With layer 2 (L2) networks, the total value locked on Ethereum L2 networks climbed to a historic record across 11 methods, totalling $51.5 billion and growing 205% year over year, L2beat data shows.
It’s a result of the demand for L2 solutions to help scale Ethereum, the market-leading platform for smart contract applications, by almost every metric and increased investor enthusiasm for Ethereum-native assets.
Scalability Needs L2 Growth
L2 solutions allow Ethereum mainnet transactions to occur decoupled, without congestion and at reduced costs. They’ve been at the forefront of scaling the Ethereum ecosystem by lowering fees and decreasing transaction speeds.
All that’s very good for blockchain innovation, but some industry insiders think L2s could be ‘cannibalistic’ to the Ethereum mainnet. Moving activity outside Ethereum’s base layer will reduce network revenue and, to some extent, generate less trajectory for Ether’s price.
Between them, Arbitrum One and Base control more than half of the L2 ecosystem’s TVL and the lion’s share of TVL growth.
Arbitrum One: Arbitrum remains on top in volumes with $18.3 billion TVL, making up 35 percent of the total L2 value. In the weeks running up to November 28, its TVL went up 12%.
Base: Cumulatively, L2 TVL holds $11.4 billion, with the base making up 22%. The base just hit a recent milestone twenty-first, with more than 106 transactions per second (TPS), and it crossed 1 billion total transactions during this current bull cycle.
What is Dencun Upgrade on Ethereum?
The Ethereum Dencun March 2023 upgrade was critical to L2 adoption. It was great for L2 solutions and introduced fee stabilization mechanisms, bringing median transaction fees to 1% for some networks.
The upgrade benefited Starknet, Optimism, Base, and Zora OP Mainnet to integrate cost-effectiveness into user adoption.
“On the point of EIP-4844, many people talk about the fee reduction, but it’s more about fee stabilization. It’s more about expanding capacity and scale and not lowering fees.”
Adding L2s hasn’t brought on the rowing yet of a legacy on Ethereum in the long term, as industry observers remain divided. They increase scalability and adoption, but their benefits must be focused on proving sustainability while not breaking the flow of activity on Ethereum’s mainnet.
These layer-2 networks on the Ethereum blockchain are shattering records, building continually and innovating to become a big part of the blockchain’s future. However, we will continue to monitor how their presence alters Ether’s price potential and Ether’s mainnet activity in crypto.
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