The central theses
- Several Ethereum Layer 2 projects could soon launch their own native tokens.
- Arbitrum, StarkNet, and zkSync have all indicated that launching their own token might be necessary to help them decentralize.
- StarkNet has already confirmed that it will be launching a token in the future, although no date has been announced.
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Several Ethereum Layer 2 networks have hinted that they could launch their own native tokens in the coming months, likely leading to airdrops for early adopters. Connect Crypto briefing as we look at who might be the first to pull the trigger.
decision
One of the most anticipated Layer 2 tokens is that of Arbitrum, an Ethereum Optimistic Rollup solution developed by Offchain Labs.
Arbitrum’s developers have commented on whether or not the project will need a token, but several clues suggest one may be coming in the not-too-distant future.
Currently, Arbitrum’s transaction sequencing and verification are performed solely by its creator, Offchain Labs. This measure was necessary in the early stages of the chain’s development to ensure stability and has allowed Offchain Labs to respond to the fixes of issues when they arose.
However, after Arbitrum has been up and running for over a year and has completed its recent Nitro upgrade, Offchain Labs could soon begin the process of opening up the chain to decentralized sequencing. Arbitrum’s creator has frequently stated that his long-term plan will decentralize transaction sequencing to bring Layer 2 more in line with Ethereum’s founding principles. However, ensuring that Arbitrum is both secure and decentralized is no easy task.
Many prominent people in the crypto community have suggested that Arbitrum could introduce a token to secure and incentivize decentralized sequencing. Layer 2 could reward sequencers with tokens if they help secure the chain, similar to how the Ethereum mainnet issues ETH rewards to validators. Offchain Labs also has an opportunity to introduce a fee market where certain services must be paid for in Arbitrum tokens, creating an on-chain sub-ecosystem. Offchain Labs could also use a token for on-chain governance; However, because Offchain Labs is a incorporated company, it can be difficult to pursue this path without violating US securities laws.
In recent months, Aribtrum has seen an influx of users looking to register activity on the chain in hopes of receiving a token airdrop. Arbitrum’s closest competitor, Optimism, launched its own token in May this year, with both early and frequent users getting a bunch of OP tokens for their patronage. The Arbitrum Odyssey campaign has further fueled speculation that an Arbitrum token may be on the horizon. However, with little official information, it remains unclear if (and when) Arbitrum will launch a token.
StarkNet
While speculation about an Arbitrum token is currently ongoing, StarkWare’s StarkNet has already confirmed its plans to launch a token.
In a series of blog posts published in July, StarkWare announced that the decentralization of its StarkNet Layer 2 network would involve the issuance of a token to be used as the network’s means of payment and deployment. StarkNet is a Layer 2 network that uses zero-knowledge rollups to scale Ethereum.
Similar to how Offchain Labs currently handles all transaction sequencing on Arbitrum, StarkNet’s sequencing is also centralized. However, StarkWare intends to hand off transaction verification and sequencing to its community to make the network more secure and decentralized. The StarkNet token is used in the network’s consensus mechanism both as a staking security deposited by sequencers and as a reward paid to those who help keep the network secure.
Additionally, while StarkNet transaction fees are currently paid in ETH, StarkWare plans to switch fees to StarkNet’s native token upon its launch. Once this is done, part of the fees paid by users will also be redirected to stakers, just like on the Ethereum mainnet. Attribution of fees to stakers should continue to incentivize decentralized sequencing long after the maximum amount of 10 billion StarkNet tokens has been distributed.
A final planned use for the StarkNet token is governance. Although StarkWare will retain ownership of StarkNet, those who own the network’s token will be able to decide its values and strategic goals through on-chain voting. The decisions that token holders will make are not yet clearly defined. However, StarkWare has confirmed that token holders will need to approve major updates such as changes to StarkNet’s operating system.
Anyone looking to qualify for a StarkNet token airdrop is probably too late. According to StarkWare, the token launch was designed to primarily compensate core contributors and developers. Half of the token supply was allocated to early investors, StarkWare employees and consultants, and StarkNet software development partners. Of the remaining 50%, 9% are intended as a community service.
Those who have proven development work on StarkNet will receive tokens along with previous StarkEx users who used the scaling project prior to June 1st, 2022. That means anyone who frequently uses protocols like dYdX, Immutable X, or Sorare could potentially qualify for an allocation.
While StarkWare has yet to confirm a launch date, the July announcement said the StarkNet token would launch in September 2022. Although the contracts could go live in the next few weeks, it is likely that the tokens will not be released until 1 later. This is because most tokens are locked and vested for at least a year from the StarkNet Token Genesis event. Anyone looking to invest in the StarkNet token will likely have to wait for the community commissions to be distributed at a later date before the market has enough liquidity to support trading.
zkSync
zkSync, another zero-knowledge rollup project working to scale Ethereum to Layer 2, may also have a token in the works.
Since the early days of its development, zkSync’s development team, Matter Labs, has been transparent about its intention to launch a token. According to the project’s developer documentation, zkSync will launch a native token that is required to validate transactions at layer 2. Although no detailed information has been released on how the token will be distributed and how it will work, zkSync will likely follow a similar path to StarkNet as both projects aim to introduce a token to support decentralization.
In terms of development, zkSync is ahead of StarkNet as it has already launched a fully composable Layer 2. Users can bridge funds into the zkSync 1.0 mainnet and participate in various activities such as; B. trading on the ZigZag exchange, gaming on Tevaera and donations to Gitcoin grants. However, version 1.0 lacks features like Validium, which can offer off-chain data availability, higher transaction throughput, and lower fees.
zkSync is currently developing a 2.0 version that will include Validium under the same zkSync API. zkSync 2.0 is currently in the testnet development phase, with a full release planned for October. If the 2.0 launch is successful, Matter Labs could shift its focus to decentralization, likely in the form of decentralized sequencing and a native token.
However, since Matter Labs is yet to release details on how it plans to decentralize zkSync, a token launch may be a long way off. Therefore, those interested in participating in a potential airdrop may still have time to get involved and register activity on the network. Using zkSync 1.0 is probably a good start; Those who donated with it before a Gitcoin grant deadline were included in Optimism’s first token airdrop. A test of zkSync 2.0 can also be worthwhile. Several DeFi and NFT apps have deployed contracts on the 2.0 testnet, so interacting with each of them could also help users qualify for additional protocol-specific airdrops.
So, which Ethereum project could be next?
If StarkNet can stick to its September estimate, it will almost certainly be the next Ethereum Layer 2 token launch. However, due to the long vesting schedule of the initially distributed tokens, it may take some time for StarkNet’s token community deployment to hit the market and provide sufficient liquidity for trading.
If this is the case, Arbitrum or zkSync token airdrops could eventually steal the spotlight from StarkNet with broader allocations to their communities. While neither project has made an official announcement, that doesn’t mean a token launch for either is necessarily that far away. Projects planning airdrop tokens usually avoid announcing launch dates in advance to prevent Sybil attacks from airdrop farmers. In the case of optimism The project announced its token about a month before launch.
At their current rates of development, Arbitrum or zkSync could surprise and launch their tokens ahead of a full StarkNet launch. However, a token launch towards the end of 2022 or early 2023 seems more plausible. Either way, one thing is certain: Arbitrum, StarkNet and zkSync have all committed to following the Ethereum ethos and plan to optimize their networks for decentralization – and they all need their own tokens to do this.
Disclosure: At the time of writing this article, the author owned ETH and several other cryptocurrencies.
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