ARE LAYER 2S GOOD FOR ETHEREUM, OR ARE THEY EXTRACTIVE?

Last updated: June 19, 2025, 23:58 | Written by: Elizabeth Stark

The Ethereum blockchain, a pioneer in the world of decentralized applications (dApps) and smart contracts, has long faced the challenge of scalability. Layer 2s have been a great blockchain success story. They ve reduced congestion on the Ethereum mainnet, driving down gas fees Are layer 2s good for Ethereum, or are they extractive?As the network gained popularity, transaction congestion and high gas fees became major hurdles, hindering widespread adoption. Layer 2s have been a great blockchain success story. They ve reduced congestion on the Ethereum mainnet, driving down gas fees while preserving security. But maybe they ve become tooEnter Layer 2 solutions – a beacon of hope promising to alleviate these issues.These secondary layers operate on top of the Ethereum mainnet (Layer 1), processing transactions off-chain before settling them on the main chain. Has Ethereum been too complacent about fees? It no longer has the luxury of being a peace-time research project, said one conference panelist. Layer 2s have been a great blockchain success story. They ve reduced congestion on the Ethereum mainnet, driving down gas fees while preserving security.This approach has demonstrably reduced congestion and lowered fees, making Ethereum more accessible to users.But a crucial question lingers: are these Layer 2 solutions truly beneficial for Ethereum in the long run, or could they inadvertently be extractive, siphoning value and activity away from the very network they were designed to support?The debate rages on, with proponents highlighting the increased adoption and enhanced user experience, while critics voice concerns about potential centralization and the uneven distribution of economic benefits.This article delves into the complex relationship between Ethereum and Layer 2s, exploring both their advantages and potential drawbacks, to determine whether they are a net positive for the Ethereum ecosystem or a source of unintended consequences.

The Rise of Layer 2s: A Scalability Solution for Ethereum

Ethereum's initial design, while groundbreaking, struggled to handle the growing demand for its services. Increased Adoption: As Layer 2 solutions enhance performance, they could lead to greater adoption of decentralized applications (dApps) and services on the Ethereum network. Concerns Over Extraction and Centralization Despite their advantages, Layer 2 solutions have sparked concerns regarding their potential to be extractive.The main chain, or Layer 1, could only process a limited number of transactions per second, leading to network congestion, particularly during periods of high activity.This congestion, in turn, drove up gas fees, making even simple transactions prohibitively expensive for many users. Ethereum Layer 2s (L2s) solve Ethereum s scalability issues by reducing transaction congestion and offering lower fees and faster speeds without sacrificing security. L2 tokens have struggled to gain traction, primarily due to limited token utility, competition from other chains, and Ethereum s relatively weaker price performance.This is where Layer 2 solutions stepped in, offering a way to scale Ethereum without compromising its core principles of security and decentralization.

How Layer 2s Work: Off-Chain Processing and On-Chain Settlement

Layer 2 solutions work by processing transactions off the Ethereum mainnet. News Summary: Layer 2s have been a great blockchain success story. They rsquo;ve reduced congestion on the Ethereum mainnet, driving down gas fees while preserving security.But maybe they rsquo;ve become too successful, drawing chain activity and fee income from the parent that spawned them? At least that rsquo;s what some are suggesting lately, most recently at Cornell Tech rsquo;s blockchainThis means that the actual computation and execution of transactions take place on a separate layer, reducing the load on the Layer 1.Once a batch of transactions has been processed on the Layer 2, the results are then bundled and submitted to the Ethereum mainnet for settlement.This settlement process typically involves verifying the validity of the transactions and updating the state of the Ethereum blockchain.

There are various types of Layer 2 solutions, each with its own unique approach:

Rollups: Rollups are a popular type of Layer 2 that batch multiple transactions together and submit them to the Ethereum mainnet as a single transaction. Fee-sharing was rarely much of an issue before Ethereum s March 2025 Dencun upgrade, which introduced blob transactions to help scale layer 2s. Blobs significantly reduced the cost for L2s to post data to Ethereum, allowing them to operate more profitably, CoinMetrics researcher analyst Tanay Ved told Cointelegraph this week.There are two main types of rollups:

Optimistic Rollups: Assume transactions are valid unless proven otherwise. This dynamic has led to many questioning whether Layer-2s are net positive for Ethereum, or whether they are extractive. Base s response. Asked about fees, a Base spokesperson told Cointelegraph, Today, Base already pays Ethereum fees for every transaction on Base.They use a fraud-proof system where anyone can challenge a transaction if they believe it is invalid.
Zero-Knowledge (ZK) Rollups: Use cryptographic proofs (zero-knowledge proofs) to verify the validity of transactions without revealing the underlying data.ZK-rollups offer faster settlement times and stronger security guarantees than optimistic rollups.

