OKX, one of the leading cryptocurrency exchange platforms, unveils its own layer 2 dubbed “X1”. Scheduled for public launch in Q1 2024, X1 is being developed in partnership with Polygon Labs, leveraging the Polygon Chain Development Kit. Let’s delve into the reasons behind and implications of this recent breakthrough.
OKX unveils X1, its own layer 2
X1: that’s the name of the layer 2 launched today by OKX, one of the world’s largest cryptocurrency exchanges. Deployed as a testnet, OKX’s new blockchain is already available to developers wishing to interact with it.
With a public launch scheduled for the first quarter of 2024, X1 will be built in conjunction with Polygon Labs and its Polygon Chain Development Kit, a tool enabling developers to deploy layer 2s based on zero-knowledge proofs (ZKP) technology on the Ethereum blockchain. What’s more, this tool enables native interoperability between all layer 2s based on its use.
The interesting thing about layer 2s is that they offer increased scalability for their parent blockchain, as well as much more attractive transaction fees than the latter, especially for Ethereum. In fact, these fees should be further reduced with the forthcoming arrival of the Dencun hard fork, which will integrate proto-danksharding under EIP-4844.
Hot Off The Press
We’re thrilled to introduce X1, our new Ethereum L2 network built on Polygon’s CDK.
Our landmark collab. with @0xPolygonLabs empowers next gen. devs. with increased security, scalability & low transaction costs to BUIDL the future of Web3.
– OKX (@okx) November 14, 2023
So many reasons that more and more exchanges are creating their own layer 2, like Coinbase and its Base network, or Kraken, which will also call on Polygon to build its own solution. According to Bloomberg, some 50 OKX developers will be working on the deployment of layer 2 X1.
X1 will thus become the native network of the OKX crypto exchange, and its current token, the OKB, will be used to pay transaction fees. The OKB token price is down following the news, but this is part of an overall downward trend for the crypto market.
Why are crypto exchanges going layer 2?
If you’re wondering what the point is for a cryptocurrency exchange to deploy its own layer 2, it actually has several advantages.
Firstly, it allows them to diversify their revenue streams, as layer 2s represent a new way of capturing money, as Jacob Joseph, analyst at CCData explains:
“The addition of these networks could help exchanges diversify their revenue streams beyond traditional methods, such as transaction fees, and help them retain users within their own ecosystems. It also reduces the need for users to transfer funds to other platforms. “
And according to Marc Boiron, CEO of Polygon Labs, exchanges also want to have control over their own ecosystems, he stresses, pointing out that demand for this type of solution is growing:
We’re in talks with dozens of other companies interested in launching their own channels. They want something fast, they want something cheap, and they want to control that environment.”
