Layer-two scaling is dead! ☠️
It became fashionable to make excuses to not scale on L1 after the Bitcoin block size wars. Bitcoin went with Lightning, Ethereum went with countless L2s. All in the name of keeping L1 decentralized.
But in the end, we didn't scale ON L2, we scaled L2s! The future belongs to those who build their blockchain to serve billions on the main chain.
Some nuance aside, L2s are basically completely separate blockchains. Think about it: different chain, nodes, security model, token, ecosystem, etc. The only differentiating factor is a set of pegging and bridging mechanisms that some (not all!) use to continue to pretend to use the coin.
L2 scaling is done in the name of L1 decentralization, but if users are forced to live under L2's decentralization trade-offs, the effect is the same as scaling L1. Unfortunately, the more "true" the L2, the worse the UX. Take a look at Lightning. ⚡️ All Lightning Network funds are in two-way payment channels (as opposed to one big bridging pool). How much you can send is severely restricted before you have to make a new L1 payment. Either you have to use L1 a whole lot to use L2, or L2 just works awful! 😵💫
We can see the results. Despite a massive marketing push and being Bitcoin's only way forward, Lightning adoption has stalled out. Devs are quitting, and there's less money in Lightning than in a second-page CoinMarketCap coin. 🤦♂️
Instead, Bitcoin's "real" L2, Litecoin, has shown strong growth, despite much less marketing and little development to speak of outside of MimbleWimble (which has absolutely minuscule adoption). This is ultimately how things are going: competing L1s, unrestricted by bridging/pegging constraints, will fight it out until some gain dominance. It's even easier today with the advent of THORChain and the Maya Protocol, which make it trivial to swap an asset for another one. This essentially makes every single coin a potential Bitcoin or Ethereum "L2"!
Notice, however, that almost no one would use Litecoin if Bitcoin just worked. No one would care for Arbitrum, Solana, etc. if Ethereum scaled. 📈 While we do have a multi-coin future, most chains won't survive as an alternative if the preferred chain scales to meet user demand.
It's very telling that Justin Bons, former Solana mega-critic, has significantly changed his tune in recent months. He sees the "scale L1 or die" writing on the wall! ✍️
Now that's not to say that there's no use for L2s. Some specialized use cases exist where the trade-offs are massively different from L1. That's fine. But you should be able to use the base network for its intended purposes without juggling chains. If L1 can't do certain things, accept that the crypto can't do those things. Scale massively on-chain, or fail!
Sources:
https://bitcoinvisuals.com/lightning
https://bitinfocharts.com/comparison/litecoin-transactions.html#alltime
https://mwebexplorer.com