State Channels: Enable users to conduct multiple transactions off-chain and only interact with the Ethereum mainnet when opening or closing the channel. This dynamic has led to many questioning whether Layer-2s are net positive for Ethereum, or whether they are extractive. Base s response Asked about fees, a Base spokesperson told Cointelegraph, Today, Base already pays Ethereum fees for every transaction on Base.State channels are well-suited for applications that require frequent interactions between a small number of users.
Plasma: A framework for creating child chains that are anchored to the Ethereum mainnet.Plasma chains can process transactions independently and only interact with the mainnet for dispute resolution.
Validium: Similar to ZK-rollups, Validium uses validity proofs to ensure the correctness of off-chain transactions. If certain alternative Layer 1s fail to gain traction and suffer as a result of small security budgets and lack of liquidity, consolidation as an Ethereum Layer 2 may become an attractive option. While Layer 2s introduce significant scalability potential and reduce cost barriers on Ethereum, they are not without risks.However, unlike ZK-rollups, Validium stores transaction data off-chain, which can further improve scalability but may come with trade-offs in terms of security and trust assumptions.

The Benefits of Layer 2 Solutions for Ethereum

The implementation of Layer 2 solutions has brought about several significant benefits for the Ethereum ecosystem:

Reduced Gas Fees: By processing transactions off-chain, Layer 2s significantly reduce the gas fees associated with using Ethereum. Yes, Layer 2s are beneficial for Ethereum. They tackle Ethereum's scalability challenges by enabling faster and cheaper transactions. By offloading some of the transactional volume from Ethereum's main chain (Layer 1) to these secondary layers, Ethereum can maintain its security and decentralization while boosting its transactional capacity.This makes Ethereum more accessible to a wider range of users, including those who may have been priced out of the market due to high fees.
Increased Transaction Throughput: Layer 2s can process a much higher volume of transactions than the Ethereum mainnet, leading to faster transaction confirmation times and improved overall network performance.With benefits like sub-second settlement times, negligible fees, and improved capacity, layer-2 chains are key to bringing Ethereum to the masses.
Enhanced User Experience: The combination of lower fees and faster transaction times results in a significantly improved user experience for dApp users.This can lead to greater adoption of decentralized applications and services on the Ethereum network.
Preserved Security and Decentralization: Layer 2s leverage the security and decentralization of the Ethereum mainnet by settling transactions on-chain.This means that Layer 2 solutions inherit the security properties of Ethereum, providing users with a high level of assurance.

For example, optimistic rollups like Arbitrum and Optimism have seen substantial growth in transaction volume and total value locked (TVL), demonstrating the increasing demand for Layer 2 solutions. This dynamic has led to many questioning whether or not Layer-2s are web optimistic for Ethereum, or whether or not they re extractive. Base s response. Requested about charges, a Base spokesperson advised Cointelegraph, Immediately, Base already pays Ethereum charges for each transaction on Base.ZK-rollups, such as zkSync and StarkNet, are also gaining traction due to their superior security and performance characteristics.

Concerns Regarding Extraction and Centralization in Layer 2s

Despite their numerous advantages, Layer 2 solutions have also sparked concerns regarding their potential to be extractive. With benefits like sub-second settlement times, negligible fees, and improved capacity, layer-2 chains are key to bringing Ethereum to the masses and to drive the next wave of Web3 adoption. However, layer-2s are not always that easy to use, and it can be burdensome moving funds across Ethereum layers and chains in order to transact and invest.The core of the concern revolves around value accrual.Is the economic value primarily benefiting the Layer 2 operators and token holders, or is it contributing to the overall health and sustainability of the Ethereum ecosystem?

Fee Distribution and Value Capture

One of the key concerns is the distribution of fees.Layer 2s collect transaction fees from users who interact with their platforms.While a portion of these fees is used to pay for the cost of settling transactions on the Ethereum mainnet (Layer 1), the remaining revenue can be significant.The question is whether this revenue is being reinvested in the Ethereum ecosystem or primarily benefiting Layer 2 operators and token holders.

Fee-sharing was rarely much of an issue before Ethereum's March 2025 Dencun upgrade, which introduced blob transactions to help scale layer 2s.Blobs significantly reduced the cost for L2s to post data to Ethereum, allowing them to operate more profitably.This raises the stakes for the debate about fair value distribution.

Centralization Risks

Another concern is the potential for centralization within Layer 2 solutions.Some Layer 2s are operated by centralized entities, which raises questions about censorship resistance and the potential for abuse of power.Even decentralized Layer 2s may be susceptible to centralization risks if a small number of entities control a significant portion of the network's infrastructure or governance tokens.

