Survey Results: layer 2 adoption
Despite much progress, layer 2 solutions continue to face hurdles.
TL;DR: Layer 2 faces many hurdles to implementation including a lack of users, bad UX, and regulatory friction. Nonetheless, the Ethereum L2 community continues building a dynamic path for scalable decentralized applications.
The most spoken of problem revolving around the Ethereum community focuses on scaling transaction throughput. A suggested solution to this issue involves migrating the majority of transactions to a layer away from the base protocol.
Not only does this provide high throughput, but also a fee-less environment for users to transact in. The majority of the application ecosystem may very well live on a second layer architecture in the future due to these benefits.
Those involved know too well the number of state channels, plasma chains, ZK protocols, and side chain implementations simultaneously being developed. Despite availability, these solutions lack utilization.
To investigate why, I sent a short survey to a number of teams building many different solutions (you can find the population breakdown at the bottom of the page).
The primary question: What is your biggest barrier to user adoption?
“User base will probably expand once we’re actually on mainnet.”
- Lack of users
“chains don’t attract users, Dapps do. Creating partnerships with early dapps is risky, they might not succeed.”
“Common L2 problems”
“Waiting for channels to get users”
- Regulatory friction
“Kyc for users to buy crypto”
“For us, fiat on and off ramp is the biggest challenge. Other barriers like layer-2 onboarding, interaction and etc, are within our own control and we are pretty confident in solving that. However, the fiat is out of my control and worries me the most”
- Poor UX
“Still need better user interfaces, L2 is a little weird and certain things are difficult to explain. Also want to make sure people don’t lose $$$ so need to be careful with auditing before going to mainnet.”
“L2 user experience inherently sucks, as it is yet another thing for a user to take attention to”
“Users losing witnesses can result into loss of claim to withdraw funds”
- Comprehensive Rant
“Oh man, okay: (1) end users and most orgs don’t actually care about trust-minimization, even within the industry. Explaining the value prop of l2 is hard to people who are either startups just trying to hack something together/survive OR end users who don’t care. (2) What is the intrinsic value to l2? Basically, it’s the intrinsic value to using a blockchain in general. What are blockchains actually useful for? Large horizontally integrated financial infra which requires consensus and verification at a massive scale. A l2 solution that isn’t as horizontally integrated or doesnt have as much demand is going to struggle STRONGLY against the network effects there, especially since most people can either just use a custodial sidechain or hold custody directly right now while they try to build their core business models (again, where are the REAL END USERS — NOT speculators!?). (3) It costs nothing to make a tx right now which means people keep saying “come back to us when gas prices rise”. (4) Outside the industry: we have been testing extensively with niche markets that we think are good fits for crypto like indie gaming/content. We think these are good fits because they are generally closed ecosystems that are tech savvy and do smaller transactions (which we believed to be hard/impossible using legacy payments). It turns out, mainstream consumers are EITHER locked into existing platforms (like Steam, etc.) OR sell so little product that saving even 5% in fees makes no difference to them. Problems like chargeback etc still exist insofar as they have to break into the network effects of crypto. On/off ramps are getting easier, but the cost comes out to be EXACTLY THE SAME if you take those into account. Yikes. (5) I’m personally getting pretty disillusioned with people’s focus on technology over actually growing the ecosystem. Until we get more developers/users using Ethereum in general, l2 solutions will not actually be useful (and people will continue to only use Ethereum to speculate on the future use of Ethereum). Sorry for the rant lol.”
No, THANK YOU for the rant!
To summarize, the reasons above include:
1) Lack of incentive for trust-minimization (the consumer base doesn’t care about data/financial sovereignty).
2) Challenge of overcoming network effects from usable, custodial solutions.
3) Low transaction fees today (low network usage) = no need for L2.
4) Incumbent marketplace inertia around existing platforms (small % fee change does little to motivate adoption).
5) Onramp fees worse than credit cards.
6) Lack of ecosystem development (no apps with users).
Nobody knows how L2 will be utilized in an application to drive mass adoption. Most likely it will occur through micro transactions of some sort… something simple and easy to play for thirty seconds to minutes at a time. Or if it isn’t mainstream consumer facing, then certainly in high frequency trading systems.
Finding this application and design pattern that seamlessly on-boards, hooks, and drives mass adoption could take a year, or five years, or ten years… for Ethereum, the first mover advantage window is closing.
The likelihood that more centrally coordinated projects (like Facebook’s Libra) will create experiences more intuitively usable for developers and users alike could limit the possibility of truly decentralized, user facing applications to gain traction.
Implementing L2 along with ideas like Incremental Decentralization and minimum viable trust could prove to be the methods needed to create the intuitive (dare I say fun) experiences to provide actual value to end users.
Something I heard a famous game developer say:
With game development, it isn’t about your batting average. It’s all about how many times you go to bat.
A similar philosophy will unearth that application with viral potential not seen before.
Thanks for all the developers and researchers who participated in this survey! If you are working on a L2 project and would like to participate in a follow on survey, please respond here.
See the breakdown of L2 folks below
What type of solution are you implementing?
Do you have users?
Are you on mainnet?
This survey was conducted by the team at Abridged.io. We are working to make decentralized application development an intuitive and delightful reality for anyone (no PhD required).
Sign up for our early access, check out our ideas, or reach out to firstname.lastname@example.org. We’d love to hear from you!