According to CoinDesk, investment firm VanEck has projected that Ethereum layer 2 networks could be valued at over $1 trillion by 2030. Despite this optimistic forecast, the firm remains generally bearish on the long-term prospects of several such networks. VanEck's analysis involved the evaluation of 46 layer 2 networks across five key areas, with the prediction that thousands of rollups will eventually emerge. The most extensive ecosystem currently is Arbitrum, with over $18 billion in locked tokens.
VanEck analysts, Patrick Bush and Matthew Sigel, estimate that Ethereum will eventually capture 60% of the market share across all public blockchains. This estimate is based on the volume of assets within the Ethereum ecosystem. Layer 2 networks, also known as L2s, are secondary networks or infrastructure built atop a main blockchain, such as Ethereum, to help with scalability and speed. Rollups are a specific type of scaling system.
The firm identified several factors that could influence the long-term growth of L2 networks. These include transaction pricing, developer experience, user experience, trust assumptions, and ecosystem size. The cost to users for transacting on L2 networks is a critical factor for attracting users. Ethereum Virtual Machine compatibility is paramount for L2 networks to attract developers, ensuring seamless porting of smart contracts and tooling from Ethereum. The speed of onboarding assets and withdrawal processes ultimately shapes the user experience. Building trust around data availability on an L2 and steps in place to prevent exploits and hacks also play a crucial role. The strength of an L2 network’s ecosystem significantly influences its value.
However, Bush and Siegel also noted that there could be intense competition among L2s, and they remain generally bearish on the sector’s outperformance. They stated, 'We are generally bearish on the long-term value prospects for the majority of L2 tokens.' They also pointed out that the top 7 tokens for L2 collectively already have $40 billion of FDV, and there are many strong projects that intend to launch over the medium term. This could potentially bring $100 billion more in FDV in L2 tokens to the market over the next 12-18 months, which could be challenging for the crypto market to absorb without massive discounts. Currently, tokens of the Ethereum L2 category are valued at just over $20 billion, according to CoinGecko data.