A well-established DeFi protocol founded in 2017 that actively chose to go all-in on rollups in 2021 is now looking to "escape" layer 2 and return to the embrace of the mainnet. The implications behind this are quite significant:
1) Synthetix's "great retreat" directly douses the entire layer 2 narrative with cold water. Back then, everyone rushed to various rollups to build due to "low gas fees," but what happened? Users simply didn't buy it, trading volume didn't increase, TVL couldn't rise, and liquidity was diluted and fragmented. The generalization stacking of various layer 2s has not achieved the expected results for layer 2 scaling strategies, but instead has become a burden for the mainnet?
2) Synthetix's choice to return to the mainnet at this time is focused on a blank space that the market has overlooked: now, various derivatives DEXs are blooming on rollup layer 2s, but the Ethereum mainnet, as the platform with the strongest security consensus, lacks a long-standing perps platform that continuously adapts to mainnet performance and follows the development of the mainnet. The logic is simple: if the mainnet is focusing on layer 1 performance optimization, how much expectation can old DeFi have for a massive explosion of applications on layer 2?
3) This could very well be a landmark event signaling a shift in the development thinking of the DeFi industry. In the past, pursuing multi-chain environment coverage led to liquidity fragmentation, user experience disconnection, and soaring operational costs. Now, there is a proactive contraction of the front lines, focusing on the core market to create exceptional products. It's not hard to understand: rather than performing mediocrely across more than a dozen chains, wouldn't it be better to compete for the top spot on the most important chain?
L2s are dead. The experiment is over. Synthetix is going all-in on L1.
As we shift focus back to Ethereum, Synthetix will sunset trading on Base and close LP vaults.
If you are currently trading or LPing, here are the details you need.
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