Opinion by: Jay Jog, co-founder of Sei Labs 

When CryptoKitties crashed the Ethereum network in 2017, the industry learned a hard lesson about blockchain scalability. Today, with over $100 billion locked in decentralized finance (DeFi) and millions of non-fungible tokens (NFTs) being traded, that lesson is more relevant than ever. The Ethereum Virtual Machine (EVM) — the engine that powers this activity — is reaching its limits.

So far, the crypto community’s answer has been layer 2 solutions — separate chains that process transactions and report back to Ethereum. But what if the community’s been looking for answers in the wrong place?

Layer 2s are not the solution

Layer 2 blockchains have long been touted as the solution to the EVM’s performance challenges, given their ability to offload the computational work from Ethereum to a secondary chain. Layer-2 solutions have proven to be nothing more than a “quick fix” instead of a permanent solution, as many hoped for. As Gemini reported, a new layer 2 appeared every 19 days in 2024, indicating that the competitive landscape is creating more problems instead of solving them.

Layer 2 solutions come with their own challenges, primarily tied to centralization and interoperability. Many of today’s layer 2 blockchains run with centralized sequencers that could expose the network to transaction censorship, transaction reordering and more. Additionally, Vitalik Buterin stated in a recent blog post that layer 2s are struggling to maintain interoperability. This called attention to the disorganized state of layer 2s, further contributing to liquidity fragmentation and a complex user experience. 

Advanced rollup designs have tried to fix these pain points. Recently, there has been a new design called native rollups that is trying to tackle layer 2’s centralization issues. Native rollups take value away from projects, which will significantly deter adoption. Consequently, it is doubtful that native rollups are the answer to all of Ethereum’s urgent problems. 

With just as many challenges as the EVM itself, why rely on layer 2s instead of looking elsewhere? Could there be a better solution? According to L2BEAT, it costs around $95.53 million annually to run all the major L2s. Instead of spending more money on building and running more L2s and interoperability solutions, why not focus on refining the existing foundational layer? 

A more accurate alternative to TPS

To create the most performant layer 1s, the industry must first reevaluate the approach to track blockchain performance. Most blockchains focus on throughput, using transactions per second (TPS) to compare chain performance. While many argue that reaching the most significant transactions per second is the way to enable mainstream adoption for crypto, TPS unfortunately doesn’t allow for apples-to-apples comparisons since different types of transactions require different amounts of compute.