If certain alternative Layer 1s fail to gain traction and suffer as a result of small security budgets and lack of liquidity, consolidation as an Ethereum Layer 2 may become an attractive option.This consolidation could further exacerbate centralization concerns, leading to a less diverse and resilient ecosystem.

Layer 2 Token Performance and Utility

L2 tokens have struggled to gain traction, primarily due to limited token utility, competition from other chains, and Ethereum's relatively weaker price performance.This dynamic has led to many questioning whether or not Layer-2s are net positive for Ethereum, or whether or not they're extractive.Without clear utility and strong value accrual mechanisms, Layer 2 tokens may fail to capture the value generated by their respective platforms, further contributing to concerns about extraction.

Are Layer 2s Net Positive for Ethereum?A Balanced Perspective

Determining whether Layer 2s are net positive or extractive for Ethereum requires a balanced perspective, considering both the benefits and potential drawbacks.

Arguments for Layer 2s Being Net Positive

Scalability and Accessibility: Layer 2s have undeniably solved Ethereum's scalability issues, making the network more accessible to a wider range of users.
Innovation and Experimentation: Layer 2s provide a fertile ground for innovation and experimentation with new technologies and business models.
Ecosystem Growth: The increased adoption and improved user experience fostered by Layer 2s can contribute to the overall growth of the Ethereum ecosystem.
Security and Decentralization: Most Layer 2 solutions inherit the security and decentralization of the Ethereum mainnet, providing users with a high level of assurance.

Arguments for Layer 2s Being Extractive

Fee Distribution: The distribution of fees between Layer 2 operators and the Ethereum ecosystem is a point of contention.
Centralization Risks: Centralization risks associated with some Layer 2 solutions raise concerns about censorship resistance and the potential for abuse of power.
Token Utility: The limited utility of some Layer 2 tokens raises questions about their ability to capture value and contribute to the overall health of the ecosystem.
Potential for Fragmentation: The proliferation of Layer 2 solutions could fragment liquidity and user attention, making it more difficult to build a cohesive and vibrant ecosystem.

Base's response to concerns about fees is noteworthy.A Base spokesperson told Cointelegraph that they already pay Ethereum fees for every transaction on Base.This demonstrates a commitment to contributing to the Ethereum ecosystem, but it remains to be seen whether this model will be widely adopted by other Layer 2 solutions.

The Future of Ethereum and Layer 2s: A Symbiotic Relationship?

The future of Ethereum and Layer 2s likely hinges on fostering a more symbiotic relationship.This requires addressing the concerns about extraction and centralization while continuing to leverage the benefits of Layer 2 solutions.

Potential Solutions

Fee-Sharing Mechanisms: Developing fair and transparent fee-sharing mechanisms that incentivize Layer 2s to contribute to the Ethereum ecosystem.
Decentralized Governance: Promoting decentralized governance models for Layer 2 solutions to reduce the risk of centralization and ensure that the interests of all stakeholders are represented.
Improved Token Utility: Enhancing the utility of Layer 2 tokens to create stronger value accrual mechanisms and incentivize users to hold and use them.
Cross-Layer Interoperability: Improving cross-layer interoperability to reduce fragmentation and make it easier for users to move assets and data between different Layer 2 solutions.

Ultimately, the success of Ethereum and Layer 2s depends on their ability to work together to create a more scalable, accessible, and sustainable ecosystem.This requires ongoing dialogue, collaboration, and a commitment to building a future where both Ethereum and its Layer 2 solutions thrive.

Conclusion: Navigating the Layer 2 Landscape for a Stronger Ethereum

The question of whether Layer 2s are good for Ethereum or extractive is not a simple one.They offer significant benefits in terms of scalability, reduced gas fees, and enhanced user experience.However, concerns about fee distribution, centralization risks, and token utility must be addressed to ensure that Layer 2s are truly net positive for the Ethereum ecosystem.As the Ethereum landscape continues to evolve, it's crucial for developers, users, and stakeholders to actively participate in shaping the future of Layer 2 solutions.By prioritizing decentralization, fair value distribution, and improved token utility, we can foster a symbiotic relationship between Ethereum and its Layer 2s, paving the way for a more robust and accessible blockchain ecosystem for all.

Key takeaways:

Layer 2s address Ethereum's scalability challenges by processing transactions off-chain.
They offer reduced gas fees and increased transaction throughput, improving user experience.
Concerns exist about fee distribution, centralization, and limited token utility.
A symbiotic relationship requires fair fee-sharing, decentralized governance, and enhanced token utility.

Consider exploring different Layer 2 solutions and actively participating in their governance to contribute to a more sustainable and decentralized Ethereum ecosystem.Which Layer 2 solution best suits your needs depends on your specific use case and risk tolerance.Research and choose wisely!