Major cryptocurrency exchange Kraken plans to build its own Layer 2 network, joining Coinbase in the trend of exchanges becoming active contributors in blockchain technology development.
Major cryptocurrency exchange, Kraken, is reportedly planning to establish its own Layer 2 network, following the successful implementation of a similar network by its rival, Coinbase. The move is seen as part of a broader trend within the crypto industry, with companies seeking to expand their roles from mere platforms for trading to becoming active contributors in the development of blockchain technology.
Kraken is said to be in discussions with several blockchain technology firms, including Polygon, Matter Labs, and Nil Foundation, for a potential partnership in building its Layer 2 network. The company has also advertised a job vacancy for a "Senior Cryptography Engineer" who would work on layer-2 solutions, further confirming its intentions.
A Layer 2 network is a secondary framework or protocol that is built on top of an existing blockchain. The main purpose of such networks is to increase the transaction speed and scalability of the blockchain, while reducing costs. This is achieved by taking transactions off the main blockchain and processing them separately, hence the term 'Layer 2'.
Coinbase, another leading cryptocurrency exchange, launched its own Layer 2 solution, Base, earlier this year. The move has proven successful for Coinbase, allowing it to diversify its revenue streams beyond just transaction fees. Kraken's decision to follow suit suggests that it sees similar potential benefits.
This trend of crypto exchanges developing their own Layer 2 networks could have significant implications for the industry. Not only could it lead to improved transaction speeds and lower costs for users, but it also represents a shift in the role of exchanges. By becoming blockchain builders, exchanges like Kraken and Coinbase are positioning themselves as key players in the ongoing development and evolution of blockchain technology.