Offchain Labs, the developers of Ethereum layer-2 network Arbitrum, have announced a partnership with the Arbitrum Foundation to launch a new incubator-style program called Onchain Labs.
According to a March 17 post by Offchain Labs, the new incubator is aimed at rapidly adding to Arbitrum’s existing decentralized application (DApp) offerings with a particular focus on supporting “innovative and experimental” projects.
Offchain Labs said this support will primarily come in the form of product and go-to-market advice and won’t provide engineering or other operational resources.
It also added that while it’s possible — there’s no guarantee that its venture capital arm, Tandem, will purchase any of these project tokens in public markets.
Offchain Labs said the continued development of Arbitrum over the past few years has seen it grow to become one of the “most performant ecosystems in the space.” But now, with the launch of Onchain Labs, the focus will shift to building out the network’s application landscape.
“Through Onchain Labs, we’re dedicating resources to support developers looking to rapidly expand the application layer by ideating with them from the ground floor to bring the best user experiences to Arbitrum,” the company said.
“With Offchain Labs’ support, we’re confident we’ll see industry-leading applications that are uniquely possible on Arbitrum.”
However, it’s not just about building more applications.
The firm has also said it will only support projects that launch fairly. Offchain Labs claimed the industry’s recent trend toward extractive zero-sum launches “stands in stark contrast to the core ethos of crypto,” adding that “as an industry, we can — and must — do better.”
It will seek to counter this trend by only working with teams that commit to equitable launches, which it said was “essential for fostering community alignment. There’s no reason why all participants in an ecosystem can’t succeed together.”
The rise of layer 2s is creating problems for Ethereum
Arbitrum was one of the earliest layer 2s (L2s) on Ethereum, but there’s been an explosion in new L2 networks since Ethereum’s Dencun upgrade last year.
According to L2Beat, there are now over 70 layer 2s and many more on the way. This has created some issues for Ethereum, according to some industry professionals.
The first is the fracturing of the Ethereum ecosystem, as different DApps run on different layer 2s, which may or may not be interoperable.
“We currently have too many, the more L2s we build, the less interoperability we will have, creating other problems around infrastructure,” Vitali Dervoed, the co-founder and CEO of perpetual exchange Composability Labs, told Cointelegraph in August.
“Developers might have good intentions when building the next super-fast, low-gas-fee, easy-to-use blockchain, but in the long run, it’s counterproductive as it creates a more fragmented ecosystem,” he added.
Another issue is that lower-cost layer 2s like Base and Arbitrum are eating into Ethereum’s revenue and impacting the layer 1’s market cap.
It comes on the same day Standard Chartered downgraded its 2025 price target for Ethereum by a whopping 60%, from US$10,000 to just US$4,000, with the bank’s head of digital asset research, Geoff Kendrick, saying, “We expect ETH to continue its structural decline.”
Kendrick cited the impact of low-cost layer 2s like Base and Arbitrum as one of the key drivers of this decline.
“Layer 2 blockchains were meant to improve ETH scalability, but we estimate that Base (a key layer 2) has removed USD 50bn from ETH’s market cap.”