Here a few observations about NFTs on Layer 2, which hint at the possibility true network effects.

These effects *only apply to nonfungibles*.

ERC721 NFTs are notoriously hard to move, you have to pay gas per asset and there is no bulk transfer.

That means once you start a collection in a particular wallet, it will be very expensive to move to a new one.

This implies that users entering the NFT world through a rollup have little incentive to move their assets to the base layer.

Moreover, moving the assets to another L2 is going to cost at least as much as bulk wallet transfers.

With Optimistic Rollups (ORs) in particular, there is an offboarding period for moving back on-chain which could take weeks.

For fungibles, an “offboarding intermediary” can give you liquidity straight away for a fee. But this scheme doesn’t work for NFTs, which are illiquid.

In other words, ORs are suboptimal for NFTs. And L2s are likely to develop network effects based on concentrations of NFTs.

This is a much different state of affairs than fungible assets, for whom moving between base layers and L2s is generally quick and low cost.

/end