Obviously, we have just experienced a big wash, and the market is full of fake news. We have once again seen wealth transfer from impetuous people to calm people, but careful people have also seen that funds have transferred to the Layer2 sector. Coinbase launched the base chain last year, Binance has launched opBNB, and even the latest Binance Launchpool launched the first Layer3 project XAI on Arbitrum. Do you understand what it means?
In the 2024 crypto market investment outlook, it was mentioned that "layer2 will usher in spring". I would like to add here that Layer2 not only includes ETH but also BTC and other public chain's Layer2. From the market share point of view, ETH's Layer2 occupies half of the market, but BTC's layer2 can unlock a larger market scale. This issue specifically analyzes why Layer2 will usher in spring and taps into the potential projects of Layer2 and Layer3.
None of our opinions are groundless. They are because we have been working on the front line of the crypto market for a long time and are well aware of the ups and downs and undercurrents in the currency circle. Layer2 is the upgrade of L1 and is also the breakthrough for the entire crypto market.
ETH Layer2
In the past year, the locked value of ETH Layer2 has increased from 4.8$B to 20.3B, an increase of more than 320%, while the market value of the entire crypto market has increased by 112% and BTC has increased by 160%. It can be seen that the Layer2 sector is one of the hot spots, and 20.3B accounts for less than 1/10 of ETH's circulating market value.
In terms of circulating market value, there are 5 Layer2 projects with a market value of more than 1 billion US dollars. The tokens are MATIC, OP, IMX, ARB, and MNT. These are all ETH-based Layer2. The trading volume rankings in the past 24 hours are ARB, MATIC, OP, MNT...
From the perspective of locked value, ARB is the undisputed leader at present, and OP occupies nearly 30% of the market share. The two currently have 78% of the market share, and the locked value on the Ethereum chain is nearly 16 $B. From this, we can see that Optimistic Rollup currently suppresses ZK Rollup. In addition, the leader of ARB is $GMX, and the leader of OP is $SNX. Note that the growth of Manta cannot be ignored.
Base VS opBNB
Coinbase and Binance are also obsessed with Layer2. Polygon (formerly known as Matic Network) is a Layer2 product jointly supported by Binance and Coinbase. Understanding why they support the construction of Layer2 can give us a glimpse into what stage the current crypto market is in. There is only one reason: to build on-chain applications for an open financial system and unlock the last billion users for the blockchain industry. According to Triple data, as of 2023, the global cryptocurrency ownership rate is estimated to be 4.2% on average, and the number of global cryptocurrency users exceeds 420 million. Unlocking the next billion users requires more complete basic network facilities, and Layer2 is the key breakthrough.
From Layer 1 to Layer 2, we can clearly feel that the block speed is getting faster and faster, the throughput is getting larger and larger, the Gas fee is getting lower and lower, and even SKALE has proposed zero Gas fee. Last year, Base launched a block time of 2 seconds. The market was only hot for three months, and the speculative atmosphere began to dissipate. Next, the real value will be reflected. I look forward to Base's performance in 2024.
Base chain monthly TVL ranking:
opBNB currently has a block time of 1 second and 858,000 daily active accounts, which is on an upward trend. opBNB provides lower fees and higher throughput to unleash the full potential of the BNB chain. opBNB is a high-performance Layer2 solution in the BNB ecosystem, built using the OP Stack like base. From games and decentralized exchanges to daily use and digital collectibles, opBNB meets a variety of needs while providing optimal performance.
It should be noted that opBNB is discussing an expansion in the first quarter of 2024, from the original 100M to 150M, while reducing costs by 10 times, which may stimulate the development of opBNB's ecological projects.
OpBNB protocol ranking
BTC layer2
In April 2024, the BTC halving will be one of the hottest events in the market in the near future. As the halving time approaches, funds will focus more on Bitcoin. In addition, if several Bitcoin ETF applications are approved in January, more liquidity will be injected into BTC. The ecosystem based on Bitcoin has attracted the attention of investors, and Layer2, which has a good narrative story, is likely to become the first choice for funds pursuing Alpha returns.
