Why We're Bullish L2s

Why are L2 tokens bullish? That is the topic today on Bankless Takes. Bankless Takes is an episode where David and I just speak our mind on whatever we want to talk about. And today we decided to talk about it.

Talk about layer two tokens.

Yeah. Are they bullish? Are they bearish? I mean, that was kind of a question. A few things we're going to take on. The question of are L2 tokens worthless governance tokens? That is a narrative going around. Will they accrue any value or are they actually bullish?

Brian, before we get into the conversation, uh why? Why are we having this conversation? Where did this come from?

While you were out mountain climbing, David, there was uh some robust discussion in the Bankless Citizen Discord, as there always is, by the way. So if you are a bankless citizen

You should

join

great discussions. Anyway, the question was posed exactly as I stated like, are L2 tokens gonna go up? Are they bearish? Are they bullish?

Are they just worthless governance tokens? How should we think about them? How do you guys think about them? And so this is essentially my answer to this. And I want to see how much you uh agree with that answer. And uh we may as well record it as an episode. Sound good?

I I think we should do it, and we'll get right into that conversation. But before we do, a moment to talk about some of these fantastic sponsors that make this show possible, especially

All right, David. So the first place, and if we're going to talk about L2 tokens, we have to see if they're zombie chains or not. Like, is anyone actually using these things? And it's been uh a few days since I've looked at some of these metrics, uh, but in depth, probably uh like a few weeks, and it's maybe maybe worth a review to look at some of the core metrics. So I've got a website pulled up.

let's set the table.

It's uh called growthhe.xyz. And uh fun fact, David, you can get a lot of L2 metrics, layer two metrics on the internet these days. All right. There's a series of I know it's uh a series of fantastic sites that put this out. The first is GrowThePie. And let's take a look at daily active addresses. So you can think of a daily active address almost like a

a bank account. It's true that like

a user can have multiple uh addresses. That is also true. So it's like a one to many relationships.

Probably have like, I don't know, thousands.

Probably. But this gives you a sense of the number of addresses on the chain. ZK Sync era is right now leading in daily active addresses. So these are kind of bank accounts, as it were, using the chain, 428,000 daily. Arbitrum, right behind that, 185,000. Linea, uh right behind that, 88k. OP Mainnet, 66, base 63, scroll 40 44k, on down, Zora, Polygon are also in there, immutable X, etc. Polygon POS is not in there because uh not technically a layer two

side chain.

Yeah.

Yeah, it's a it's a side chain, but that is in the process of being converted to a layer two. I expect we see that sometime in 2024. Anyway, that gives you a sense of some of the activity. And it's um it's kind of up only, David, if you look at sort of the maximum. Look at this.

Right.

I mean, it's growing. Now,

Yeah.

we I should probably say not all of this activity it corresponds to one like user. I think some of these chains are like airdrop hunting, airdrop farming,

Yeah.

as it were.

The chains that have not issued tokens have a probably a significant premium of activity from people who are just using the chain to hunt the token. And you can probably see that both in the daily active addresses and also the transaction counts for some of these chains.

And which ones would those be? Like ZK, uh

Yeah. ZK Sync era is the big one. Linnea also very big. Base is probably not being airdrop hunted because I don't think people are really like thinking about a base token. And so there's opportunity cost to hunt the base token when you could be hunting like ZK Sync has been talking about their token for like 2019 or something. Like they've haven't been shy about that. And so probably base is more or less above 95% organic.

So good numbers uh on that and uh certainly up only. On the transaction count, we're seeing kind of uh up only numbers as well. So you'll notice some m massive spikes here too. Like, see this arbitrary

In inscriptions inscriptions, right?

inscription. Oh, that was

That was the spike that took down the Arbitrum chain.

exactly this was uh

Also, was the number one largest daily transaction volume of any layer two.

Yeah. Um so really stress tested arbitrary and actually

Trust tested.

so this is definitely a metric of for usage, but it can be gamed and like all various ways that we've sort of seen

Transaction is does not equal one transaction. Not all transactions are the same.

But still, I mean, you want to see an uptrend line over time, and you'll see spikes for volatility. It's also a good stress test of how many transactions these networks can actually uh handle before falling over. So ZK Sync era right now is the current lead with 1.3 million transactions on a daily basis. Arbitrum a second with uh 720,000 right now.

Did you hear the report as to uh why Arbitrum um toppled over when the inscription attack got it?

Um a little bit, yeah. I don't recall all the details.

I think it was something like super trivial. It was like an out-of-date Prism client. And once they once they updated it, it was like, oh, it's done. We fixed it.

That's the problem. You just have one sequencer as well, right? Which multiple sequencers can start to fix.

Liveness failures.

Um OP Mainnet is next, uh 369,000. Uh, and then base and immutable X is on there. Uh Linnea is on there as well.

Congratulations to Arbitrum for passing 500 million transactions. I don't know if that makes them number one in total like raw transaction count. It could be. They could be number one in that for layer two. So that that's pretty cool for layer twos. Yeah. Yeah. That's pretty cool. And Arbitrum like probably has the highest ratio of total transactions to total organic transactions because they've had like a decent amount of activity post token launch. Yeah.

They've been around for a while too. Um stablecoin metrics as well. So Arbitrum has about $2 billion worth of stable coins on chain. Uh OP has 610

uh million.

Million

And then base, all right. This is one to watch for stable coins. You know that Coinbase is going to send some love, base is

they're gonna put the USDC on the base chain. That's where it's gonna go. And then Circle, which Coinbase owns 25% of, is gonna go public. And then base is going to be the Visa competitor. That's my prediction.

That feels like a a good, a solid prediction. So this is at 300 million right now, but I expect that to like 10x, blossom, you know,

Block.

Yeah.

50x. I don't know, something like that. It's going to uh be pretty large. Then a total lock value locked. This is a pretty astounding statistic. So yeah. So if we look at the total,

Arbitrum chart.

22 billion across all layer twos. All right. But so um Arbitrum has about half that at uh 10 billion. OP has about 6 billion, and then base 750 million. Uh so pretty respectable ZK Sync era.

I I really like having base metrics here because they feel so pure.

Optimism and Arbitrum probably pure pretty damn pure too. Arbitrum, I think, recently has some uh liquidity incentives going on that are kind of juicing some numbers. But like the base is they're not gonna juice liquidity. They're not launching a token. So like the base just feels like it gives us um