Research on the Liquidity Play People for Suckers Problem in the Layer 2 Era

With Ethereum shifting towards Layer 2-centric scaling solutions and the rise of various tools, a large number of public chains are developing rapidly. Many entities wish to build their own chains to represent different interests and seek higher valuations. However, the emergence of numerous public chains has led to the ecosystem's development struggling to keep pace, with many projects experiencing a collapse in value at the time of their initial token issuance.

With the help of various technology stacks, many well-known companies and institutions have launched their own Layer 2 or public chain solutions. Nowadays, the threshold for building and operating a chain has been greatly reduced, with monthly operating costs of about $10,000.

The future will undoubtedly be an era of coexistence of multiple chains. Although these chains may choose compatibility for interoperability, it is difficult to build applications and reach consensus on the same chain due to the differences in downstream applications of the entities behind them.

The current multi-chain ecosystem has brought a new challenge: liquidity and state dispersion. Due to the inevitability of multi-chain existence, interoperability has become a field that must be explored and resolved. There are currently various liquidity solutions, such as chain abstraction, intents, liquidation execution, native cross-chain, ZK sharding, etc., but their core essence is similar.

The commonly accepted architecture in the industry includes the following layers from top to bottom:

1. Application Layer: The interface layer that users interact with directly.

2. Permission Layer: Users connect their wallets and request transaction quotes.

3. Account Management and Abstraction Layer: Adapt to the account structure of different chains.

4. Layer 2: Receive and realize user trading intentions.

5. Settlement Layer: Includes components such as oracles, cross-chain bridges, pre-confirmation schemes, and data availability.

Currently, there are several main types of solutions to address liquidity play people for suckers in the market:

1. Centered on RaaS: For example, OP Stack assists in building Rollups on top of it through shared sequencers and cross-chain bridges, sharing liquidity and state.

2. Account-centric: For example, NEAR builds a full-chain account wallet that supports multi-chain signing and executing transactions.

3. Centered on off-chain intent networks: Users send intents to the Solver network for bidding and execution.

4. Centered on the on-chain liquidity network: Build a dedicated liquidity layer to share liquidity across the entire chain.

5. Application-Centric: Build high liquidity applications by integrating large market makers or third-party applications.

Several typical chain abstraction projects include:

• INFINIT: RaaS service that provides the components needed for direct construction of DeFi protocols.

• Khalani Network: has built three core components: intention-compatible layer, validity language, and universal settlement layer.

• Liquorice: A decentralized application that enables auction-based price discovery and unilateral liquidity pools.

• Xion: A cross-chain communication solution based on Cosmos IBC.

• =nil; Foundation: Propose zkSharding solution, building embedded cross-shard communication through sharded Layer 2 architecture.

• ERC-7683: A cross-chain liquidity standard being advanced by Ethereum, using an intent-based cross-chain approach.

• OP Stack: A complete multi Layer 2 solution designed to address the issues of information transmission and the decentralization of sequencers.

Overall, solving cross-chain liquidity is a complex field with various solutions. The coexistence of multiple chains in the future is an inevitable trend, and integrating liquidity across all chains will bring huge opportunities, potentially building important infrastructure for the Web3 era.