When crypto exchange OKX launched its first blockchain, OKTC, a few years ago, the results were underwhelming. Despite being open source and decentralized—qualities often celebrated in the Web3 world—the chain failed to gain meaningful traction. Today, OKTC ranks as the 54th largest blockchain by total value locked (TVL) in its DeFi ecosystem, with just $19 million in assets, according to Defi Llama.
Compare that to newer entrants like Polygon zkEVM and Scroll, both of which have surged ahead in adoption and developer interest. Clearly, OKX’s initial foray into blockchain infrastructure didn’t deliver the impact it hoped for.
But OKX isn’t backing down. This week, the exchange introduced X1, a new Layer 2 (L2) blockchain built on Ethereum, launching its testnet with ambitious goals. Unlike OKTC, which operated as a standalone Layer 1, X1 leverages Ethereum’s security while drastically reducing transaction costs—a model increasingly proven by successful L2s like Arbitrum and Optimism.
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Why Now? The Rise of Layer 2 Solutions
Jason Lau, OKX’s Chief Innovation Officer, believes the timing couldn’t be better for a second attempt. He points to the early days of crypto—2017 through 2019—when high gas fees, poor scalability, and clunky user experiences stifled innovation.
“Back then, a lot of the use cases people wanted to build simply weren’t feasible,” Lau explained in an interview with DL News. “High friction, high fees, and bad usability killed many promising ideas.”
Fast forward to today, and the landscape has transformed. The emergence of Layer 2 scaling solutions has unlocked a new era of efficiency and accessibility. By processing transactions off the main Ethereum chain and settling them in batches, L2s offer faster speeds and lower costs without sacrificing security.
“I think there’s a very clear roadmap now to solving the scalability issues we faced,” Lau said. “And Layer 2s are a key, key part of that answer.”
With over 30 active L2 networks already on Ethereum—and more on the way—the space is crowded. Yet competition hasn’t deterred major players. Coinbase launched Base, its own L2, in August 2023. Within months, Base became the third-largest L2 by ETH bridged from Ethereum, surpassing $580 million in value.
Kraken is reportedly exploring a similar move. Clearly, crypto exchanges see L2 development not just as technical innovation, but as strategic positioning in the future of Web3.
X1: Built for Accessibility and Growth
Unlike OKTC’s independent architecture, X1 is built using Polygon’s open-source Chain Development Kit (CDK)—a modular framework that simplifies the creation of customizable, interoperable L2s. This approach mirrors Coinbase’s use of Optimism’s OP Stack, highlighting a broader industry shift toward shared infrastructure and collaborative development.
But OKX emphasizes that its decision wasn’t driven by following Coinbase’s lead.
“We weren’t influenced by their partnership,” Lau clarified. “But we do share a common philosophy: contributing engineering resources to help grow a larger ecosystem so more developers and users can participate.”
This spirit of collaboration reflects a maturing Web3 industry—one where success is measured not just by dominance, but by contribution and community growth.
X1 will be permissionless, meaning any developer can build on it, and any user can interact with it freely. According to Lau, the mainnet launch is expected in the first quarter of 2024.
The goal isn’t immediate profit. Instead, OKX sees X1 as part of a long-term strategy to onboard users into Web3—similar to how its non-revenue-generating crypto wallet serves existing customers by offering seamless access to decentralized applications.
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Beyond Revenue: A Strategic Play for Web3 Adoption
For OKX, X1 isn’t about direct monetization. It’s about enabling user engagement in a future where blockchain underpins digital identity, finance, and commerce.
“The wallet doesn’t generate revenue,” Lau noted, “but it helps our users—many of whom do generate revenue for us—access Web3 easily and securely.”
By providing tools that simplify complex technologies, OKX aims to become a trusted gateway to the decentralized internet. The belief is that value will follow utility: as users grow more comfortable with Web3 through products like X1 and the OKX wallet, they’ll naturally gravitate toward services that enhance their experience—including those offered by OKX.
Lau also dismissed concerns that X1 might pull trading activity away from OKX’s centralized exchange.
“We don’t expect this transition to happen overnight,” he said. “Most users will likely use both centralized and decentralized platforms side by side for quite some time.”
This dual-path adoption model acknowledges that decentralization won’t replace centralized services immediately—but it will coexist with them during the transition phase.
FAQ: Understanding OKX’s Blockchain Strategy
Q: What happened to OKX’s first blockchain, OKTC?
A: OKTC is still operational and open source, but it failed to gain significant adoption due to outdated technology and limited ecosystem growth. It currently ranks 54th in DeFi TVL.
Q: How is X1 different from OKTC?
A: X1 is a Layer 2 blockchain built on Ethereum using Polygon’s CDK, offering lower fees and faster transactions. Unlike OKTC (a standalone Layer 1), X1 benefits from Ethereum’s security and thriving developer community.
Q: Is X1 a competitor to other L2s like Arbitrum or Optimism?
A: While X1 operates in the same ecosystem, its focus is on accessibility and integration with OKX’s user base. It’s less about competing directly and more about expanding Web3 adoption.
Q: Will X1 generate revenue for OKX?
A: Not immediately. Like the OKX wallet, X1 is a long-term strategic investment aimed at user onboarding and ecosystem development rather than short-term profits.
Q: When will X1 launch?
A: The testnet has launched; mainnet deployment is expected in Q1 2024.
Q: Can anyone build on X1?
A: Yes. X1 will be fully permissionless, allowing developers worldwide to create decentralized applications (dApps) without restrictions.
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Final Thoughts: Learning from the Past, Building for the Future
OKX’s journey from OKTC to X1 reflects broader shifts in the crypto industry—from isolated chains chasing vanity metrics to collaborative ecosystems focused on real-world utility.
By embracing proven L2 frameworks and prioritizing user experience over quick wins, OKX is positioning itself not just as an exchange, but as an enabler of Web3’s next chapter.
The road ahead remains competitive, but with strategic partnerships, open-source contributions, and a clear vision for adoption, OKX may finally have the formula to succeed where it once fell short.
As Layer 2 networks continue to redefine scalability and accessibility, projects like X1 could play a pivotal role in bringing blockchain technology to billions—not just crypto natives.