Ethereum’s layer-2 solutions have been gaining traction in recent years as the ecosystem continues to expand.
These solutions aim to improve scalability, reduce transaction costs, and enhance the user experience. One of the most popular layer-2 networks is Polygon, which has seen a 30% increase in daily active users since October 2022, according to analytics provider Token Terminal. However, there is a growing sentiment among experts that the use of token incentives in layer-2 networks may soon become obsolete.
Token incentives have been used as a powerful tool to incentivize user and developer behavior in the past. Still, some have argued that they are not always a good fit for underlying chains, and can even result in risky or nefarious situations. Coinbase’s recently launched layer-2 solution, Base, is an excellent example of a network that aims to stand on its own without using token incentives. Base provides an easy-to-use platform for developers to build applications and distribute them to real human beings, without requiring an incentive mechanism. As Jesse Pollak, Coinbase’s head of protocols and Base core contributor, put it: “Our product will stand on its own.”
While the move away from token incentives may lead to easier-to-use and more functional layer-2 solutions, it also raises questions about the impact on decentralization. Some worry that without incentives, networks may become more centralized, as users may be less motivated to participate. It remains to be seen how this will play out, but the shift towards a more functional approach is undoubtedly a fascinating development in the evolution of Ethereum’s layer-2 solutions.
