Following an impressive growth period at the end of 2023, layer 2s (L2s) have become a hot topic of discussion. To help give us an insight into the L2 space, Veer (@0xVEER) and LBrian (@DAO_LBrian) explore the latest developments and discuss the pressing challenges associated with L2s.

Additionally, Ivan (@ivangbi_), known for his influential work at Gearbox Protocol and Lobster DAO, joins the panel. Ivan offers insights into the L2 space and sheds light on the integral role these solutions, such as Mantle Network, will assume within Gearbox Protocol.

What is Gearbox, and how did it start?

I: Gearbox is an on-chain, generalized leverage protocol built on Ethereum. The protocol uses Credit account abstraction to bring together lending and prime brokerage in the same protocol. Lenders deposit assets to earn passive yield, while the composable leverage side users borrow these assets to create spot leverage positions, which can be used across DeFi. The idea is to be that composable layer — a generalized layer that gives you more capital. Then, the execution of orders, farms, trades, and positions happens on those other protocols. So it's extremely ecosystem-nourishing in a way that all of that happens in other pools, other AMMs, other protocols. And, as a result, those other protocols also get the volume and the fees. So, it's an ecosystem play to an extent.

Gearbox started at the ETH global hackathon at the end of January 2021. It was founded by Mikhail, who is the core inventor. Then, I joined shortly after.

How does Gearbox DAO operate and make decisions?

I: Some decisions are becoming full on-chain, and some aren't. For example, you can't put decisions that concern protocol spending on-chain as these topics are subjective and require in-depth discussion. As for interest rates or collateral factors, those are becoming fully on-chain as they don't need the semantics to be discussed. You can still discuss all those things, and you should, but they're becoming more on-chain.

What are the key elements driving increased voter engagement in the governance layer of Mantle Network?

L: In the BitDAO days, there was modest engagement with fewer than 500 voters in early 2023. However, by November, voter numbers surged to over 12,000. This growth is mainly due to the excitement generated by the community-building efforts and the launch of new, innovative products within Mantle Network. Additionally, the expanded utility of $MNT, serving as a native gas token, further fueled interest. The overall enthusiasm for the network's focus on developing new products was crucial in attracting a larger voter base in the governance activities.

Why is Gearbox considering an expansion to L2? What are the key factors driving this interest?

I: It's much more beneficial to open smaller positions on L2. On the main chain, you must have a very high minimum borrower limit to ensure the liquidation fees can be paid. However, L2s help lower these collateral limits so that regular users can participate.

Another reason is that L2 solutions like Mantle Network present fresh and innovative opportunities, including new farms and assets, which generally attract interest due to their novelty. Promptly introducing new features can allow Gearbox to keep up with the latest offerings, boosting user engagement. As Gearbox is built on top of other protocols, we integrate with whatever the ecosystem already has in place, which usually holds us back on the innovation side of things. However, integrating with L2s helps Gearbox offer its users the most exciting opportunities.

Regarding Gearbox's L2 strategy, are you considering establishing a home within one or two L2s, or are you opting for a multi-chain approach?

I: The key to success in any blockchain network lies heavily in community involvement. Dedicating time to engaging with the community and contributing positively is essential. By aligning a protocol's objectives with those of the community, there's a greater chance of success. This is often why protocols that launch on a single chain tend to outperform those that spread across multiple chains, as the alignment with the base asset holders and community is stronger.

In the case of Gearbox, the complexity of the product, there needs to be a period of time to educate users about its functionalities and benefits. This requirement makes it impractical to launch on multiple chains simultaneously, as each community requires dedicated time and resources to understand what Gearbox brings to the table.

V: I think L2s such as Mantle Network can relate to this. From an ecosystem perspective, it's hard to differentiate yourself from others when you're the 17th L2 to integrate within a specific DeFi protocol. That's why, at Mantle Network, we support the applications that want to establish a home within the ecosystem, and be a part of the family as they benefit the community the most and their goals are aligned.

What is Lobster DAO?

I: LobsterDAO is a research chat that offers a platform for engineers, developers, and founders to discuss their projects and technology and converse on various web3 subjects, projects, and applications. Imagine it as an open research chapter. You can discuss anything web3 and DeFi-related. The only thing we don't allow is for people to shill projects; we have a dedicated team of moderates who help keep the chat clean.

What's your take on 2023, and how did you navigate the bear market?

I: It wasn't as bad as I expected it to be. During this bear market, funding rounds were much higher for many projects, hackathons still went ahead, projects continued to build, and there wasn't a significant outflow of people this time. Gearbox was in between v2 and v3, so we knew it would be quiet and it would take some time to generate significant traction again.

V: I'm heavily involved in product building and research, so it was a very busy year with the launch of Mantle Network. I have to agree with the point you made about projects continuing to build. For builders, in general, the vibe was still there. I spent a lot of time in different hackathons and speaking to developers, and I loved seeing how optimistic and convinced they all were. I believe the bear market is the best time to build because there's less noise, and you can focus on what matters.

Did you intentionally time going into L2s and releasing Gearbox v3 with market sentiment?

I: No, it was completely random. Our audits kept identifying issues. We then fixed the problems and realized there were better ways to do things. As this continued, we decided to go ahead with v3 to address these issues. So no, there wasn't any planning or trying to play with the timing of the market. Here at Gearbox, we understand that implementing quality changes takes time. This strategy reflects how we plan to integrate with specific L2 networks. Initially, our priority is the successful rollout of v3, followed by a concentrated effort on L2s.

What are your thoughts on the L2 space this year?

I: My biggest problem with the space concerns chain abstraction. I don't like the idea of switching from one chain to another, so from a user perspective, it'll be great when things are a bit more abstracted. But then there's the question of infrastructure behind it. Because every lending protocol is different, every project is different, and every asset is different on each chain. So, I don't think we will be able to fix the issue of liquidity fragmentation within the next three years. So unless that is solved, I'm not sure that the concept of users being abstracted away from a chain is even possible.

If you didn't catch the AMA live, visit our X/Twitter to listen to the entire recording. While you're there, drop us a follow so you don't miss out on any future AMAs and updates. There are many exciting developments within Mantle Ecosystem in the upcoming year, so expect a lot more content.