The mysterious Redditor may turn out to be a psychic, predicting that layer 2 scaling solutions on Ethereum will be in the spotlight in the coming months.
The mysterious Redditor made a data-driven prediction that the next major development in the blockchain space will be layer 2 solutions, primarily on Ethereum.
The May 22 post explains that “we are at a tipping point” as the industry transitions from bridging L1 to L2 blockchains, which are “more secure and more decentralized from the outset than the legacy L1 and are designed to use sound money on a trusted basis.” neutral platform:”
“The implementation of L2 is happening now, albeit slowly and in fits and starts. Behind the scenes, L2 improves reliability, lowers fees, and improves affordability. L2 is still being built and improved, which is great.”
An L2 scaling solution secures an L1 chain such as Ethereum and reduces traffic on it by bundling a series of transactions into a single batch that is processed simultaneously.
Other L1 networks such as Solana, which boast relatively cheap and fast transactions, have garnered support from users who are put off by high fees.
The average Solana (SOL) transaction is worth around $0.0025, while an Ether (ETH) transaction is worth around $1.30 at the time of writing. Despite these wild differences, demand for the Ethereum block space remains overwhelmingly dominant as the $73.89 billion total value locked (TVL) exceeds Solana’s $4.24 billion, according to blockchain tracker DefiLlama. Also, Solana has been suffering from reliability issues lately.
At the time of writing, Arbitrum was the largest L2 on Ethereum with $2.65 billion in TVL, according to L2beat. The entire Ethereum L2 ecosystem has a TVL of $4.77 billion. These numbers could skyrocket if the right forces conspire to wrest users and capital away from other L1s.
Several large decentralized applications (DApps) are already deployed on L2. Decentralized exchange (DEX) SushiSwap and aggregator yield curve are on Arbitrum. Meanwhile, crypto derivatives protocols Synthetix and DEX Uniswap are optimistic.
Related: MakerDAO Rolls Out StarkNet on Tier 2 Network to Empower DAI Stablecoin.
The upcoming Optimism airdrop could mark the beginning of a rapid influx of users on L2. This may be due to the same network effects that have attracted users to decentralized finance (DeFi) protocols based on Ethereum and the Ethereum Virtual Machine (EVM) over the past two years.
Optimism is L2 with a TVL of $474 million. EVM chains are compatible with Ethereum token standards such as Binance Chain (BNB), Polygon (MATIC), and Fantom (FTM).
Ultimately, as the utility of L2 increases, Ethereum L1 will experience a natural increase in usage, which could further solidify Ethereum as the world’s leading platform for smart contracts and decentralized applications.