Layer2 has become one of the most important tracks this year. Its development will enable the Web3 network to serve users with higher efficiency and lower fees while maintaining advantages such as new production relationships and smart contracts. As underlying infrastructure, it will impact the speed of future industry development. Recently, in addition to projects specifically focused on the L2 track, exchanges have also been active in the L2 track. Mantle, Base, and opBNB have successively launched or announced L2 mainnet schedules, attracting market attention. In this article, we will take stock of the latest developments in exchange L2 and what they mean.
1. Base
Supported by Coinbase, Base is an Ethereum L2 network that provides a secure, low-cost, developer-friendly way to build decentralized applications or on-chain “dapps”. Its goal is to bring the next billion users into Web3 and the crypto economy.
1. Technical Overview
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Base is the first to collaborate with the OP Stack team and become the core developer of OP Stack. It adopts Optimistic rollup and OP Stack’s modular technology stack, which are also aligned in the 2023 technical roadmap. It can be said that all the advantages of OP Stack will be inherited by Base, such as shared Ethereum security, EVM equivalence, the lowest fees in the current L2, excellent scalability, and OP Stack’s modular structure. For further technical features of OP Stack, you can refer to our previous report “Looking ahead to the Cancun upgrade, is OP worth being “optimistic” about?”.
2. Current Progress
(1) Timeline: Base testnet launched on February 23, 2023, announcing cooperation with optimism and the concept of a superchain – Open to builders on July 13, 2023 – Announced that the mainnet will be open to the entire network on August 9, 2023, and launch the one-month Onchain Summer event.
(2) Meme frenzy at the end of July:
Shortly after the mainnet opened on July 13, there wasn’t much capital on-chain. On July 28, the official promoted a link for early builders to mint NFTs, with the condition of deploying smart contracts on the Base mainnet. After July 30, TVL on Base began to grow rapidly, with TVL exceeding $8 million within two days.
Since there weren’t many applications launched on-chain, the smart contracts deployed were mainly meme tokens without actual applications. Along with capital operations, meme coins represented by bald saw a thousandfold increase in value within a day and then plummeted to zero. Although most memes made a flashy debut and quickly rug pulled, the exaggerated data attracted more capital to Base. Due to the absence of an official cross-chain bridge, a large amount of capital remained on-chain for speculation. This wave generated high market heat even before the Base mainnet was officially launched to the public.
(3) On-chain data:
Since the announcement of the mainnet launch date on August 3, the current on-chain TVL has exceeded $120 million.
Total number of transactions: 5.75 million, total number of users: 340,000+, number of created contracts: 53,000, average gas fee: $0.36.
The current main application on the chain is Dex, with baseswap ranking first, accounting for 50% of the TVL of the top ten Dex.
3. Future plans
(1) Vision of building an open entrance for web3:
From the beginning of Coinbase, there was a four-stage plan with the goal of creating an open financial system to increase global economic freedom. In the past decade, the first three stages have been completed, namely: protocols (*Bitcoin, Ethereum), establishing an exchange (*Coinbase Exchange) as a bridge for cryptocurrencies, and creating a mass-market interface for decentralized applications or “dapps” (*Coinbase and Coinbase Wallet). Currently, the fourth stage is being carried out. In the past, Coinbase’s main services were built on Web2 technology. In this stage, a chain written in smart contracts will be built as an environment for various native encrypted dapps, bringing 1 billion users into the crypto economy in the future.
(2) Technical roadmap:
The goal for 2023 is to collaborate with OP Labs and Optimism Collective to advance Base and Op Mainnet from Phase 0 Roll up (*defined by Vitalik) to Phase 1 Roll up and achieve a high level of decentralization and trustlessness.
A. Launching fault proofing: Start at least one fault proof for the OP stack, protect the security of Base and Op Mainnet by utilizing a set of validators to identify and challenge faults.
B. Advancing decentralization: Decentralize the upgradeability of Base and Op Mainnet smart contracts, first entrusting it to a security committee, whose decentralized quorum is not controlled by any single entity.
C. Starting to implement the super chain: Launch the initial version of the super chain, which can sort transactions aggregated from Base, Op Mainnet, and any OP Stack, protecting the rights of anyone participating in these ecosystems.
The goal for 2024 is to strive to advance Base and Optimism Mainnet to Phase 2, with a level of decentralization and security comparable to Ethereum.
4. Project characteristics
(1) No token plan: Base has explicitly stated through official channels that there are no plans to issue a network token. (*This may mainly consider compliance regulations in the United States, and there may be new changes in the future under the regulatory game between Coinbase and the SEC)
(2) Building an open chain: Base hopes to build a bridge, not an island. It will provide access to Ethereum L1, other L2s, and other L1 ecosystems such as Solana. In addition to enabling Base to interoperate with other chains, it will also support as many chains as possible in Coinbase products.
(3) Eco-connection with Coinbase: With nearly 100 million users and $130 billion in assets, Coinbase’s development and interoperability with Base will bring these users to the world of chains through Coinbase, and it also hopes to attract more new users to Coinbase from the on-chain entrance of Base.
