VanEck predicts that the capitalization of Ethereum-based L2 networks will grow to $1 trillion by 2030

What’s new? Investment firm Van Eck predicts that the aggregate capitalization of Layer 2 (L2) solutions for scaling the Ethereum blockchain will grow to $1 trillion in six years. According to analysts Patrick Bush and Matthew Sigel, this segment will include thousands of highly specialized L2 networks focused on different use cases.

VanEck’s report

What else is known? According to L2BEAT, there are currently 46 Ethereum-based Layer 2 networks with a total value locked (TVL) of $39,83 billion. The largest L2 is Arbirtum with $18,4 billion. It is followed by OP Mainnet ($7,52 billion), Base ($3,82 billion), Blast ($2,54 billion), and Starknet ($1,36 billion).

VanEck analysts write in their report that Layer 2 blockchains aim to capitalize on Ethereum’s main problem, its limited ability to process, store, and compute data. They noted that Ethereum’s dominance of smart contracts faces obstacles due to scalability issues. “While the network offers unparalleled security and decentralization, transaction fees and processing times soar when usage intensifies,” the experts added.

According to them, Ethereum’s development is currently focused on improving its ability to process transaction data on L2 networks, which became evident with the release of the Dencun upgrade on March 13. This hard fork reduced fees on L2 networks by 60-90% with proto-danksharding, which scales the blockchain and reduces the cost of gas by introducing a new mechanism for storing compressed large arrays of binary data (blobs).

Bush and Sigel expect Layer 2 networks to surpass Ethereum in terms of revenue because the underlying blockchain “cannot match the transaction throughput or user experience of L2s.”

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They also believe there will be thousands of Layer 2 networks for specific use cases in the future, with a few big players in the ecosystem — general-purpose networks.

Thousands of narrowly focused networks will be “segmented by sector, application, or function,” and some will be created for a specific purpose, for example, decentralized social L2 networks with associated applications will emerge.