Undercurrents: The Battle for Maximizing dApp Revenue between L2 and L1

Author: @0xtaetaehoho

Compiled by: Lyric, ChainCatcher

In the crypto ecosystem, discussions about L1 (Layer 1) and L2 (Layer 2) often focus on transaction speed, fees, and security. However, from the perspective of dApps (decentralized applications), what is truly thought-provoking is how to choose between the two to maximize revenue and minimize costs.

This article will outline the latest viewpoints and explore the competition and game theory between L1 and L2 in dApp economics.

From Technology to Economics: The Fundamental Differences Between L1 and L2

In traditional understanding, L1 blockchains represent decentralized underlying networks, such as Ethereum and Solana, bearing all transaction and validation responsibilities. However, this also means that their validators must bear high operational costs and capital requirements, thereby limiting the distributable profits shared with dApps. In contrast, L2, as an extension built on top of L1, incurs operational costs primarily from a small number of sequencers, without the high capital costs. This structural advantage allows L2 to have a lower breakeven threshold when maximizing profits, enabling more value to flow into the dApp ecosystem.

Fee Distribution and MEV: A New Leverage for dApp Revenue

The key pillar driving dApp revenue maximization lies in the distribution of fees and MEV (Miner Extractable Value). Currently, by enabling MEV taxes or fee sharing, dApps can internalize part of the MEV opportunities in a pre-agreed manner. For example, some projects have achieved this by redirecting a portion of the base fee from EIP1559 to users interacting with dApps (such as the mechanisms of Canto CSR or EVMOS), which to some extent breaks the traditional transaction fee model. Additionally, L2's centralized block proposers—whether through reputation proof or "honest" proposers based on TEE—can execute fee sharing and prioritization more efficiently, achieving optimal revenue redistribution without significantly altering the underlying protocol.

The Balancing Act of Validator Costs: Structural Limitations of L1

The existence of L1 relies on the participation of a large number of validators, but this also brings significant cost issues. To ensure the continuous operation of the L1 network, the following inequality must be satisfied:

Total number of validators × Operating costs + Staking capital requirements × Capital costs < TEV (Inflation + Total network fees + MEV tips)

From the perspective of a single validator,

Operating costs + Capital demand × Capital costs > Inflation returns + Fees and MEV

If operating costs and capital costs are too high, even with subsidies from inflation and fee income, some validators may still struggle to be profitable. Taking Solana as an example, its high validator operating costs mean that, in the face of declining inflation, the profit margin shared with dApps will be severely compressed.

This structural contradiction forces L1 to maintain a high network acceptance rate to achieve profitability balance across the network, but this directly limits the income ceiling for dApps.

L2's Innate Advantages and Future Potential

Compared to L1, L2's network operating costs are merely the expenses of a few sequencers, without the burden of high staking capital requirements, making the overall profit needed for breakeven minimal. This characteristic allows L2 to return more revenue to dApps at a lower cost, helping developers maximize income while maintaining the same profit levels.

More importantly, L2 gains security by periodically borrowing some block space from L1, further compressing network fee expenditures. This cross-layer collaborative mechanism will become a highlight in the future competition of dApp economics.

At the same time, the centralized block proposer structure of L2 also gives it a unique advantage in exploring breakthroughs in throughput and optimizing fee sharing. Whether through builders like flashbots for fee sharing or using infrastructure like Jito to redistribute MEV income based on CU usage, L2 is continuously testing and validating new profit models, bringing more economic dividends to dApps.

The Future of dApp Economics: Competition Drives Innovation

As projects like Solana continue to enhance throughput and gradually introduce mechanisms such as ASS, MCP, and MEV taxes, the future competitive focus will shift from purely technical parameters to dApp economics. The contest between L2 enabled by non-OCAproof TFM and L1 enabled by CSR or MCP + MEV taxes will directly determine the revenue distribution, cost structure, and long-term competitiveness of dApps.

This competition not only drives infrastructure towards profit-driven models but also lays a solid foundation for regulatory transparency and institutional capital deployment. As more capital flows into infrastructure development, the industry will usher in a new wave of technological innovation—from applied cryptography to performance engineering, and to entirely new consensus mechanisms, the competition between chains will undoubtedly trigger an unprecedented transformation.