The Ethereum Foundation’s Platform Team has one ultimate goal: to scale Ethereum as a unified coordination system so that all users can rely on it with confidence. This article aims to share our perspective on the relationship between L1 and L2, clarify the role of each layer, and explain how we leverage the strengths of both L1 and L2 to build the most compelling platform for all users.
TL;DR
Goal: Every individual and institutional user should have a clear path to utilize, extend, and benefit from Ethereum’s core properties. The best way to achieve this is by fully leveraging the unique capabilities of each layer—reinforcing Ethereum’s core properties and unlocking meaningful value for end users through them.
As the Ethereum ecosystem evolves, the roles of each layer evolve too: In the past, L2s’ primary mission was scaling Ethereum, with differentiation and customization as secondary goals. Today, L2s’ primary mission is scaling while delivering differentiated features, services, customization, go-to-market strategies, and control domains. Currently, the strongest drivers are differentiation, control, and innovation.
L1 serves as the truly permissionless, globally resilient settlement, shared-state, liquidity, and DeFi hub—and provides a stronger foundation for L2s. L2s deliver valuable new functionality, customization, and control to grow their own onchain economies while extending Ethereum’s core properties to more users. Robust L2 networks strengthen the broader Ethereum ecosystem—and its gravitational center.
Introduction
Over the past five years, a massive L2 ecosystem has grown around Ethereum L1. These L2s inherit different native Ethereum properties: some fully replicate Ethereum’s decentralized architecture; others inherit only partial security properties; still others merely comply with the generic EVM standard. It is now time for the Ethereum Foundation (EF) and the broader Ethereum ecosystem to update our understanding of the relationship between L1 and L2 networks.
Over recent months, the future direction of the L1–L2 relationship has become increasingly clear: A thriving Ethereum ecosystem must be built upon a strong L1 foundation. Ethereum L1 will achieve order-of-magnitude scalability while preserving the highest levels of security and decentralization. Ahead lies an ecosystem of independent, interoperable L2 chains offering higher degrees of customization, control, and functionality than L1 alone can provide.
What roles do L1 and L2 play—and how do they work together?
Ethereum L1 is the world’s leading programmable blockchain—unmatched today in user adoption, developer ecosystem, decentralization, resilience against risks, and foundational robustness. Ethereum L1 is the heart of the DeFi ecosystem, aggregating the deepest liquidity across the entire network. Over the coming years, we will scale Ethereum L1’s capacity by multiple orders of magnitude—without compromising its core values.
At the same time, no single public chain can accommodate the diverse demands of a global, multi-faceted onchain economy. Many distinct chains offer specialized and customized services that L1 cannot provide—such as non-EVM functionality tailored to specific applications or use cases, enhanced privacy guarantees, alternative pricing mechanisms or transaction inclusion logic, ultra-low latency, or other ordering characteristics. This creates an opportunity for a mutually beneficial L1–L2 relationship, where each layer focuses on complementary responsibilities.
Why would other independent public chains choose to become Ethereum L2s?
Key reasons include: low cost (no need to bear high fixed infrastructure costs), access to users and developers (tapping into the largest L1 and L2 cluster globally), interoperability (secure access to L1 assets and DeFi liquidity), and marketing advantages (brand recognition and reputational benefits).
What does Ethereum L1 gain from this?
Positioning Ethereum L1 at the center of a growing L2 network reinforces Ethereum’s and ETH’s unique role in the onchain economy: generating demand for ETH, expanding Ethereum’s network effects, cementing Ethereum’s status as the core of a multi-chain ecosystem—and as the primary settlement and liquidity layer for the onchain economy—and providing Ethereum with broader business development, growth, and marketing support.
What does this mean for the future of L2s?
L2s should focus strategically on complementing L1 and achieving platform differentiation. L2s may choose to extend all or only select properties of Ethereum—but must ensure users can easily understand which security properties they provide (and which they don’t). Trust-minimized L2s should—at minimum—reach Stage 1 and pass the “exit” test. L2s should continue advancing broader interoperability and shared liquidity mechanisms.
What is the Ethereum Foundation doing to help build this world?
To realize this vision, the Ethereum Foundation is actively pursuing the following initiatives: scaling L1 and blobs; providing targeted support to L2s with expertise—or ambitions—to deepen capabilities in privacy, security, and trust minimization; enhancing L1 liquidity; collaborating closely with L2 teams; investing R&D into “native rollup” technology; partnering with L2Beat and other institutions to monitor and verify L2 security properties; and building more robust interoperability solutions to address fragmentation.
[Foresight News]
Ethereum’s Strategic Reorientation: L1 as Settlement Hub, L2s as Specialized Application Chains
The Ethereum Foundation’s recent publication outlining the division of labor between Layer 1 and Layer 2 represents a pivotal moment in Ethereum’s evolution. This isn’t merely an architectural update but a fundamental strategic repositioning that will reshape the competitive landscape and value distribution across the entire blockchain ecosystem.
Strategic Shift: From Scaling to Specialization
The most significant revelation in this document is the explicit redefinition of L2s’ primary mission. Previously, scaling Ethereum was the paramount objective. Today, the Ethereum Foundation articulates a clear paradigm shift: L2s must simultaneously scale while delivering differentiated features, services, customization, and control domains.
