April 08, 2024
By Anjali Kochhar
Investment firm VanEck has issued a bold prediction regarding the future of Ethereum’s layer 2 scaling networks, predicting a stunning $1 trillion market value by 2030. This upbeat view comes despite initial concerns about competitiveness in the area.
Patrick Bush, VanEck’s senior digital assets investment analyst, and Matthew Sigel, digital assets research director, underlined Ethereum’s main challenge: its limited ability to manage massive amounts of data. They believe that layer 2 blockchains will be critical to overcoming this challenge.
Layer 2 blockchains, which sit on top of Ethereum, are poised to capitalise on the network’s strengths while addressing its scalability issues. These blockchains offer faster transaction processing and lower fees compared to Ethereum’s main network.
Currently, there are 46 Ethereum layer 2 blockchains with a total value of $39 billion locked in them. The largest among them, Arbirtum, boasts $18 billion in locked value.
According to Bush and Sigel, Ethereum is expected to dominate 60% of the market share across all public blockchains. This estimation, coupled with the growing volume of assets within the Ethereum ecosystem, leads to their $1 trillion market cap prediction for layer 2 blockchains.
Despite their bullish outlook, the analysts expressed caution regarding the long-term value of most layer 2-related tokens. They noted intense competition within the sector, which could lead to significant discounts on token prices.
Looking ahead, Bush and Sigel envision a future with thousands of specialised layer 2 blockchains tailored to specific use cases. These networks will be segmented by sector, application, or function, catering to diverse needs such as decentralised social media or finance-specific applications.
While there will be numerous specialised networks, a few major players are expected to dominate the general-purpose layer 2 market. These blockchains will benefit from the network effect, becoming more valuable as more users join the ecosystem.
The analysts also anticipate a shift towards zero-knowledge frameworks (ZKU) for most roll-ups, citing the numerous advantages of this approach.
In conclusion, VanEck’s analysts foresee a bright future for Ethereum’s layer 2 scaling networks, driven by innovation, competition, and the quest for scalability. With the potential for a trillion-dollar market cap within the next six years, the landscape of decentralised finance is set for significant evolution.
About the author
Anjali Kochhar covers cryptocurrency stories in India as well as globally. Having been in the field of media and journalism for over three years now, she has developed a sharp news sense and works hard to present information that goes beyond the obvious. She is an avid reader and loves writing on a wide range of subjects.
