Paul Brody, EY’s Global Blockchain Leader, emphasizes that only large user-facing financial firms like Coinbase benefit from their own Layer 2 networks, impacting enterprise blockchain strategies.
Such moves bring benefits to Ethereum’s ecosystem but raise skepticism over isolated Layer 2 launches, highlighting a market preference for interoperable platforms.
Paul Brody of Ernst & Young has commented on the rising trend of enterprise Layer 2 (L2) networks. According to Brody, only companies with substantial transaction volumes stand to benefit from creating their own L2 solutions. As Brody states,
Only companies that can aggregate significant transaction volume into the network, and whose customers can’t make their own direct connection to Ethereum, would benefit from creating their own layer 2.
Recent corporate initiatives include Layer 2 launches by companies such as Coinbase with Base https://twitter.com/lorientree/status/1928413969225523696 and Robinhood’s own platform. These efforts aim to increase transaction efficiency and reduce costs.
Financial Sector Eyes Lower Fees and Greater Activity
The launch of enterprise Layer 2s can significantly affect associated cryptocurrencies and transaction fees. Companies in the financial sector are focusing on utilizing these platforms effectively. These initiatives may lead to increased on-chain activity and affect key assets like ETH and major L2 tokens. Historical data suggests that such moves often increase total value locked and facilitate higher trading volumes.
Challenges in L2 Adoption Despite Decreased Fees
Historical precedents indicate that earlier L2 initiatives have increased total value locked (TVL) but often faced challenges in gaining market traction. Binance Smart Chain, a notable example, highlights the importance of network effects. Paul Brody emphasizes that only firms aggregating large user bases can justify own L2 launches. This aligns with past observations where fragmented L2 efforts struggled to achieve broad user engagement despite decreased fees and enhanced efficiency.
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