Builder warning: L2S leaks value, L1 app is a smarter bet

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Layer-2 chains were supposed to be the next evolution of blockchain scalability, and in a sense it was distributed. They made transactions faster and cheaper, helped projects shrink quickly, giving them room to breathe Ethereum (ETH) amid the surge in network activity. But as the dust settled, one of the uncomfortable truths became difficult to ignore. L2 does not retain the value to generate. Instead, they leak it into the parent chain, go back to the liquidity hub, then go back to the governance structure that was never theirs at first.

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This may not have been an issue in 2021, when the project competed to achieve speed and scale above all else. However, we are currently in a different cycle, and the number of projects targeting users is increasing exponentially. The project needs to be considered in the long term now. They optimize for sustainability, sovereignty and integrity. And more and more, they are turning to app-specific “Appchain” layer 1. It’s not as novelty, it’s as a need.

L2S: Fast, cheap, economically hollow

L2S is a downstream environment. They inherit security, resolve transactions, rely on Ethereum (or another L1) to finalize everything that matters. That dependency has economic consequences.

Every time a transaction is processed in L2, it eventually rolls up and settles in L1. result? Fees will be returned to Ethereum. Data availability fees will be returned to Ethereum. MEV value – Upstream. It is a one-way transfer of value that secures it from the L2 economy back to L1. If you are building a project with L2, you are not exacerbating the value in your own ecosystem. You are granting someone else’s grant.

These fees may seem trivial, but at the end of the day, they are only a small portion of the revenues of the network, but they quickly increase and take away infinite liquidity. For projects looking to scale, these persistent overheads can seriously limit growth and long-term sustainability.

These fees may seem minor, but a small portion of the overall revenue quickly accumulates liquidity that is quietly draining from the ecosystem. Over time, data availability and layers reissuance costs become significant. For projects approaching scale, these persistent overheads can seriously limit growth and long-term sustainability.

And that doesn’t stop at the price. Liquidity and governance are also rooted in the parent chain. Most Defi protocols still rely on liquidity pools and bridges based on Ethereum mainnets. Token holders often stake or vote using systems built upstream. Even if the L2 has its own tokens, they are often structurally tied to the economic and political dynamics of Ethereum.

Different ways: L2 gives you speed, but they take away your independence and slowly drain the token economy of resources.

AppChain L1S: Keep the created values

In contrast, AppChains are built to hold the values they generate. When you launch your own sovereign chain, you are not settling elsewhere. There is no charge leakage or reliance on a different network’s set of verification devices. The economic activities you generate – transaction fees, staking fees, MEV, governance power – are all local.

This creates a radically different growth model. Instead of the value that flows from your ecosystem, it gets worse internally. Tokens capture more utilities. Your community is directly betting on the success of your chain. Your infrastructure will become an engine for growth rather than a cost center that supplies the economy of other chains.

It also gets full stack control and is no longer bound by parent chain restrictions. Want to set up custom validator incentives? keep it up. Why not try gas-free transactions or dynamic toconamis? Do that. L1 allows you to build an infrastructure that suits your application’s needs.

But what about fragmentation?

For years, the biggest knock on Appchains has been creating isolated ecosystems. The criticism held weight, but it wasn’t.

There are reliable ways to move data and assets throughout the chain thanks to interoperability solutions such as Layerzero, Avalanche Warp Messaging, and IBC. AppChains can connect to the wider ecosystem while maintaining sovereignty. They may be connected and independent. You won’t be forced to choose between integration and control.

The fragmentation debate is outdated. In fact, AppChains are becoming a natural extension of the multichine world, and the tools around them are rapidly improving.

The market is catching up

More and more projects are choosing to go to the Appchain route, and this trend continues to increase steam. Builders want autonomy, economic sustainability, and want users the freedom to design infrastructure, rather than Ethereum bottlenecks.

That’s not to say that L2 is gone. For many early stage projects, it’s a decent starting point. But they are not built for scale. They are not designed to retain value. And they are definitely not built for projects that want their infrastructure and sovereignty over their economy.

If you are trying to build something permanent, you should not settle in Layer 2 if it is not only fast and inexpensive, but also aligned, sovereign and sustainable. You should think like an ecosystem manager. You must own the stack. You need to commit to building a chain that meets your own custom needs without siphoning up resources.

Spin up the L2 may seem like the simplest market strategy, but you can get to the market faster because you are responsible, but investing in the L1 infrastructure is not a problem. Important Steps to long-term success. Eventually, all projects compete to build their own app chine.

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