2. Mantle
Supported by Bitdao and Bybit, Mantle Network is an Ethereum L2 solution that uses Optimistic rollup. It has a large Mantle treasury and its product and roadmap are governed by token holders.
1. Technical Overview
(1) Modular architecture and data availability: Similar to OP Stack, Mantle also uses a modular architecture where the core functions (*execution, consensus, settlement, data availability) of the modular blockchain are performed on dedicated layers. The benefit of this approach is that it can alleviate the blockchain trilemma to some extent. In terms of scalability, resource separation improves network efficiency as each layer is responsible for specific tasks. In terms of security, all users operate at the same security level. In terms of decentralization, fraud proofs and zk proofs running on different layers reduce the overall execution and verification load on nodes, eliminating the need to execute all transactions to check their validity.
Based on the modular architecture, Mantle has a separate data availability layer (DA), which means that Mantle can increase throughput without compromising security or burdening validation nodes. Mantle DA is supported by EigenDA technology.
(2) Threshold signature scheme: Optimistic rollup has a limitation where withdrawals are subject to a longer waiting time in the form of challenges. To address the uncertainty of transaction verification during the challenge period, Mantle implements a distributed signature scheme to verify block data. This distributed key generation combined with digital signatures is commonly known as a threshold signature scheme (TSS), which allows every party in the client network to generate valid signatures and ensures the verifiability of distributed signature data (*as long as there are enough honest signatures). Since each TSS client only holds a portion of the private key, the private key is no longer a single point of failure.
By using the threshold signature scheme (TSS) technology, dedicated nodes contribute multi-party signatures to improve the correctness of off-chain transactions. This shortens the challenge period for withdrawals. However, the current TSS nodes are authorized by Mantle core contributors, which means they are centralized.
(3) Improved fraud proofs
In the current popular fraud proof model, the contract that resolves disputes – on-chain validators – can only execute instructions in lower-level virtual machines such as MIPS or WASM. This forces Ethereum Virtual Machine (EVM) clients to recompile their fraud proofs into lower-level languages so that on-chain validators can interpret them, which means that the content of fraud proofs is generated outside the scope of the EVM.
Mantle Network uses an interactive fraud proof mechanism to establish the validity of transactions and compiles and verifies fraud proofs using EVM-level instructions (*without the need for low-level translation, avoiding ambiguity).
2. Current Progress
(1) Timeline: On January 10, 2023, BitDAO announced the launch of the testnet for the modular Ethereum Layer 2 network, Mantle Network. On May 19, 2023, the BitDAO community passed a proposal on “branding, tokens, and token economics optimization” with a 100% approval rate. BitDAO, Mantle, and the BIT ecosystem will be unified under the name Mantle, and the BIT token will also be converted to Mantle. On July 17, 2023, Mantle Network announced the launch of its mainnet Alpha version at EthCC.
(2) Tokenomics and Token Swap:
Mantle officially launched the token swap at 6:00 AM UTC on July 17, 2023, allowing users to convert BIT to MNT at a 1:1 ratio.
The current total supply of MNT is 6,219,316,794, with 52% in circulation, 47.4% held by the treasury, and 0.6% allocated to the core team’s budget. MNT tokens play a dual role as governance and utility tokens in the Mantle ecosystem, providing holders with voting rights and practical functions. (Please note that the tokenomics of Mantle may change due to factors such as token swap and governance proposal approval.)
(3) On-chain data:
TVL is 92 million, mainly due to the large number of tokens available since the launch of MNT. The current circulating supply of MNT is around 320 million, with a current price of $0.505 and a market cap of $1.6 billion.
In recent days, daily transactions have exceeded 100,000, with over 160,000 wallet addresses and a total of 1.1 million transactions.
The top-ranked application in terms of on-chain TVL is its native DEX, Agni Finance, which adopts the ve(3,3) mechanism and accounts for over 63% of the top ten TVL.
3. Future Plans:
(1) Technical Roadmap:
The official disclosure mainly focuses on further plans in terms of technology. At the L1 level, fraud proof will be optimized, including transforming the current authorized node mechanism by core contributors into permissionless fraud proof. At the L2-L1 level, the focus will be on optimizing EIP-4844. At the L2 level, the current version is EVM-compatible and will enhance the EVM environment. The centralized sequencer will be upgraded to a decentralized sequencer.
4. Project Features:
(1) Strong Financial Strength: BitDAO is one of the largest DAO organizations and has one of the largest treasuries, with $3.8 billion in reserve assets. These assets are contributed by Bybit, which has donated over $600 million worth of USDC/USDT and 177,000 ETH to the BitDAO treasury.
Through the merger of BitDAO and Mantle, Mantle Network has inherited nearly $300 million in stablecoin reserves and nearly 270,000 ETH (worth $489 million), which will be the core competitiveness to promote the development of the entire on-chain ecosystem.
