The so-called "building L2 ecosystems" has already been disproven.

Author: Godot; Source: @GodotSancho

Lately, I’ve seen a lot of discussion about Monad $MON and the moat of public blockchains. As an L2 contributor, I truly feel that the so-called “building an ecosystem” has already been debunked.

If you’re starting from scratch to build a public chain or L2 with the purest intentions to create great projects, the first thing you need to consider is where your users and on-chain funds will come from.

When you’re seeking partnerships everywhere, you’ll realize no one pays attention to you. Even if you offer to pay KOLs for promotion, you’ll still get rejected.

At this point, you realize that the most basic need for everyone is to be sure you won’t run away—not to care about your chain’s performance or technology. You need strong VC funding to back your brand.

But what do VCs look for when investing? You need to have a background from a prestigious university or major tech company, and ideally a cryptography background—or at least a partner who does.

Suppose you have all of the above and find a co-founder with a cryptography background and successfully raise funds. Then, a small number of people will try to farm on your chain following the fundraising news, and KOLs will approach you for collaboration opportunities.

Then you’ll face a problem: how do users transfer funds to your chain?

If it’s a public chain and you haven’t issued a token, the only way is through testnet faucets.

If it’s an L2, you have to partner with cross-chain bridges. Most bridges operate pool-to-pool, so the types of funds that can reach your chain are very limited—mainly USDT, USDC, and ETH and its LST assets.

Of course, the total amount of assets will not be huge, because people are still worried you might rug.

And the most critical issue: if there’s no native USDT/USDC on-chain, then those tokens on your chain are actually derivatives locked in the bridge. If something goes wrong with the bridge, you won’t be able to redeem assets for users.

Want to talk to Tether and Circle for collaboration? The basic fee starts at several million dollars—forget about it.

So, liquidity on your chain is limited to USDT-USDC and ETH-wstETH trading pairs, which is meaningless.

The assets coming to your chain via bridges are obviously insufficient. The center of liquidity is exchanges, and if an exchange supports withdrawals to your chain, that would be a huge help.

But you’ll find that most exchanges charge listing fees. The biggest one doesn’t, but you have to be valuable to them. Congratulations, you now have a KPI.

What about TVL? You can only approach institutions, BD whales, and big players one by one, promising returns. When you issue your token, you use it to supplement the APY for those contributing TVL.

What about on-chain activity? Established major DeFi projects won’t bother with you unless you can guarantee huge liquidity—meaning at least tens or hundreds of millions of dollars in TVL for their projects to consider deploying on your chain. Otherwise, there’s not enough depth, no users, and it’s pointless for them to deploy.

GameFi, NFT? Basically dead.

Projects that approach you are mostly after grants. They’ll copy an existing project, deploy it on your chain, wait for your token launch, request a grant, cash out the tokens, then deploy on multiple chains looking for the next public chain or L2.

Even if they genuinely want to deploy on your chain, they won’t limit themselves to just your chain. They care about market cap too, and need to expand their user base and market size—multi-chain deployment is the best strategy.

MEMEs seem like a good way to many people—they think pumping a few MEMEs will make the chain work. But in reality, you can’t issue MEMEs yourself, considering regulations in many countries are strict.

Also, you can’t just hire a market-making team temporarily—that’s a cost too. Collaborating with third-party MEME issuance teams? At first, a few tokens may be stable, as long as whales don’t take profit or cash out.

When new users slow down and real buying power is lacking, whales cash out, and MEMEs get dumped at lower and lower prices, with more and more red candles.

High-frequency traders make it worse—they’ll drive up gas fees, snipe market maker orders before they can be canceled. So market makers have to widen the bid-ask spread, causing greater slippage for users, and price volatility gets more severe.

Gradually, users hold positions for shorter and shorter periods, taking quick profits and leaving. Market makers can only maintain prices for shorter periods as well.

The endless game is about who can exit fastest. Eventually, no one needs to exit anymore.

If you’re lucky enough to finally hit your KPIs and get listed, there’s still the problem: do you protect the VCs’ interests? What about the whales and big players providing TVL? The grants for ecosystem projects? The market makers’ liquidity, exchange listing airdrops, staking rewards, airdrops for users, and your team? Whose interests do you protect, and whose do you sacrifice?

In the end, even if you succeed in listing, exchanges will only open deposits and withdrawals for your native token, and maybe ETH at most.

Tether and Circle still charge millions to tens of millions of dollars, so there’s no native U on-chain. Exchanges can’t open U deposits or withdrawals on your chain, DeFi whales won’t trust the security of bridges and won’t bridge large funds over.

Users who want to participate in your chain’s activities need to withdraw your native token, then swap it for ETH or U on-chain—the friction itself is a barrier.

Oh, and without native U, don’t expect RWA projects to deploy. Even your oracle can’t use Chainlink, since their fees are also extremely high.

In the end, you’ll realize that issuing a general-purpose chain to build an ecosystem is a false proposition.

It’s actually a massive “Emperor’s New Clothes” situation—the buying power isn’t based on your fundamentals, but on conspiracy theories, or the perception that some big player is backing or manipulating you.

You’ll find that funds on your chain ultimately return to ETH and SOL, maybe also Base. The Matthew effect for these chains is already very obvious.

Asset deposit and withdrawal support from exchanges, existing on-chain asset liquidity, DEX capital and slippage, DeFi scale and synergy, types and composability of DeFi protocols, various trading types like spot, futures, and options, whether positions can be hedged, whether bond products can be constructed, the liquidation security of lending protocols, even user trading habits, entrenched user perceptions and path dependency—all of these are the moats of successful public chains.

So, back to the question: why do users have to use your chain? Why do ecosystem protocols have to deploy on your chain? The key isn’t technology itself—it’s uniqueness.

This uniqueness must help with trading and yield, these two core scenarios. And it has to be at the consensus layer—like Hyperliquid’s cancel-priority consensus ordering helps market makers provide liquidity, or Solana’s ongoing development of ACE (Application Control Execution).

Actually, I’ve said all I wanted to say by now.

Finally, I want to point out that projects incubated by Manta aren’t forced to deploy on the Manta chain—they’re free to choose whichever chain suits them, like superfortune on BNB Chain, Junk.Fun on Solana, etc. But a portion of their revenue needs to be used to buy back MANTA.

That’s all.