Currently, BTC Layer2 is not as complicated as ETH and can be easily screened. Liquid runs as a consortium chain and cannot issue coins. Lightning chooses to be an open network, but does not have a global state or a complete virtual machine. Stacks and RSK have open networks and have issued their own network tokens STX and RSK. They both aim to expand the functions and application scenarios of Bitcoin. The difference between the two lies in the design of network compatibility and network security assurance. In comparison:
The construction of the Stack network is more closely connected with Bitcoin, while RSK is EVM compatible, which is more conducive to developers entering the RSK ecosystem; STX tokens are tied to network development and can better capture the value of ecological development; in terms of governance, Stack can allow any community member to participate, while the RSK governance model is to represent the community through a governance committee composed of 5 seats. Therefore, the Stack network and ecological projects are more worthy of attention.
From the perspective of project value: For investors, there are not many BTC Layer2 targets available. Stack has developed well overall, and its current market value has reached 2.3 billion US dollars. The price of the token STX has risen by 800% in the past year. Its ecology deserves our attention. For example, RSK has a current market value of 317 million US dollars, but the number of active transactions per month on the network is only 68,000.
Therefore, the overall BTC Layer 2 concept track is still far behind the maturity of Ethereum Layer 2; but as the infrastructure of the Bitcoin ecosystem becomes increasingly complete, it is believed that it will attract more and more projects and investors’ attention.
Layer3
The latest Binance Launchpool project XAI has brought Layer3 into the vision of more people. Layer3 has developed to the stage of entering the secondary trading market, and XAI is the first Layer3 of the gaming blockchain built on Arbitrum.
Layer3 is an advanced protocol built on existing Layer2 solutions that provides interoperability and application-specific features. This means that Layer3 is highly customizable and able to meet the specific needs of developers. Currently, most Layer 3s are built on Ethereum.
specific project:
XI
Xai enables potentially billions of traditional gamers to participate in open trading, allowing them to trade in-game items in their favorite games without having to interact with a crypto wallet. Currently, there are 3 days left for the project to participate in staking mining on Binance Launchpool, and Binance will list XAI on January 9, 2024 at 10:00 (UTC).
The testnet has more than 4 million daily transactions, more than 150 million total transactions, and nearly 500,000 connected wallets.
Raised over $20 million through node sales in about 3 weeks
Orbit decision
In 2023, the Arbitrum Foundation also released a new feature - Arbitrum Orbit, which is envisioned as a Layer3 blockchain built on top of the Arbitrum Nitro platform. In addition to lower transaction costs and enhanced scalability, developers will be able to create their own self-managed private blockchains on the Arbitrum Nitro platform. This allows developers to use customized blockchains based on their specific needs. XAI uses this technology.
zkSync Hyperchains
The zkSync hyperchain launched by the zkSync team can be called Layer 3, using Layer 2 for settlement. zkSync Hyperchains are powered by the same zkEVM engine available on the ZK Stack, where all ZKP circuits remain the same and inherit the security of Layer 1 no matter who deploys them. One benefit is that Layer 3 based on the same Layer 2 will enable faster messaging between each other and interoperability across a wider ecosystem.
Orbs
Orbs is focused on solving the scalability issues facing the Ethereum blockchain. Orbs sees its Layer 3 as “enhanced execution,” where developers are able to write and deploy their smart contracts on Orbs’ own decentralized network without having to worry about the network’s underlying infrastructure. This also provides developers with the convenience of not having to maintain physical servers. Currently, Orbs works with a number of Layer 1 and Layer 2 protocols, including Ethereum, BNB Chain, Avalanche, Polygon, and more.
Until V4
Deri V4 is a decentralized derivatives trading platform built on Layer3. It uses Arbitrum Nitro to achieve efficient cross-chain futures, options and derivatives. This changes the original DEX model, and you can perform on-chain hedging, speculation and arbitrage.
Summarize:
From the development of Layer2, I see that the entire crypto market is working hard to unlock the next billion users. Music, games, movies and TV may be breakthroughs, but this means a higher standard of infrastructure. We see that the criticisms of Web3 games are being solved one by one. Layer2 and Layer3 have entered zero Gas, and the block speed has entered the millisecond level. From games and decentralized exchanges to daily use and digital collectibles, there will be a qualitative leap.
