The Ethereum Foundation's Privacy and Scaling Explorations (PSE) team selected 22 projects to receive grants totaling $948,000 under its Layer 2 Community Grants program, according to a February 14, 2023 announcement on the Foundation's blog. PSE originally set aside $750,000 for the initiative but raised the allocation after more than 130 proposals were received during a six-week window that ran from October 24 to December 5, 2022. The grants span six categories: cybersecurity, user experience, community and education, data analysis, data visualization, and cryptography including zero-knowledge proofs. Individual per-project grant amounts were not publicly disclosed by PSE; the $948,000 figure represents the total program allocation across all 22 recipients.

"Due to the high quality of the proposals we received, we decided to raise the budget from the initial 750k USD to a total of 948k USD," the PSE team wrote in the announcement.

A notable cluster of winners centers on ERC-4337, the account abstraction standard that launched on Ethereum mainnet on March 1, 2023, just weeks after these grants were announced. Account abstraction removes the requirement for users to hold ETH before interacting with the network. Instead, third parties called paymasters can cover transaction fees on a user's behalf. Three grant recipients are building core infrastructure for this standard: Candidelabs, which is developing bundler and paymaster services as shared public infrastructure; Soul Wallet; and a TypeScript-specific bundler implementation by Kristof Gazso. More than 40 million smart contract accounts have since been deployed across Ethereum and its Layer 2 networks, according to Alchemy.

The program also reflects a broader push to address Ethereum's cost problem. Average gas fees on the Ethereum base layer exceeded $7 in 2023, with median fees spiking as high as $13.92 during congestion. Layer 2 networks, which process transactions off the main chain and post proofs or state data back to Ethereum mainnet, routinely keep fees below $0.01. Those cost differences have been driving substantial transaction volume. Arbitrum surpassed Ethereum mainnet in daily transactions in March 2023, averaging roughly 1.2 million transactions per day compared to Ethereum's 1.1 million. Total value locked across L2 networks hit $10 billion in April 2023, with Arbitrum holding more than 66 percent of that market. L2 transaction volume grew 60 percent quarter-over-quarter in Q2 2023, and L2 networks collectively accounted for 56 percent of total combined L1 and L2 transactions by that point.

For users in South Asia and Sub-Saharan Africa, the fee gap has real economic consequences. India ranked first and Nigeria ranked second in Chainalysis's 2023 Global Crypto Adoption Index, which measures grassroots activity rather than institutional flows. Yet L1 costs have effectively priced out median-income users in both regions from most on-chain participation. ERC-4337 wallets with gasless onboarding matter especially in markets like Nigeria and Pakistan (which ranked eighth in the same Chainalysis index), where acquiring ETH through regulated exchanges involves significant cost and friction. In Bangladesh, where cryptocurrency remains legally prohibited, adoption has continued through informal channels driven by capital controls and limited foreign exchange access, illustrating the range of structural barriers that extend well beyond transaction fees. The grants also funded "L2 en Español," an educational project by Jose Figueroa aimed at Spanish-speaking communities. PSE's willingness to fund non-English content sets a precedent that Web3 communities in South Asia and Africa can reference when applying for support to develop Hausa, Swahili, Hindi, or Urdu-language resources.

ScopeLift, one of the user experience recipients, built tooling that allows DAO members to cast governance votes from L2 networks at a fraction of the L1 gas cost. Decentralized governance has historically skewed toward large token holders partly because gas fees make participation economically irrational for smaller balances, a dynamic that affects token holders in lower-income countries disproportionately. "The user experience for a voter on Layer 2 is similar to voting on Layer 1 but with dramatically lower gas fees," ScopeLift wrote in a blog post titled "DAO Voting from Layer 2 with Flexible Voting." The underlying Flexible Voting contracts were audited by OpenZeppelin and had received prior support from the Uniswap Grants Program.

One grant that looks particularly prescient in retrospect is the award to Blossom Labs for Blobscan, the first explorer built for a transaction type that did not yet exist on Ethereum at the time of funding. Those transactions were later introduced by EIP-4844 as part of the Dencun network upgrade in March 2024, and they significantly cut the cost for L2 networks to post data back to Ethereum mainnet. Funding the monitoring infrastructure ahead of the upgrade meant tooling was in development before the launch arrived.

PSE, formerly known as the AppliedZKP team within the Foundation, publishes all of its funded work as open source. For developer communities in Lagos, Nairobi, Bangalore, or Lahore where startup capital is scarce, that means building on this infrastructure carries no licensing cost.