Ethereum’s Evolving Landscape: A Resurgence for High-Value DeFi
Ethereum’s Layer 1 (L1) is re-establishing its position as a hub for high-value decentralized finance (DeFi) projects. This trend sees established L1s migrating to become Layer 2 (L2) solutions, while some projects on existing L2s are returning to the Ethereum mainnet.
Several factors contribute to this shift. Ethereum’s L1 boasts a significantly larger Total Value Locked (TVL) compared to its competitors, indicating its continued dominance in the DeFi space. The L2 model, meanwhile, offers substantial cost savings and potential network effects for projects integrating into the Ethereum ecosystem.
L1s Embracing the L2 Model
Projects previously operating as independent L1 blockchains are increasingly adopting the L2 framework. This strategic move aims to leverage Ethereum’s robust security and developer network while benefiting from the scalability and reduced transaction fees that L2s provide.
Celo’s Cost-Saving Transition
Mobile payments network Celo, for instance, transitioned from an independent L1 to an Ethereum L2. This move, which involved shutting down its validator network, is projected to result in annual operational cost savings of nearly $7 million.
Ronin’s Return to Ethereum
Blockchain gaming L1 Ronin has also announced its intention to rejoin the Ethereum ecosystem as an L2 by early 2026. This decision comes after network congestion on Ethereum previously prompted Ronin to operate independently for its popular game, Axie Infinity. Sky Mavis co-founder Jeffrey “Jiho” Zirlin noted Ethereum’s progress in scaling as a key factor in this decision.
Ethereum’s Enduring Appeal for DeFi
While some L1s are becoming L2s, high-value DeFi projects like Synthetix and Aave are actively leveraging the Ethereum mainnet. This demonstrates the L1’s continued appeal for applications requiring robust security, decentralization, and access to the deepest liquidity in the crypto space. The complementary nature of L1 and L2 solutions within the Ethereum ecosystem appears to be strengthening its overall position in the blockchain landscape.
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