Bankless: The wave of L2 tokens is coming, what preparations do we need to make?
L2 tokens are inevitable.Original Author: William M. Peaster, Bankless
Original Compilation: Alex, TechFlow
L2 tokens are coming.
Ryan pointed out in last week's article that L2 tokens are inevitable. To fully decentralize and compete with alt-L1s, networks like zkSync, Optimism, Arbitrum, and StarkWare will need to launch native tokens.
Ryan predicts that these rollups will start distributing tokens from the end of 2022 to 2023.
Why? Because there are still many technical hurdles for L2s to overcome before deploying tokens to govern their networks.
According to Ryan's predictions, this gives us nearly a whole year to engage with various rollups and accumulate any qualifying criteria that each rollup team will use to distribute native tokens.
For William, this standard will primarily take the following forms:
1) Transactions
2) Bridge usage
3) Application usage
PS: You can combine the value of this guide with our upcoming best L2 yield guide!
Let's get started!
Many of Ethereum's most promising Layer 2 (L2) scaling solutions will launch native tokens in the coming years. Therefore, what we do on these L2s today will impact our token allocations tomorrow. Bankless will show you how to effectively adapt to these upcoming L2 tokens.
Goal: Understand how to prepare for L2 token launches
Skill Level: Intermediate
Time Required: 1 hour
Return on Investment: Potential future airdrops
L2 tokens are hot on the way!
Last week, builder and researcher Ryan wrote a guest article for Bankless titled "Layer 2 Tokens Are Coming."
This is an incredible article as it comprehensively explains why and how L2 projects are adopting native tokens for decentralization.
Notably, in this article, Wang also speculated on a rough timeline outlining when the "Big Four" rollup projects will launch their own tokens. To this end, he predicted:
"I believe Rollup tokens will arrive in the following order at the end of 2022 and sometime in 2023: zkSync (confirmed) -> StarkNet (no comment) -> Arbitrum -> (no comment) -> Optimism (public denial)."
I certainly am not the level of L2 expert that Wang is. However, I have spent a lot of time studying the L2 ecosystem, and from everything I see, his predictions here seem entirely reasonable and warranted.
In summary, I think a good way to fully leverage L222 and prepare for the L2 token season is to follow Wang's blueprint and engage as a user with the four major rollups, such as:
1) Trading on these L2s
2) Using their dapps
3) Using bridges
4) Building new L2 dapps
However, since most of us are not developers and application development is impossible for us, focusing on the first three points—trading and using applications and bridges—is very good and a direct approach.
As we prepare for the upcoming major L2 tokens, let's amplify some details to consider. Today, we will look at zkSync, Arbitrum, and Optimism, temporarily skipping StarkNet. The StarkNet ecosystem is still young, with most of its applications still on the testnet. However, we encourage you to modify all L2s, so check out our guide, How to Use StarkWare Layer 2s!
1) zkSync
What is zkSync
zkSync is a zkRollup developed by Matter Labs. This L2 efficiently batches many transactions into a single valid proof on the Ethereum mainnet using zero-knowledge cryptographic proofs. Remarkably, this model means that zkSync becomes cheaper as more people and projects use the network.
Bridges
LayerSwap (for transfers from CEX to zkSync)
How to Use zkSync
Create a zkSync wallet using Argent. Then, after funding your account, you can consider the built-in application integrations of the L2 wallet:
1) Swap ETH for DeFi tokens via ZigZag
2) Purchase ETH via Lido or Yearn
3) Purchase WBTC via Yearn-vaults-on-layer-2/">Yearn
4) Purchase DAI or USDC via Yearn or Gro Protocol
5) Lend DAI or USDC via Aave
Check out my previous Bankless guide How to Use zkSync for more ideas (such as Gitcoin donations and zkNFT minting!).
2) Arbitrum
Read Ben Giove's Essential Guide to Arbitrum
What is Arbitrum
Arbitrum One, commonly simplified to "Arbitrum," is an optimistic rollup created by Offchain Labs. This L2 is EVM-compatible, meaning DeFi and NFT projects can easily port their code to the scaling solution.
According to L2BEAT, this is part of why Arbitrum currently has the largest total value locked (TVL) among L2s.
Image from L2BEAT
Bridges
1) Official Arbitrum One Bridge
2) Quick bridges (for fast deposits/withdrawals):
How to Use Arbitrum
After funding your Arbitrum account using a bridge, you can explore popular applications on Arbitrum One:
1) Invest in Badger's DeFi vaults
2) Trade tokens or provide liquidity on Balancer
3) Try BarnBridge's SMART Alpha pools
4) LP for Curve's three cryptocurrency pools
5) Borrow tokens on Hundred Finance
6) Earn yields on LP tokens using Pickle Finance
7) Trade on Slingshot
8) Trade or LP on Uniswap
If you're also interested in exploring Arbitrum's early NFT ecosystem, check out my Metaversal article The Arbitrum NFT Scene and A Quick Guide to Treasure.
3) Optimism
What is Optimism
Optimism is an optimistic rollup developed by Optimism PBC. Currently the fourth largest L2 by TVL, this rollup is the only scaling solution that offers full EVM equivalence. This means DeFi and NFT teams can migrate their applications to L2 with one click and still benefit from all the standard Ethereum L1 tools that most projects rely on today.
Bridges
1) Official Optimism Ethereum Bridge
2) Quick bridges:
How to Use Optimism
After funding your Optimism account, you can explore the application ecosystem, such as:
1) Trade options or LP on Lyra
2) Trade or LP on Uniswap
3) Create and trade options on Thales
4) LP and farm yields on ZipSwap
5) Create content locks using Unlock Protocol
6) Participate in trades on Aelin
If you're interested in NFT trading on Optimism, check out my recent Metaversal article Quixotic Marketplace Guide.
Final Considerations
In the coming months, we may see L2 tokens distributed based on random numbers or fees paid, so participating early and often is the ideal way to prepare for these launches.
There's no need to spend a fortune preparing; simply migrating some of your DeFi activities and exploring L2 NFTs is enough to get the job done.
Narrowing the scope and viewing these potential L2 token allocations as profit opportunities will only cause you to miss the forest for the trees.
These scaling solutions are the future of Ethereum, and having a voice in their governance will be a very powerful and meaningful thing!
Action Steps
1) Try Dapps on zkSync, Arbitrum, and Optimism
2) Learn about Our Views on L2 Tokens
3) Check out our previous content on Arbitrum, zkSync, Optimism, and StarkWare
4) Review our previous strategies on How to Take a DeFi Governance Bribe