This strategic pivot transforms L2s from mere scaling solutions into specialized application chains—each with its own value proposition, target audience, and economic model. For investors, this signals a fundamental change in how we should evaluate L2 projects: differentiation and specialization are no longer secondary considerations but primary determinants of long-term success.
Value Distribution Implications
The article clearly delineates the value capture mechanisms across layers:
L1 (Ethereum):
– Reinforces its position as the global settlement and liquidity hub
– Generates sustained demand for ETH through L2 settlement requirements
– Expands network effects as the gravitational center of the multi-chain ecosystem
– Benefits from broader business development and marketing support across L2s
L2s:
– Capture value through specialized functionality and user experiences
– Create differentiated onchain economies with tailored business models
– Benefit from Ethereum’s security umbrella and liquidity depth
– Leverage Ethereum’s user base and developer ecosystem
This explicit division of labor creates a more sustainable value distribution model than previous scaling-centric approaches. For ETH holders, this represents a strengthening of the token’s fundamental value proposition as the bedrock of the entire ecosystem.
Market Impact and Competitive Landscape
The strategic implications extend far beyond Ethereum’s borders:
For Competing L1 Blockchains:
This vision intensifies the competitive pressure on alternative L1s like Solana, Avalanche, and others. The Ethereum ecosystem now offers a compelling value proposition: institutional-grade security at L1 combined with specialized execution at L2. This may incentivize some competing L1s to consider becoming L2s to tap into Ethereum’s liquidity and user base.
For L2 Ecosystem:
We’re likely to see increased consolidation around successful L2s with clear differentiation strategies. Projects with strong teams, well-defined target markets, and robust security postures will benefit disproportionately. However, the market may also become more fragmented as numerous specialized L2s emerge, creating both opportunities and challenges for discovery and liquidity.
For Cross-Chain Infrastructure:
As the L2 ecosystem expands, the demand for interoperability solutions will intensify. Projects facilitating asset transfers, shared liquidity, and cross-chain composability will play increasingly critical roles in the Ethereum ecosystem’s success.
Risk Considerations
Despite the strategic clarity, several risks demand investor attention:
Security Model Complexity:
The article acknowledges that L2s may inherit only partial security properties from Ethereum. This creates a complex landscape where users must understand which security guarantees each L2 provides. The exit test and Stage 1 requirements represent minimum thresholds, but not all L2s will meet these standards. Investors should scrutinize L2 security postures and be wary of solutions that compromise on decentralization or trust minimization.
Interoperability Challenges:
As the L2 ecosystem grows, ensuring seamless interoperability becomes increasingly complex. The Ethereum Foundation’s investment in interoperability solutions is critical, but fragmentation could still occur if L2s become too siloed. This could limit composability benefits across the ecosystem.
Centralization Pressures:
The emphasis on L2 differentiation and control introduces centralization risks. As L2s implement custom transaction ordering, pricing mechanisms, and other features, the risk of centralized control points increases. The Ethereum Foundation must balance innovation with maintaining Ethereum’s core decentralization values.
Investment Opportunities
This strategic shift creates several compelling investment opportunities:
ETH as Foundational Asset:
The role of Ethereum as the settlement layer strengthens ETH’s fundamental value proposition. Staking mechanisms will become increasingly valuable as L2s settle transactions on L1. Long-term accumulation of ETH remains a core strategy for investors bullish on Ethereum’s multi-layered future.
Specialized L2s:
L2s with clear differentiation strategies targeting specific verticals (DeFi, gaming, enterprise, privacy, etc.) present significant upside potential. Projects like Arbitrum (general-purpose scaling), zkSync (emphasizing ZK technology), StarkNet ( Cairo-based computation), and Optimism (emphasizing developer experience) are establishing distinct identities that could capture disproportionate value.
Cross-L2 Infrastructure:
Protocols enabling shared liquidity, interoperability, and asset transfers between L2s will play critical roles. Projects facilitating liquidity sharing, aggregated DEX functionality across L2s, and unified user experiences will benefit from the ecosystem’s expansion.
Developer-Focused Infrastructure:
As the L2 ecosystem matures, tools and infrastructure enabling developers to build across multiple L2s efficiently will see increased demand. This includes cross-chain development environments, testing frameworks, and deployment tools.
Conclusion
The Ethereum Foundation’s strategic vision represents a sophisticated approach to scaling while preserving Ethereum’s core values. By clearly defining the roles of L1 and L2, Ethereum positions itself as the foundational layer for a diverse, multi-chain ecosystem. For investors, this creates a more predictable value distribution model while opening up opportunities across the specialized L2 landscape.
The success of this vision depends on execution—particularly in enhancing L1 scalability, ensuring L2 security, and maintaining interoperability. However, the strategic clarity provided by this document offers investors a framework for evaluating opportunities in an increasingly complex multi-layered Ethereum ecosystem.
In this new paradigm, Ethereum emerges not as a monolithic platform but as the bedrock upon which a diverse, specialized, and thriving multi-chain ecosystem will be built.