The valuation is based on the future expected usage of several layer 2 networks across usecases such as metaverse, banking and gaming.
VanEck, an investment firm, projects that Ethereum layer 2 (L2) networks could attain a valuation surpassing $1 trillion by 2030, albeit maintaining a “generally bearish” outlook on several of these networks’ long-term prospects.
Examining 46 L2 networks across various parameters, VanEck anticipates the emergence of “thousands” of rollups. Arbitrum, currently boasting over $18 billion in locked tokens, leads as the largest ecosystem among the assessed networks, capturing a substantial portion of the total $36 billion locked across all 46 platforms.
VanEck analysts Patrick Bush and Matthew Sigel estimate that Ethereum is positioned to secure 60% of the market share across all public blockchains, basing their forecast on the volume of assets within the Ethereum ecosystem.
Layer 2 networks function as secondary infrastructures built atop main blockchains, like Ethereum, to address scalability and speed issues, with rollups representing a specific type of scaling mechanism.
The long-term growth trajectory of L2 networks, according to VanEck, will be influenced by several factors:
- Transaction Pricing: The cost of transactions on L2 networks is crucial for user adoption, influenced by factors such as data compression, scale, proving costs, and profit margins.
- Developer Experience: Seamless compatibility with the Ethereum Virtual Machine is essential to attract developers, facilitating the porting of smart contracts and tooling from Ethereum.
- User Experience: User onboarding speed and withdrawal processes significantly impact overall user experience.
- Trust Assumptions: Building trust regarding data availability and implementing measures to prevent exploits and hacks are critical for L2 networks.
- Ecosystem Size: The strength of an L2 network’s ecosystem, measured by the value locked within it, indicates engagement and opportunity capture.
However, VanEck also acknowledges the risks associated with L2 networks, anticipating fierce competition among them and expressing a bearish sentiment towards their long-term performance.
The analysts highlight the considerable value already attributed to the top 7 L2 tokens, totaling $40 billion in Fully Diluted Value (FDV). Additionally, with numerous robust projects set to launch in the medium term, an influx of approximately $100 billion in FDV across L2 tokens is expected within the next 12-18 months. Managing such supply without substantial discounts poses a significant challenge for the crypto market, according to VanEck.
