Key Points: 

  • Ethereum layer 2 tokens were some of the most profitable cryptos to hold in 2023. 

  • Scaling technology has come a long way since the last bull run, and several new projects are looking to lead the way during the next bull run. 

Ethereum ($ETH) has dominated the smart-contract blockchain market for years, and judging by its enormous market capitalization and ecosystem, it doesn’t appear to be going anywhere soon. However, Ethereum is not without problems; expensive transaction costs and poor scalability mean developers and users often leverage layer-2 solutions to interact with Ethereum. In the last bull run, layer 2s posted massive gains, but which ones will thrive in the next bull run? Let’s take a look at the most promising layer 2s for the next bull run. 

What Is an Ethereum Layer 2 Protocol? 

An Ethereum layer 2 protocol is a scaling solution deployed on the Ethereum blockchain that aims to improve user experience. Layer 2s generally aim to make transactions faster and cheaper without losing the high level of security guaranteed by Ethereum. Generally, Layer 2s process transactions off-chain before having them registered on the Ethereum mainnet. Layer 2 protocols use native ERC tokens to pay for gas fees, governance, and other use cases, which allows traders to gain exposure to layer 2s. 

Ethereum layer 2 scaling solutions are designed to solve the blockchain trilemma. 

Types of Layer 2 Protocols 

Although the basic aims of all layer 2 protocols are similar, there are a handful of different methods for achieving scalability, security, and efficiency. These are two of the most common layer 2 protocols. 

Optimistic Rollups 

Optimistic Rollups, such as Arbitrum and Optimism, leverage Ethereum’s security while moving the transaction processing off-chain. They use ‘fraud proofs,’ which the network assumes submitted transactions are valid. Users have the right to contest transactions, and if a node is found to have submitted fraudulent transactions, they are penalized. 

zkRollups

zkRollups, or zero-knowledge rollups, submit bunches of transactions compressed into a cryptographic proof as opposed to sending individual transaction requests. This method reduces the amount of computing power needed to verify a single transaction by sharing the cost. Ethereum layer 2 protocols that use zkRollups include Polygon ($MATIC) and Loopring ($LRC).

5 Most Promising Layer 2s to Surge in the Next Bull Run

Most Ethereum layer 2 tokens have been hit hard by the bear market, and many of them are trading at massive discounts from their all-time highs. The five most promising layer 2s in this post have respectable market caps, a proven track records, and support from bullish price predictions. 

1. Polygon ($MATIC)

Market Capitalisation: $5.1 billion

Total Value Locked: $800 million

Current Price:  $0.55

The Polygon ($MATIC) zkRollups is one of the most successful projects of its type. It has a total value locked (TVL) of just under $800 million, and its market capitalization puts it just outside of the top 10 cryptos on the entire market. Polygon has a solid track record for security, and if you’ve ever used this layer 2 you’ll know how fast and cheap it is even when the Ethereum mainnet is congested.

$MATIC trades at $0.55, which is a 90% discount on its all-time high as Polygon ($MATIC) was hit badly in 2022, especially following the FTX collapse. Most price predictions, including CoinCodex and AMBCrypto, are bullish on $MATIC in the long run and expect it to be trading above $1 and possibly even $2 in the next 1-2 years. 

2. Arbitrum ($ARB)

Market Capitalisation: $1.2 billion

Total Value Locked: $1.7 billion

Current Price: $1

Arbitrum ($ARB) is one of the most successful Ethereum layer 2 optimistic roll-up protocols. Despite launching less than one year ago, it already has over $1.5 billion TVL. $ARB has maintained a surprisingly stable price despite the general market volatility, with a trading range of $1 - $1.5. Arbitrum price predictions are very bullish. AMBcrypto expects its price to double in the next two years, and Coincodex expects it to return 30% before the end of 2023. 

3. Optimism ($OP)

Market Capitalisation: $1.1 billion 

Total Value Locked: $725 million. 

Current Price: $1.55

Optimism ($OP), as the name suggests, is an optimistic Ethereum layer 2 scaling solution. $OP is one of the leading Ethereum layer 2 tokens with a market cap of over $1 billion, and the network has $725 million in TVL. $OP hit its all-time high six months ago and has since dropped by over 50%. Price prediction analysts do expect $OP to recover its all-time high of $3.22 eventually. Techopedia has a high price target of $6 in 2025, which would require $OP to 6X from its current price.  

4. ImmutableX($IMX)

Market Capitalisation: $680 million

Total Value Locked: $32 million 

Current Price: $0.6 

ImmutableX ($IMX) is a zkRollup solution that focuses on NFT minting and blockchain gaming. Since its launch in late 2021, ImmutableX has enabled millions of NFT trades at almost no cost. The issue with this project is that it does depend on the high NFT trading volume on Ethereum. At the moment, the NFT market is in the dumps, so betting on ImmutableX means betting on the NFT market recovering. Price predictions for $IMX are mixed, but analysts who believe the NFT market will recover in 2023 are optimistic that this Ethereum layer 2 could generate some decent returns. 

5. Mantle ($MNT)

Market Capitalisation: $1.3 billion

Total Value Locked: $37 million

Current Price: $0.4

Mantle ($MNT) is an optimistic roll-up Ethereum layer 2 protocol that launched in 2023. Mantle was created by BitDAO, a decentralized autonomous organization (DAO), and launched in July on the ByBit exchange. Despite being only a month old, the project has grown its TVL to over $30 million, and its market capitalization is well above $1 billion. Several price prediction experts expect $MNT to post massive gains in the medium and long term. Ovenadd expects $MNT to more than 5x in the coming year, and Coincodex expects it to double before the end of 2025. 

Conclusion

Ethereum’s dominance in DeFi, NFTs, and just about any smart contract-based industry appears destined to continue for years to come. However, the network needs to get faster and cheaper if mass adoption is the goal, which is why so many layer 2 solutions have been developed over the past few years. If the next bull run includes more transactions flooding the Ethereum blockchain, then the most successful layer 2 scaling solutions could see huge gains, as we saw in 2023.