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L2 on TON: More Than Just Scaling
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Dec 204 min read
L2 on TON: More Than Just Scaling
Tonstakers
Table of contents
  1. What is L2?
  2. Why Use L2?
  3. Why Does TON Need L2?
  4. Addressing Liquidity Issues with TON L2
  5. Who Will Use L2 on TON?
  6. When to Expect L2 on TON?
  7. Conclusion

Tonstakers expresses gratitude to the TAC team for sharing their expertise and assisting in preparing this article.

This year, several teams announced their work on Layer 2 (L2) solutions for the TON blockchain. While L2 solutions typically address scalability and transaction cost issues, TON already achieves scalability through sharding. So why does TON need L2?

This article explores how L2 solutions can bring more than low fees to TON. They introduce new DeFi opportunities, additional liquidity, and attract more users, offering transformative potential for the ecosystem.

What is L2?

In 2017, Vitalik Buterin introduced the blockchain trilemma: no blockchain can simultaneously achieve high decentralization, security, and scalability without compromising one. To mitigate this, L2 solutions were developed.

L2 refers to a secondary blockchain that operates atop an L1 (Layer 1) blockchain. Unlike L1s, which secure themselves via validators and consensus algorithms, L2s rely on the underlying L1’s security.

“L2 (rollups) achieves this by regularly sending state updates to L1. These updates aren’t stored on-chain but require simplified validation from L1 validators to enable continued L2 operations and facilitate withdrawals to L1.” — TAC Developer

l2-scheme-1.webp

By offloading security concerns to L1, L2 networks focus on performance, achieving high transaction throughput (several blocks per second) and minimal fees (less than $0.01 per transaction).

Why Use L2?

L2 primarily scales L1 for more efficient DeFi interactions. For example, a swap between ETH and USDT on Ethereum (L1) costs over $5 and takes 15 seconds, whereas the same transaction on Arbitrum (L2) costs $0.1 and completes in 0.25 seconds.

L2 solutions rely on bridges to interact with L1, enabling asset transfers between the two layers. Ethereum users, for instance, move assets to L2 to access DeFi protocols and withdraw them back to L1 when needed.

Moreover, L2 scalability fosters innovation, allowing the creation of new products like decentralized leveraged futures, Web3 games, or on-chain social networks. These applications would be infeasible on slower, more expensive L1s.

As a result, L2 has become integral to DeFi. While Ethereum L2s hold less TVL ($10 billion) compared to Ethereum itself ($70 billion), their trading volumes are comparable at $2 billion daily. L2 networks also boast twice the number of active wallets (1 million vs. 400,000).

Why Does TON Need L2?

ON’s sharding ensures scalability, with transaction costs comparable to Ethereum’s L2s. However, TON L2 solutions can provide benefits beyond scalability by adopting alternative architectures.

For instance, an EVM-based L2 on TON could use Ethereum’s Virtual Machine instead of TON’s, enabling the deployment of Ethereum-based DeFi protocols with minimal code modifications. This approach simplifies development, as Ethereum’s ecosystem has matured over a decade, with far more Solidity developers than FunC developers on TON.

Addressing Liquidity Issues with TON L2

Liquidity remains a significant challenge in DeFi. L2 solutions typically source liquidity from their L1 via bridges. Advanced bridge technologies, like those from LayerZero, further streamline liquidity movement.

LayerZero’s Omnichain Fungible Tokens and Stargate bridge facilitate seamless cross-chain transfers, handling $1.5 billion in monthly token transfers across EVM networks. An EVM-based L2 on TON could integrate such bridges, attracting liquidity from TON and other networks with a combined TVL exceeding $100 billion.

Who Will Use L2 on TON?

On Ethereum, liquid staking, lending protocols, and DEXs dominate. However, Ethereum L2s prioritize applications like decentralized futures platforms (e.g., GMX, Synthetix) that thrive in low-cost, high-speed environments.

An EVM-based L2 on TON could host popular EVM applications while offering unique features like Toncoin and NOT, diversifying opportunities for DeFi participants.

When to Expect L2 on TON?

In 2024, two EVM-based solutions for TON were announced:

  • DuckChain: A TON-friendly EVM L2 using Arbitrum technology but relying on Ethereum as L1.

TAC addresses compatibility issues between TON and EVM wallets using proxy contracts. This solution allows TON users to interact with EVM applications via their TON wallets without the need for separate wallets or manual bridging.

ton-l2-explained.webp

“This solution eliminates the need for bridging assets or separate EVM wallets, allowing TON users to access EVM apps seamlessly with familiar tools.” — TAC Developers

Conclusion

For Ethereum, L2 solutions address slow transactions and high fees. For TON, they offer compatibility with the EVM ecosystem, unlocking liquidity and enabling the deployment of battle-tested DeFi applications.

With solutions like TAC, TON can attract liquidity providers to its ecosystem while minimizing risks. An EVM-based L2 on TON has the potential to unify TON and Ethereum’s DeFi ecosystems, creating a hub for innovation and collaboration.