Decentralized second-tier exchanges Loopring and DeversiFi are joining together to form a committee dedicated to promoting the use of Tier 2 solutions called L2 Squared, or simply L².
The alliance was announced on Monday and wants to make it easier for users to transition to these high-performance exchanges. “Loopring and DeversiFi are currently the first Ethereum exchanges to use Tier 2 solutions using zkRollup and StarkEx Validium, respectively,” explained Will Harborne, Founder of DeversiFi. “However, the much-needed migration to Layer 2 is not an easy task, and the network effects of Layer 1 layout capabilities are very strong, which could slow this ongoing transition.”
Loopring and DeversiFi each require a separate deposit transaction to access their ecosystems. Although funds are never held in exchanges, this requirement still conflicts with usability and compositional capabilities with other protocols.
The alliance will have many areas of responsibility to facilitate the implementation of the second team. From a business point of view, it will implement educational initiatives to explain how the technology works and the advantages it offers over the traditional use of Ethereum, and will also facilitate greater wallet integration.
On the technical level, L2 Squared will develop interoperability standards between Level 1 and Level 2, as well as between different Level 2 systems. Currently, most of the second order solutions are isolated environments that cannot be connected without first going through Ethereum.
The alliance comes when the Ethereum roadmap officially includes a collective vision. Data distribution is expected to become available after a relatively short development period in 2021, and by combining it with bulk updates, the network can start processing thousands of transactions per second faster than previously expected.
Achieving friction-free planning and interaction is fundamental to achieving a collective vision. While many DeFi DApps have promised to use some type of solution when it becomes available, some see potential fragmentation as an important obstacle to adoption.