Nick Tomaino, founder of 1Confirmation, argues that Ethereum Layer 2 solutions positively influence the price of Ether, contradicting the view that they drain liquidity from the main chain. Tomaino points to Coinbase’s success with Ethereum as evidence of a positive ecosystem effect, noting L2s enhance Ether’s adoption as both a payment method and investment. Moreover, he highlights EIP 1559 as a mechanism that can help reduce ETH supply, challenging the narrative that L2s are detrimental to Ethereum.
In a recent discussion, Nick Tomaino, founder of the venture fund 1Confirmation, shared his insights on the relationship between Ethereum Layer 2 (L2) solutions and the price of Ether (ETH). He argues that successful L2s can positively impact Ether’s value, countering some skeptics who suggest these networks drain liquidity from Ethereum’s main chain, which some blame for its current subdued performance.
On May 13, Tomaino delved into the notion that Ethereum-based EVM (Ethereum Virtual Machine) L2 networks are beneficial for Ether. He took to X (previously known as Twitter) to share his perspective with his 67,000 followers, stating that the future for crypto applications lies in app chains that grant developers a level of self-sovereignty. Notably, he highlighted Coinbase’s partnership, where the exchange has generated substantial ETH revenue, underlining Ethereum’s early recognition of this trend.
Tomaino points out that Coinbase, a leading U.S. exchange, is now making millions in USD each month from its Ethereum-based OP Stack blockchain, named Base. Furthermore, the exchange reportedly holds hundreds of millions in ETH, suggesting a robust confidence in the cryptocurrency’s future.
According to him, L2s are solidifying Ethereum’s identity as a neutral, internet-native store of value. This shift facilitates the distribution of Ether not only as a payment method but also as an investment asset. This distribution is said to enhance the network effects surrounding the Ethereum ecosystem, which remains the backbone of the world’s largest programmable blockchain networks.
Tomaino also pointed out the implications of EIP 1559, which affects how transactions are handled on the Ethereum blockchain. This upgrade means that activity in L2s ultimately contributes to burning ETH tokens, thereby reducing supply. He believes this development debunks the narrative that L2 success comes at the expense of Ethereum and its native currency.
In conclusion, Tomaino’s posts have resonated with many. His followers largely supported his views, indicating that Ethereum’s L2 solutions are, in fact, driving the ecosystem’s flywheel rather than inhibiting it, a promising sign for Ether enthusiasts and investors alike.
