Tim Chen, Global Head of Strategy at Mantle MNT/USD, addressed retail investors' concerns about fragmented liquidity and gas fee confusion in Layer 2 (L2) ecosystems, emphasizing their growing importance.

In an interview with Benzinga, Chen likened L2s to retailers serving niche markets, arguing they are vital for scaling Ethereum's ETH/USD capabilities but must find meaningful product-market fit to overcome current challenges.

"Think of it as like if Ethereum were wholesalers," said Chen. "You need retailers to go into every nook and cranny, serve every niche." But he cautioned, "The infighting happens when there is not enough activity… when the L2s have no product-market fit."

He acknowledged that infighting among L2s stems from insufficient activity and lack of demand, stating, "The infighting happens when there is not enough activity. The infighting happens when the L2s have no product market fit."

To illustrate, Chen compared poorly positioned L2s to "a retailer trying to sell winter coats in the Caribbean," highlighting the need for demand-driven solutions.

He cited Mantle's UR Bank, a crypto neobank, as an example of an L2 application driving real-world transactions, noting, "if we can have UR Bank as a global product, and that's processing millions of transactions a day that's being settled on the mantle L2, then passed back to L1 mainnet is being secured there, then the economics will start working, right?"

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Chen stressed that L2 ecosystems can resolve retail hesitations by creating products with tangible demand, such as Mantle's infrastructure, which supports $4 billion in treasury assets and $3-4 billion in total value locked on its Mantle Network.

"I think those concerns are well founded, but can be mitigated once these L2s and ecosystems actually create a product with enough meaningful demand and transaction bumps," he added.

Chen's vision underscores L2s' role in onboarding the next billion users, particularly in emerging markets, by simplifying access through user-friendly interfaces like UR Bank.

As L2 competition intensifies, Chen believes differentiation lies in solving real-world problems, not just technical scalability.

"That's why for us we're trying to find new product market fit in the real world as opposed to just on chain," he said.

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