October Layer 2 Landscape Recap

Although the broader crypto markets rallied in price in October, the on-chain activity on layer 2s (L2s) continued to fall. This suggests that the demand for crypto assets came mostly from centralized exchanges instead of decentralized avenues. The rise in TVLs for most L2s was mainly caused by the price rally, which pulled up the prices of L2 governance tokens as well, some of which constitute a significant percentage of the L2’s TVL.

The most notable on-chain development in October would be the launch of Scroll mainnet. Scroll is a zero-knowledge rollup (ZKR) that launched its mainnet on October 17, 2023. Its main feature is being a type Type 1 zkEVM ZKR, which gives it EVM compatibility while capitalizing on the advantages that validity proofs bring. However, considering how fragmented the L2 space has become, technological advancements alone cannot capture market share. Even though Scroll has EVM compatibility, there are numerous other EVM-compatible L2s already present, which might pose a challenge for Scroll to onboard users.