Ethereum's Layer-2 Networks Predicted to Hit $1 Trillion Market Cap in Six Years
Summary:
This article talks about the future of Ethereum's layer-2 networks (L2s), with projections from investment management firm Van Eck suggesting a $1 trillion market capitalization within six years. The firm expects thousands of chains tailored for specific applications in the future. However, they also point out potential issues, particularly with Ethereum's scalability, and are wary about the long-term value of L2-related tokens due to intense competition. The firm predicts that most roll-ups will eventually transition into the zero-knowledge framework (ZKU).
According to investment management firm Van Eck, Ethereum's secondary scaling networks, or layer-2 blockchains, are projected to achieve a staggering market capitalization of $1 trillion in half a dozen years. The future of these networks, they predict, will consist of thousands of chains, each specialized for particular applications. This growth is expected to balance Ethereum's main disadvantage - its restricted ability to process, store and compute data, as outlined by Patrick Bush and Matthew Sigel in a recent report.
The pair arrived at this substantial market cap prediction by anticipating that Ethereum could capture 60% of the public blockchain market share, and then gauged the volume of assets within the Ethereum ecosystem. At present, there are 46 secondary Ethereum networks collectively housing $39 billion, with Arbirtum, the largest, hosting $18 billion, as reported by L2BEAT.
"Ethereum's dominance in smart contracts faces a critical hurdle: scalability," wrote the analysts. High transaction fees and increased processing time are the thorny issues confronting the network which boasts peerless security and decentralization. Ethereum, however, is now focusing on improving how much secondary transaction data it can process. This intent was demonstrated with its recent Dencun update which reduced L2 transaction fees through the implementation of a data-saving tool known as "Blobs."
The analysts also highlighted the potential for L2s to generate "substantially more" revenue than the base Ethereum network due to their superior transaction throughput and user experience.
However, the study's authors expressed scepticism about the long-term value of most L2-related tokens due to intense competition. Despite projections of strong projects launching in the next year and a half, raising the total valuation of the top seven Ethereum L2 tokens to $100 billion, they maintain that it is unlikely the crypto market would be capable of absorbing this uptake without major discounts.
The future, according to the analysts, will feature thousands of niche-specific secondary networks; each tailored to serve a specialized purpose. Scarce merges into the general-purpose secondary network market are predicted to be attributed to the network effect, where the value of blockchains is directly correlated with user quantity. Most roll-ups, they added, will likely transition to the zero-knowledge framework (ZKU) because of its numerous benefits.
Published At
4/4/2024 7:48:36 AM
Disclaimer: Algoine does not endorse any content or product on this page. Readers should conduct their own research before taking any actions related to the asset, company, or any information in this article and assume full responsibility for their decisions. This article should not be considered as investment advice. Our news is prepared with AI support.
Do you suspect this content may be misleading, incomplete, or inappropriate in any way, requiring modification or removal?
We appreciate your report.