Monday, 27 March 2023

Crypto News

Ethereum layer-2 solutions may focus less on token incentives in the future

Ethereum layer-2 solutions may focus less on token incentives in the future

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 — a 30% increase in activity since October 2022. 

Moreover, the Polygon ecosystem recently announced the launch of its beta version Zero-Knowledge Ethereum Virtual Machine. As a result, Polygon’s native token, Polygon (MATIC), maintains a bullish narrative.

While notable, some believe layer-2 networks offering token incentive models may soon become obsolete. For instance, Jesse Pollak — head of protocols and Base core contributor at American crypto exchange Coinbase — 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:

“We 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.”

According to Pollak, Base is a layer-2 solution that allows developers to easily build applications without requiring an incentive mechanism. “Our 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,” he said.

Shifting focus from token models to user experience

Focusing on ease of use and distribution are important points, as Pollak pointed out that many of today’s decentralized applications have been used solely for trading cryptocurrencies. “Trading 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,” he added.

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. “It costs about 10–15 cents to conduct transactions on layer-2s. We aim to bring that down,” he mentioned.

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…

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