Investment firm VanEck has forecasted that Ethereum layer 2 (L2) networks could surpass a valuation of $1 trillion by 2030, driven by anticipated growth in various sectors such as the metaverse, banking, and gaming.
VanEck’s analysis spans 46 layer 2 networks across five crucial areas, envisioning the emergence of thousands of rollups in the future. Notably, Arbitrum stands out as the largest ecosystem, boasting over $18 billion in locked tokens, a significant portion of the $36 billion total across all networks evaluated.
VanEck’s analysts, Patrick Bush and Matthew Sigel, anticipate Ethereum to capture 60% of the market share among public blockchains, factoring in the volume of assets within the Ethereum ecosystem.
Layer 2 networks, serving as secondary infrastructure atop main blockchains like Ethereum, aim to address scalability and speed issues. Rollups, a specific type of scaling system, are expected to play a pivotal role in this endeavor.
Several factors are deemed critical for the long-term growth of layer 2 networks:
- Transaction Pricing: The affordability of transactions on L2 networks influences user adoption. Factors such as data compression, scale, proving costs, and profit margins contribute to differentiation in transaction pricing.
- Developer Experience: Ethereum Virtual Machine compatibility is crucial for attracting developers, ensuring seamless migration of smart contracts and tooling from Ethereum.
- User Experience: Efficient onboarding and withdrawal processes shape the overall user experience.
- Trust Assumptions: Establishing trust regarding data availability and implementing measures to mitigate exploits and hacks.
- Ecosystem Size: The strength of an L2 network’s ecosystem, indicated by the value locked within, significantly impacts its overall value.
Despite the optimistic valuation projections, VanEck remains cautious about the long-term performance of many layer 2 tokens. The analysts express bearish sentiment, citing fierce competition within the sector and the influx of new projects launching in the medium term.
They caution that while there is substantial potential for additional layer 2 token valuations to enter the market, the crypto market may struggle to absorb such a significant supply without significant discounts.
