Why not choose L2 native tokens as the Gas tokens for Rollup?

Consider using L2 native tokens as Gas tokens for Rollup.

Author: Andrew Huang, Founder of Conduit; Translation: LianGuai0xxz

At Conduit (note: Conduit is a platform based on OP Stack that enables one-click deployment of Rollups without code), we are fortunate to be able to discuss with hundreds of teams and protocols about releasing their own Rollups.

The most common question is: “Can we allow users to pay gas fees with our own native tokens?”

Our answer is as follows:

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• Why not use protocol tokens as gas tokens for rollups?

No net new demand for native tokens

If you draw the flow of tokens, you will find that there is no net demand. Users purchase your tokens to bridge to your Rollup. When they spend gas, the sequencer sells these tokens in an attempt to offset the data availability (DA) cost, which is only priced in ETH.

If the gas cost in your tokens cannot cover the DA cost, then your protocol will pay for the remaining DA cost. Essentially, you are subsidizing the use of Rollup, but still need to pay the DA cost in ETH.

Cross-domain MEV and interoperability

In the long run, cross-domain interoperability and MEV may become the main revenue models for Rollup sequencers. By forcing Rollup users to acquire your tokens, you can make it more difficult for builders/searchers to extract MEV on your chain.

Unlike holding only ETH as a token, they need to hold N tokens in N Rollups, which makes their token strategy very complex.

In fact, for some systems, such as Optimism’s superchain, having your own token as a gas token would make you incompatible, thereby decentralizing access to the chain and isolating your Rollup from a wider ecosystem.

User experience cost

Lastly, this imposes a heavy user experience cost on users. All users have ETH because it is the native token of Ethereum. Requiring them to first purchase your tokens in order to use Rollup sets up another barrier for using your application.

When can native tokens be chosen?

If interoperability is not important to you and your token has net demand (or it is a stablecoin), then it can be effective. An example might be Eco, whose core users are not native cryptocurrency users.

Eco requires their users to have Eco stablecoins in addition to ETH, which brings additional user experience costs. This is essentially the opposite of the experience of native cryptocurrency users.

Potential options for value accumulation

Perhaps a more sustainable approach to accumulate value for the protocol’s token is to use excess sequencer revenue obtained through Rollup for buybacks.

This could create more sustainable demand for the protocol token based on the transaction volume of the Rollup, and help better coordinate incentive measures between users and the protocol.

Other solutions

Of course, you can also use meta-transactions, relayers, or account abstractions to mimic users paying gas with protocol tokens.

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