It’s hard to say exactly when bubbles started forming in the water, but by mid-summer Ethereum was headed for a rolling boil. Growth was explosive, and platforms and protocols everywhere were starting to feel the heat of soaring fees.
By August, transactions that used to cost a few bucks were nearing the equivalent of hundreds of dollars each. In a word, the frog was fucked.
Despite the existential threat, this was also a moment to celebrate. Because here’s the thing: this is the kind of growth we live for. Seeing Ethereum, a transformative financial medium, become the most popular decentralized computing platform on the planet, facilitating billions in value creation and transfer—that’s incredibly inspiring for people like us who build at the edge of the internet.
So, for Foundation, the question became this:
How can we support the evolution of Ethereum but use it as a springboard for something more sustainable and all-around better for our creator-focused markets?
We knew the answer was L2—the hard part was figuring out which one. After a lot of diligence, we landed on xDai.
As Ethereum has grown, it’s unlocked previously impossible applications and brought in a tsunami of new users who are driving rapid innovation. But it’s also shown us its limitations. There’s a lot more work to be done to achieve scale—as we’ve seen with CryptoKitties, the launch of COMP, and the yield farming that followed, just a few successful apps can bring the network to a crawl.
L2 systems operate as extensions of the Ethereum main chain, off-loading the bulk of transactions and computation, and reducing congestion. Manifestations of L2 have been around for years, but were mostly stuck in exploration and experimentation. Researchers and developers knew the community would need it at some point, but the urgency wasn’t there until this summer.
At Foundation, we always knew that when the time came, we would want to move to L2 for two reasons:
To give our users the best possible experience
To be good stewards of Ethereum’s mainnet by helping to reduce congestion
Last month, we pulled the trigger.
At Foundation, most of our work flows like this:
sharp instinct → aggressive validation → fast (but thoughtful) implementation
When we saw what was happening with L1, we followed that same formula, keeping a few core considerations top of mind:
Stable value: Foundation users need to be able to transact easily with stable value like they do with fiat in daily life. The volatility of cryptocurrencies like ETH and BTC isn’t conducive to active commerce. Instead, these assets encourage people to hold rather than spend to ride out potential losses and win new gains. This informed our original decision to use Dai on L1.
Simplicity: To create vibrant markets, you have to make it easy for users to transact and experiment with the platform. Complexity creates obstacles. Technically, L1 supports Dai, but it requires users to transact with Dai and ETH.
Speed: Buyers have to be able to move quickly to get in on a drop. Anything that slows us and our users down is a problem. It’s that simple.
Accessibility: Foundation is inherently participatory and experimental—we want creators and buyers on our platform to help us define what it will become. Prohibitive cost is the enemy of access and chokes out experimentation.
There are a lot of L2 solutions in theoretical or early stages of development. But after an aggressive validation period, it became clear that xDai mapped most closely to our considerations above.
xDai is stable. xDai makes Dai the native currency. This aligns perfectly with how we structured our markets, which were already denominated in Dai.
xDai is simple. Gas fees are paid in Dai, which allows transactions to be conducted in a single currency. No need to hold ETH. No `permit` necessary to transact with Dai.
xDai is fast. Since the network operates on a Proof of Stake consensus model rather than Proof of Work, transactions are executed and confirmed faster and with greater predictability.
xDai is inexpensive. Because of its low and consistent transaction fees, xDai lets Foundation launch new markets quickly and at minimal expense. We can experiment and iterate more rapidly without needing to check gas fees every hour.
xDai is in production. xDai is proven in practice, not just in theory. It’s been around since 2018 and in that time, it’s processed millions of transactions, whereas most other L2 solutions are still on testnets.
The biggest trade-off with xDai is centralization, but current validators (MakerDAO, Gnosis, POA Network) are known entities with skin-in-the-game, who operate in publicly auditable and transparent ways. There are also plans to open xDai up to public staking and validation in the coming months, and we’re confident the network will become further decentralized as the community continues to grow.
As for other L2 options, rollup solutions being developed by teams like Optimism, StarkWare, and Matter Labs show a lot of promise. We don’t think they’re ready for prime time yet, but we’re keeping close tabs on progress. If they can provide a better experience for our users, we’ll consider them for Foundation. Right now though, xDai is in production and gives us the right features for our community today.
We designed our own market model instead of putting tokens onto Uniswap. This allowed creators to customize and launch their own bonding curves with no upfront capital.
We were all in on Dai from day one, committing to using a stablecoin that’s fair, open, and accessible to anyone with an internet connection because that was the right thing for culture.
And now, we’ve migrated Foundation to a fast, stable L2 with xDai.
Since launch, we’ve been building at the edge of what’s possible. And as this space evolves, that’s where we’ll continue to be.