Layer 2s and Infrastructure

4.1 Busy networks, struggling tokens

Mint noticed something puzzling. Several Layer 2 networks were processing more transactions than ever, with millions of users and growing fees. Yet their tokens had fallen substantially from their launch prices.

"The networks are thriving," said Mint. "Why aren't the tokens?"

"You already know the answer from Module 5," said Hash. "Ask who captures the value."

4.2 The Layer 2 sector

Layer 2 networks (Module 3, Chapter 8) scale Ethereum by processing transactions off the main chain and posting data back to it. Since around 2021, they've grown into a major sector, with dozens of networks competing for users, developers, and liquidity.

Related infrastructure projects include:

Infrastructure type	What it does
Data availability networks	Store transaction data for rollups more cheaply (Module 3, Chapter 9)
Shared sequencers	Order transactions for multiple rollups
Rollup frameworks	Toolkits that make launching a rollup easy
Interoperability and bridges	Connect networks and move assets between them (Module 3, Chapter 10)
Oracles	Bring data on-chain (Module 3, Chapter 12)
Indexing and data	Make blockchain data accessible to applications

4.3 The value accrual puzzle

As Module 5, Chapter 9 explained, many Layer 2 tokens don't receive the network's profits.

Layer 2 economics (illustrative)	Value
Fees from users	$40 million a year
Costs paid to Ethereum	$4 million
Margin	$36 million
Margin paid to token holders	Often $0
Gas paid in	Usually ETH, not the Layer 2 token

Without a link between usage and the token, the token's value relies on governance rights and expectations of future changes, such as using the token for sequencer staking or directing revenue to holders.

Meanwhile, Layer 2 tokens often launched with low float and large unlocks (Module 5, Chapter 5), adding supply pressure.

"So the sector can win while the tokens lose," said Mint.

"For a period, yes," said Hash. "The narrative is 'Layer 2s will scale Ethereum.' That's largely coming true. But the investment question is whether the tokens benefit."

Chapter 4 · The L2 value-accrual gap

User fees of about $40M on a Layer 2 mostly pay Ethereum for data and leave an operating margin, with gas denominated in ETH rather than the L2 token. After costs and fee competition among many rollups, the amount that reaches the token holder is often near zero.

4.4 Competition and commoditisation

Rollup frameworks have made launching a new Layer 2 relatively easy. That has led to many networks competing for the same users and applications. As Module 5, Chapter 13 explained, easy entry and similar products push toward commoditisation: competition mainly on price, with thinner margins.

Differentiation comes from distribution (for example, a Layer 2 run by a large company with many users), unique applications, deep liquidity, or specialised features.

4.5 Appchains and the "every app is a chain" thesis

Some applications launch their own chains, called appchains (Module 3, Chapter 9), to control fees, performance, and economics. The narrative holds that successful applications will capture more value by owning their infrastructure.

Benefits	Drawbacks
Control over fees and user experience	Need to attract users and liquidity to a new chain
Captures sequencer and MEV revenue	Bridging friction for users
Customisation	Smaller security budget, more operational responsibility

4.6 Infrastructure tokens

Infrastructure projects like oracles and data availability networks have their own tokens and narratives. The core questions are the same as for any token:

1. Is the service actually used, and by whom?
2. Do users need the token to pay for the service?
3. Do service fees reach token holders or stakers?
4. Is the service a commodity, or does it have a moat?

Infrastructure can be valuable but slow to monetise, because demand depends on applications built on top.

4.7 Sector signals

Signal	What it suggests
Total Layer 2 activity growing	Sector adoption progressing
Activity concentrated in a few Layer 2s	Winner-take-most dynamics
Fees per transaction falling sharply	Commoditisation, or cheaper data costs
Token value accrual changes announced	Possible narrative shift for the sector
Large unlock schedules across the sector	Supply pressure

4.8 Try it yourself

Using a Layer 2 analytics dashboard, rank the five largest Layer 2s by activity and by value secured. For each, find: whether it's a rollup, who runs the sequencer, what its token is used for, and how much supply is still to unlock. Then compare each token's performance with ETH over the past year.

Key takeaways from this chapter

1. Layer 2s and infrastructure, including data availability, sequencing, bridges, and oracles, form a major sector.
2. Many Layer 2 tokens don't capture network profits, creating a gap between network success and token performance.
3. Low float and large unlocks have added supply pressure to many Layer 2 tokens.
4. Easy launches push Layer 2s toward commoditisation; distribution and liquidity differentiate.
5. Appchains let applications capture more value but face liquidity and security challenges.
6. Infrastructure tokens should be evaluated on usage, token necessity, fee capture, and moats.