(2) LSD Layout: The Mantle community has proposed the introduction of Mantle LSD and mntETH. Users, including the Mantle Treasury, can deposit ETH and receive interest-bearing mntETH receipts. The validation service is outsourced to external node operators.
The Mantle treasury currently holds nearly 270,000 ETH. In the LSD track, Frax, ranked fourth, has pledged 245,000 ETH, and StakeWise, ranked fifth, has pledged 94,000 ETH. This indicates that Mantle can quickly establish a presence if it wants to develop LSD vigorously.
3. BNB Chain-L2
Supported by Binance, BNB Chain has laid out two L2 solutions, opBNB and zkBNB, to expand the performance of the BSC chain. Currently, opBNB is developing faster and also uses OP Stack technology.
1. Technical Overview
BNB Chain consists of two blockchains – BNB Beacon Chain (*BC) and BNB Smart Chain (*BSC). BNB Beacon Chain is responsible for BNB chain governance, as well as managing staking and voting on the BNB chain. BNB Smart Chain is a blockchain component that is EVM-compatible, has a consensus layer, and features multi-chain hubs.
zkBNB and opBNB are second-layer scaling solutions for BSC. Unlike other L2 solutions introduced in this article, zkBNB and opBNB are designed based on BSC as the first layer, rather than Ethereum. Although BSC is much faster than Ethereum, it is still important to further enhance scalability through L2, as it is a chain that hosts a large number of games.
zkBNB – zkBNB is an infrastructure built by developers based on the zk-Rollup architecture. In the future, it can help them build large-scale BSC-based applications with higher throughput and lower or even zero transaction fees. Currently, it is in the testnet stage. Arnaud Bauer, the Senior Solution Architect of BNB Chain, stated in an interview with The Block in the first half of this year that zkBNB is not yet compatible with EVM, so opBNB was prioritized for release.
opBNB – opBNB network is the second-layer scaling solution for BNB Smart Chain, supported by OP Stack. It can achieve scalability while inheriting the security and EVM compatibility of the first layer of BSC. (*OP Stack content will not be further expanded here)
2. Current Progress
(1) Timeline: On February 14, 2023, BNB Chain announced the 2023 technical roadmap, setting scalability as a long-term goal. On June 19, 2023, it announced the launch of the opBNB testnet. On August 2, 2023, it announced that the opBNB mainnet will be launched in mid-August, first open to infrastructure providers, and then open to the public at the end of August or the beginning of September. (*zkBNB was originally the focus of scalability for this year, but there has been no further progress for now)
(1) On-chain data:
The Total Value Locked (TVL) of ETH is seven times that of BSC, and the trading volume of BSC is three times that of ETH. The total fees on BSC are 7.7% of that on ETH. On L1, BSC has lower fee consumption compared to ETH, but ETH has the largest amount of funds.
On L2, the opBNB testnet has an average daily processing volume of around 100,000 to 150,000, with an average block time of 1 second. There are about 6,000 to 20,000 daily active accounts, and the fee per transaction is approximately $0.005.
3. Future Plans
BNBChain will advance in five aspects in its 2023 technical roadmap:
(1) Enhancing the overall performance of the blockchain network: mainly by increasing the block gas limit, implementing parallel EVM, upgrading BSC nodes and clients, etc.
(2) Improving scalability: achieving BSC scalability through a multi-chain strategy, with the rollup solutions mainly being zkBNB and opBNB. Currently, opBNB is progressing faster, and zkBNB was originally planned to be launched this year.
(3) Building new infrastructure: adopting more infrastructure, with decentralized storage being one of the key focuses. BNB Greenfield was launched this year, where users and dApps can create, store, and exchange data with full ownership, forming a new data economy. Storage is also a crucial factor in further enhancing network performance.
(4) Enhancing decentralization: by the end of 2023, the number of active validator slots will increase from 29 to 100, and more consensus mechanisms and on-chain governance will be introduced.
(5) Improving BNB security: introducing new security services, security and risk management frameworks, and enhancing the security of cross-chain components.
4. Project Features
(1) Built on BSC L2: BSC outperforms ETH in terms of processing speed and fee consumption. Through the technology of opBNB, performance will be further enhanced through L2.
(2) Complete and mature BNB Chain ecosystem: Binance is currently the largest cryptocurrency exchange with the most users and funds. BNB Chain has built various infrastructure and applications within its own ecosystem, which can flexibly and efficiently adapt to opBNB and fully leverage the value of the ecosystem and tokens.
Conclusion:
In the second half of this year, there will be more voices regarding L2, and perhaps L2 Summer will come. From a technical perspective, mainstream L2 technologies have converged to choose a more scalable modular structure. Optimistic rollup has been adopted more due to its feasibility. OP Stack has gained more external collaborations.
Exchanges are actively deploying their own L2 solutions, perhaps because they can leverage their existing CEX funds and user base to attract more new users and dApps by building Web3-native blockchain networks, creating a more diverse business structure and incremental space. In the future, we will wait and see who can further consolidate their position or change the development ranking through L2.
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