Key Takeaways
- VanEck predicts a $1 trillion valuation for Ethereum Layer 2 networks by 2030;
- The firm highlights transaction pricing, developer experience, user experience, trust assumptions, and ecosystem size as crucial factors for L2 growth;
- Despite potential challenges from market competition and new token introductions, L2 networks are expected to play a significant role in the blockchain ecosystem's future.
Patrick Bush and Matthew Sigel from investment management firm VanEck predict that Ethereum Layer-2 (L2) networks could reach a valuation exceeding $1 trillion by the end of this decade.
Despite their optimistic projection, the analysts maintain a cautious stance on the long-term success of many of these networks, predicting intense competition among them.
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L2 networks operate on top of a main blockchain, like Ethereum, by processing transactions separately and then integrating them back, thus increasing transaction speed without sacrificing security or decentralization.
The VanEck analysis is based on an investigation of 46 L2 networks across five key areas: transaction pricing, developer and user experience, trust assumptions, and ecosystem size.
The firm predicts that Ethereum is set to dominate 60% of the public blockchain market and will see a rise of use-case-specific rollups.
However, Bush and Sigel have expressed concerns over the challenges these networks might face:
We see cutthroat competition amongst L2s where the network effect is the only moat. As a result, we are generally bearish on the long-term value prospects for the majority of L2 tokens.
According to the analysts, the market is becoming increasingly competitive, with a collective Fully Diluted Valuation (FDV) of $40 billion for the top seven L2 tokens. They predict the entry of new projects, potentially adding $100 billion more in FDV, leading to a saturated market that might not sustain without significant price adjustments.
Despite the hurdles, the growth and development of L2 networks remain an area of interest for investors and developers in the blockchain and crypto sphere.
In other news related to ETH L2 networks, Starknet has recently announced plans to introduce a "parallelization" feature to enhance transaction speed and efficiency.
