-week mentoring program to empower talent for leadership in the decentralized finance space.