Decoding the reason behind Layer1 blockchain migration to Layer2 Rollups?

TL;DR

Before advanced layer-2 scaling solutions like side chains, appchains, and L2 rollups were developed, Layer1 blockchains stood as the best solution for enterprises to build their own independent and customized blockchain network. Now that rollups are getting overwhelming popularity, the web3 landscape is shifting towards it. In the of heightened security without compromising sovereignty, scalability, or modularity, numerous Layer-1 blockchains are embarking on a journey toward Layer-2 rollups. This transition is notably witnessed among projects that face moderate or limited traction within their ecosystems, signaling a trajectory toward a fully matured Layer-1 ecosystem.

This article delves into the realm of such Layer-1 blockchains, shedding light on the challenges entailed in managing Layer-1 blockchains and unraveling the advantages of layer1 blockchain migration to Layer-2 rollups. Moreover, we explore instances of Layer-1 blockchains that have recently made the leap to Layer-2 rollups.

What Challenges Medium/Less-Traction Layer-1 Blockchains commonly face?

1. High Infrastructure and Operational Cost:

Getting a highly optimized, enterprise-grade infrastructure ready and maintaining it is integral for a blockchain network to ensure its availability and performance. Speaking about Layer-1 blockchains with limited traction, managing such robust infrastructure proves to be both complex and cost-intensive.

1. Validator Set Bootstrapping and Scaling:

The whole process of bootstrapping a new validator set, ensuring decentralization, and organizing validators to stake coins or get compensated is a formidable task. This becomes especially intricate and costly for Layer-1 blockchains that have yet to fully mature into broader ecosystems akin to Ethereum, Solana, Avalanche, Cardano, etc.

1. Problem of maintaining Ethereum Compatibility:

Ethereum compatibility is paramount, but not all blockchains are inherently compatible with Layer1 Ethereum. Achieving this compatibility often necessitates additional integrations, making it a complex and unsustainable task for less mature or developing Layer-1s since they work with restricted resources.

1. Maintaining reliable security and Decentralization:

A sovereign Layer-1 blockchain that is building from scratch, must independently ensure robust security and decentralization. This includes complexities and expenses related to validator selection, consensus mechanism implementation, auditing, and cryptographic encryption.

1. Limited access to Technical/DevOps Resources:

Like other blockchains, Layer-1s also require independent developer resources and technical support teams. Building these resources from the ground up is not a feasible option for emerging Layer-1s, emphasizing the need for DevOps support from established blockchains.

1. Optimization of ecosystem for Specific Application/Industry:

Tailoring a general-purpose blockchain for specific industries or applications presents challenges. The optimization process, whether for real-world asset tokenization, gaming, DeFi, Payments, etc., is intricate, requiring innovation and ensuring faster traction, particularly for Layer-1s with limited ecosystem traction.

1. Challenges related to governance:

Transparent and efficient governance is pivotal for a blockchain’s decision-making aspect. Low/medium traction Layer-1s face challenges in designing and managing their own governance, leading to concerns such as centralization, coordination issues, unfair voting participation, and conflicts of interest.

1. Problem of Liquidity:

Layer-1 blockchains with average user volumes will struggle to maintain high Total Value Locked (TVL), resulting in insufficient funds in liquidity pools and AMMs. This lack of liquidity impacts users’ trading, investment, and development experiences, discouraging further investment and dApp building on the blockchain.

What are the Advantages of Layer-1 Blockchains Migration to Layer-2 Rollups?

While Layer-2 rollups offer a range of benefits, Below we have mentioned the main Advantages of Layer-1 Blockchains Migration to Layer-2 Rollups:

1. Low-Cost Infrastructure:

Building a Layer-2 rollup provides reliable infrastructure support from Layer-1, ensuring high performance while reducing operational and upfront costs. Rollups-as-a-service (RaaS) further allows for a cost-effective launch of modular rollups.

1. Full Ethereum Compatibility:

The reliable rollup frameworks, including Polygon CDK, Zk Stack, Arbitrum, and OP Stack, are 100% Ethereum-compatible. Hence, when Layer-1s migrate to Layer-2 rollups, they can seamlessly use existing Ethereum-based smart contracts, ERC tokens, Dev tooling, and codebases.

1. Reliable Security from Base Layer-1:

Layer-2 Rollups inherit security directly from their underlying Layer-1 chain while operating as separate networks. This eliminates the need to set up validators, implement separate consensus mechanisms, or cryptographic proofs for data integrity.

1. Network Effect:

Building a Layer-2 rollup allows projects to benefit from the network effect of matured Layer-1s like Ethereum. Access to resources such as web3 engineers, researchers, product experts, and 24/7 dev support teams enhances the chances of project success.

1. Ideal for Use Case-Specific Applications:

Layer-2 rollups can be easily tailored to power-specific use cases, such as gaming. This specialization allows for massive scalability, different VM choices, Validium mode adoption, etc. Flexibility extends to launching multi-rollups supporting various use cases while maintaining interoperability.

1. Shared Liquidity:

Liquidity challenges do not exist in Layer2/layer3 rollup networks. Layer-2 rollups can tap into liquidity from interconnected rollups through shared bridges, ensuring ample liquidity. Examples like Polygon CDK showcase seamless interoperability and shared liquidity between CDK chains.

1. Seamless Governance:

Layer-2 rollups offer the flexibility to design independent governance structures while enjoying support from the underlying blockchain. For instance, rollup chains designed with Arbitrum Orbit can customize governance while leveraging benefits from Arbitrum DAO.

Exploring Recent Migrations: Layer-1 Blockchains Transitioning to Layer-2 Rollups

Canto:

Canto has successfully transitioned to a Zk-powered Layer-2 using Polygon CDK. The move aims for permissionless sovereignty, Ethereum-based security, and access to deep liquidity.

Celo:

Celo recently migrated to an Ethereum Layer-2 rollup designed with OP Stack. The migration was driven by the desire for Ethereum alignment, security, and exposure to a broader audience.

Astar Network:

Astar network is now moving from a Layer-1 built with Polkadot to a Layer-2 rollup with Polygon CDK. This shift promises a zero-knowledge proof blockchain with multi-chain compatibility.

Lisk:

Lisk announced migration its from an independent Layer-1 using Lisk SDK to a Layer-2 rollup with OP Stack. Lisk aims to utilize this open-source L2 ecosystem for applications focused on real-world assets, offering scalability and lower fees.

What role Zeeve is playing in Layer-1 blockchain to Layer-2 Rollup Migration?

Zeeve plays a crucial role in simplifying the migration process from Layer-1 blockchains to Layer-2 rollups. With an expert team of rollup and DevOps engineers, Zeeve ensures a seamless upgrade of the underlying infrastructure, minimizing costs and preserving user experience. The modular Rollups-as-a-Service (RaaS) offering facilitates one-click deployment of rollup chains, integrating various solutions for efficient development. For more details on Zeeve’s blockchain-related services and solutions, reach out to our experts via email or schedule a one-on-one call.

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