Public, permissionless infrastructure will underpin private, permissioned infrastructure, not replace it.

The Ethereum blockchain introduced new technological primitives that can provide unprecedented trust between counter-parties. Transactions provide an irrefutable record of history that can verify the integrity of data, prove ownership and provide provenance of digital assets. Smart contracts execute deterministic logic which provides guarantees that were previously extremely difficult and prohibitively expensive to enforce.

Right now there is huge investment in scaling this infrastructure since the cost associating with interacting with the network (known as gas fees) are extremely high. It seems exceedingly likely that the key to scaling this infrastructure is the adoption of additional blockchains, or Layer 2s, that can interoperate with the main Ethereum network. The main Ethereum network will instead act like an archive that can guarantee the integrity of the Layer 2 data.

We’ve already seen the economic benefits in the adoption of Layer 2s. dYdX’s adoption of a StarkWare’s StarkEx has been hugely successful, realising over $45 million in revenue during the month of September alone. By migrating transactions off of the main Ethereum network, dYdX was able to remove gas fees, provide instant balance updates and prevent front-running of trade settlement.

The introduction of zero-knowledge rollups mean these additional blockchains can optionally expose the details of individual transactions or the history of a specific address. This provides a crucial missing piece to the widespread adoption of blockchain technology, especially investment from the private sector.

Ethereum heavyweights ConsenSys (Metamask, Infura) are already working with BP, Shell and Mastercard on private, permissioned blockchains and their recent $65M raise led by JPMorgan show strong signals from the private sector that they see blockchain technology as an opportunity, not a threat to business as usual.

While it’s hugely exciting to imagine a world where a single public, permission-less infrastructure replaces all private ones—it seems far more likely that the majority of activity will take place on private, permissioned Layer 2s.