The highly anticipated Cancun upgrade of Ethereum is set to unleash tremendous opportunities for Layer 2 scaling solutions. Let’s take a look at some top Layer 2 protocols that are ready to leverage the Cancun features.
The core of the Cancun upgrade is turbocharging Layer 2 through EIP-4844, introducing Blob to improve throughput and reduce costs. This greatly enhances Ethereum Layer 2 compared to alternative Layer 1 solutions. However, as the competition for market share among Layer 2 solutions intensifies, the competition between them will also increase.
Arbitrum: The Biggest Winner
Arbitrum has been leading Ethereum Layer 2 in terms of protocol count and ecosystem richness. Its thriving derivatives industry and incubation of top-tier gaming ecosystems like Treasure DAO are unparalleled. According to DefiLlama, Arbitrum has 524 protocols, ranking third among all chains. Its TVL is $2.6B, ranking fourth among all protocols. L2Beat data shows that Arbitrum processed 28 million transactions in the past 30 days, ranking second after zkSync.
Given Arbitrum’s dominant position in high-throughput areas like gaming and derivatives, it becomes the biggest beneficiary of the Cancun upgrade. The enhanced performance allows developers to focus more on innovation rather than Layer 2 limitations. This virtuous cycle could give rise to more leading protocols on Arbitrum.
Optimism: Customizable Blockchain for Everyone
Although lagging behind Arbitrum in terms of quantity, Optimism has taken a creative approach through the OP Stack, enabling projects to launch fully customizable and interoperable blockchains with just one click. Major adopters include Coinbase’s Base Chain, BNB Chain’s opBNB, and renowned projects like Worldcoin and DeBank. The Cancun upgrade will also extend to these OP Stack-based superchains, further solidifying Optimism’s position.
Beyond the Leaders: Three L2 Submarkets
Apart from the top two, other Layer 2 competitors are worth noting, especially protocol aggregators. L2 can be roughly divided into three categories: ZK Rollups – higher development complexity but powerful technology (zkSync, Starknet), Exchange-supported Layers (Mantle, Base) – deep resources, Buzzworthy L2 innovations (Metis, Manta, Blast) – up-and-coming players. Each submarket will benefit from Cancun’s gas fee and performance improvements. As protocols refine their value propositions to become leaders, we should expect intensified competition.
Leveraging Cancun’s Data Availability
Cancun’s Blob data structure provides temporary Layer 2 data availability before deletion within a month. While the value of this data is still uncertain, on-chain data holds significant strategic importance in cryptocurrencies. Therefore, decentralized storage networks may engage in fierce competition to leverage Blob data. Existing solutions like Filecoin and Arweave, as well as new solutions built specifically for data availability like EigenDA and EthStorage, complement each other and help drive Ethereum’s rich data economy.
Preparing Applications to Leverage Cancun
With the Layer 2 performance boost from the Cancun upgrade, high-capacity industries like gaming and derivatives are at the forefront of opportunities. For derivatives, the order book model has always faced secondary limitations such as low liquidity and high slippage, deterring professional traders. The gas fee and performance optimizations of Cancun enable the flourishing of order book protocols, attracting more adoption. Decentralized derivatives exchanges could experience a surge in trading volume, narrowing the gap with centralized platforms.
For gaming, eliminating throughput bottlenecks paves the way for truly decentralized and interactive immersive gaming experiences. We can expect the next wave of blockchain gaming development to flourish on Ethereum Layer 2.
Conclusion
The Cancun upgrade represents a watershed moment for Ethereum by significantly enhancing Layer 2 capabilities. The resulting performance improvements, cost reductions, and data availability will usher in a new wave of innovation in Ethereum’s thriving Layer 2 space. As the platform steadily enters the 2.0 era, this upgrade consolidates Ethereum’s market leadership and expands possibilities for developers and users.
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