The crypto landscape is evolving rapidly, and Ethereum, as a pillar of this universe, is not immune to upheaval. Layer 2 (L2) solutions are seeing tremendous growth, peaking at $51.5 billion in total value locked (TVL). But this dazzling success could well hide major challenges for Ether. How are these innovations transforming the Ethereum ecosystem? And is Ether really threatened? Decryption.
The explosion of L2: a historic leap
L2s, like Arbitrum and Base, push the boundaries of Ethereum’s scalability. These solutions allow transactions to be processed on side chains, reducing fees and waiting time on the main crypto network.
Result: a TVL which jumps by 205% in one year, going from 16.6 billion in November 2023 to more than 51 billion today.
Arbitrum dominates this market, holding 35% of total L2 TVL, or $18.3 billion. Base follows with an impressive 22% share, thanks to record transactions per second (TPS) and excitement around memecoins. These figures demonstrate the enthusiasm of investors for these solutions, considered essential for the future of Ethereum.
However, this rise is not without consequences. Recent upgrades, like Dencun, have stabilized transaction fees on L2s, making these solutions even more attractive.
But this optimization could divert some revenue from the mainnet, raising a strategic question: to what extent can L2s coexist with crypto Ether without harming its value?
Ether, a giant under pressure?
If L2s stand out for their efficiency, some experts see them as potential “cannibals” for the Ethereum ecosystem. By concentrating activities on secondary chains, they could weaken the main network and, in turn, compromise the valuation of the crypto ETH.
For now, Ether remains the core engine of Ethereum, used for transactions and fees on the mainnet.
But with increased use of L2s, ETH crypto could lose its appeal, especially in terms of demand. This scenario poses a strategic dilemma for developers: should they prioritize large-scale adoption of L2 over the price of Ether? However, recent data indicates a fragile balance.
While the TVL of L2s skyrockets, the price of Ether stagnates, unable to keep up with this dynamic. This divergence raises a crucial question: could the popularity of L2s lead to a lasting decoupling between Ethereum and its native token?
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