Issue 16: Superchain, layer 3, and the push to scale

This issue of the newsletter is about the recent explosion in blockchain scaling and what that will enable as more activity moves onchain.

Issue 16: Superchain, layer 3, and the push to scale
Base, a layer 2 built on the OP superchain, is booming and enabling other apps to scale. SOURCE

Here are the high-level takeaways:

Thanks to recent upgrades to Ethereum and the rollout of rollups, the modular blockchain idea is taking off as a scaling tactic. The result? The rise of the superchain.

As layer 2 protocols continue to flourish, layer 3 projects are starting to gain a footing.

Let me know what you think. The best place to reach me is @danielmcglynn on Twitter and Warpcast.

Market news

A look at the current fear and greed index for the entire crypto market. SOURCE

One interesting development this week, against a background of big market drop (BTC broke below the resistance at $60k and ETH went sub $3k) and recovery over the past seven days, was the consolidation of major onchain publishing platforms.

Paragraph announced it is taking control of Mirror, which essentially merges the two big onchain long-form writing platforms. Also as part of the announcement was news about the launch of a new product called Kiosk.

From the looks of it, Kiosk will combine a bunch of onchain functions into one place, so that people can easily create, mint, collect, etc.

But back to the Paragraph and Mirror merger. We covered onchain publishing in a previous post and talked about these two projects specifically.

On one hand, maybe the merger helps accelerate the adoption of onchain publishing.

After all, mergers and acquisitions happen all the time in other growth industries. 

But it’s also good to have competition, especially when there are two market leaders pushing each other to innovate and adopt new features, etc. If nothing else, the onchain media and publish space will continue to be an interesting area to watch.

How blockchain is scaling vertically and horizontally at the same time

In hindsight, we can define previous market cycles by the dominant activity at the time. Like the ICO boom, DeFi summer, or the NFT craze.

I’m starting to think that this market cycle will be defined by all of the work with regards to scaling blockchain.

Scaling is happening on multiple fronts and across multiple chains. Just last week we talked about new Bitcoin token standards (such as Runes and Ordinals) and the development of Bitcoin layer 2s.

In the not-so-distant past we also talked about Ethereum’s modularity and the introduction of rollups and blobs, and how those technologies are making it easier to boost transaction speed while driving down cost — both key ingredients to make it easier to do more stuff onchain.

One interesting facet of the current scaling situation is that we are seeing horizontal scaling and vertical scaling at the same time.

The idea of a superchain, or a tech stack of developer tools and standards that make it easier for onchain projects to interoperate, is a great example of horizontal scaling. 

One of the posts this week featured a look at Optimism’s OP stack, which is enabling a bunch of Ethereum-based layer 2 protocols to build and interact without having to start from scratch each time.

Supersizing with a superchain
The idea behind the Optimism-based superchain is to create a scaling system for Ethereum projects.

Read more about scaling with the superchain model

The rapid development and success of layer 2s, like Optimism and Base, are creating the conditions for vertical scaling.

New blockchain projects are leveraging transaction capabilities to create all kinds of new onchain functionality.

From Base-based social tipping to a Bitcoin Lightning-based universal money address, layer 3 functionality is making the onchain experience more customizable and more specific to user needs.

What is layer 3 blockchain?
Layer 3 blockchain sounds is starting to sound equal parts interesting and complicated. Where does the layered scaling approach end?

Read more about scaling with the layered approach

As the explosion in scaling continues, it does raise interesting questions about the overall security and complexity of adding more layers to make onchain transactions possible.

After all, the goal of blockchain is to remove intermediaries and situations that require giving up control and security. So hopefully, that ethos continues as more and more layer 3s (and beyond) enter the space and compete for market share.

Only time will tell if we are in a period of massive onchain scaling, but when looking around at where all of the attention and interest is headed, it’s hard to image growth and scaling not becoming a major theme of this market cycle.

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