Your Business Probably Doesn’t Require Its Own Ethereum Layer 2 Network

According to EY’s Global Blockchain Leader Paul Brody, only companies that can aggregate significant transaction volume into the network and whose customers cannot create their own direct connection to Ethereum would gain from setting up their own Layer 2.

More businesses are considering establishing their own Ethereum Layer 2 solutions, yet many should think twice. Currently, there are over 150 existing solutions available. Numerous such networks are centralized and associated with single enterprises, including Robinhood’s recent announcements of its Layer 2 ambitions.

The appeal of creating an Ethereum Layer 2 network is notable, especially relative to developing a brand new Layer 1 blockchain, which must vie with established players like Ethereum and Solana in a saturated market.

Layer 2 networks harness the strengths of Ethereum, drawing from its ecosystem while facing competition in their market. With Ethereum celebrating its tenth birthday this July, it continues to lead in smart contract technology and serves as a primary base for digital and real-world assets, stablecoins, and DeFi apps, maintaining around 50% of the overall DeFi ecosystem.

The convenience of a Layer 2 network is clear: it allows organizations to maintain control within their ecosystem, yet remain intertwined with Ethereum. Such networks can dictate pricing, control access, and manage data visibility, akin to private blockchains.

However, this control comes with costs. Layer 2 networks must procure transaction processing space on the Ethereum mainnet, which can be lower than establishing an entirely new network. Reports from Token Terminal show that in June 2025, Coinbase’s Base Layer 2 network accrued $4.9 million in fees against just $50,000 for Layer 1 settlements.

Robinhood’s announcement of its own Layer 2 network solidifies the overarching thesis: these networks aren’t just good at scaling; they offer diverse business models attracting many enterprises. Participants within this ecosystem will range from fully decentralized to entirely centralized.

So, does your company require its own Layer 2? Most likely not. The intrinsic value of a blockchain ecosystem is in collaborative dynamics without any single entity controlling the network. For instance, manufacturing firms should seek to operate collaboratively with suppliers and clients.

Although some Layer 2 networks appear highly profitable, this is contingent on substantial transaction volumes. Many existing Layer 2 solutions struggle to stand out and have less than $1 million in Total Value Locked (TVL), averaging under one user operation per second, based on L2Beat’s statistics.

When might a firm need its own Layer 2? It could be suitable when organizations can consolidate notable transaction volumes within the network, and their customers lack the means to create individual Ethereum connections. This scenario primarily pertains to financial service establishments like Coinbase, Kraken, and Robinhood.

Assessing whether a business should launch an Ethereum Layer 2 network involves three inquiries: can the company gather significant client transactions compared to competitors? Is on-chain transaction management integral to its business model? Does its Layer 2 approach offer a distinctive value compared to existing options? A ‘yes’ to all might suggest this avenue is worth exploring.

For most firms, linking directly to Ethereum or existing Layer 2 networks may provide a superior value: it’s often more economical and private than using an aggregator that escalates costs and gains visibility into transaction flows.

Ultimately, expect some firms to pursue their Layer 2 despite not needing one, echoing previous trends of private chain launches. The temptation of controlling one’s future and extracting ecosystem benefits is hard to dismiss.

Centralized Layer 2 solutions may appear as an attractive compromise between private chains and the public decentralized networks that, while open, may seem daunting to organizations desiring greater control. History tends to repeat, and not all such ventures will prove successful. Here we go once more.