Most Layer 2 Solutions Will Migrate to the Ethereum
According to EY’s Global Blockchain Leader, Paul Brody, Ethereum’s ongoing consolidation of the blockchain sector will lead to the platform operating as Layer 1 for all blockchains. Brody draws a parallel with the networking industry, where a variety of incompatible data networks initially existed but eventually converged onto a single global standard, TCP/IP. He believes Ethereum’s standardization and scale will similarly lead to its dominance.
Brody highlights that not all Layer 2s and sidechains will be identical, as specialized sub-ecosystems may develop. For instance, EY targets industrial companies for its OpsChain solutions, requiring high volumes and prioritizing privacy and scalability. Nightfall, a Layer 2 network developed by EY, meets these requirements. Other Layer 2s will serve financial transactions or specific identity networks subject to regulatory rules.
Despite the emergence of specialized networks, Brody emphasizes the value of interconnection facilitated by Ethereum. Interconnection allows for the flow of products and services between ecosystems, benefiting trade and investment. While friction between networks may exist, Ethereum will provide substantial advantages as a common Layer 1 across various specialized networks.
However, Brody acknowledges that Ethereum’s dominance may lead to less variability in network functions, requiring tokens and smart contracts to be largely uniform across chains. He compares this to the telecommunications industry, where specialized circuit-switched networks for voice calls were eventually replaced by the more versatile TCP/IP, even though VoIP calls represented a quality downgrade.
In conclusion, Brody suggests that the blockchain space will undergo a similar transformation, with Ethereum gradually consolidating its dominance, potentially relegating specialized blockchains to history.
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