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Expert Opinion: What Will Fuel Ethereum Layer 2 Project Growth in 2023?

According to blockchain analytics platform L2Beat, Ethereum layer-2 networks reached a noteworthy milestone in November 2023 when they surpassed a total value locked (TVL) of nearly $15 billion within their contracts.

The following is a list of Ethere

  • Arbitrum One
  • Optimism, Base
  • Polygon zkEVM
  • Metis

and a number of others.

Less than $10 billion in total value locked (TVL) was present in Ethereum layer-2 networks prior to June 15, 2023. The TVL had been declining since peaking at $11.8 billion in April 2023.

There has been an increase in the total value locked (TVL) on Ethereum layer-2 networks since June 15, 2023. These networks had achieved a new peak of almost $12 billion in total TVL by October 31, 2023. As of the most recent data, the trend had continued, crossing the $13 billion TVL threshold on November 10, 2023, and approaching $14.8 billion.

These networks are becoming more and more prevalent while also offering users a variety of choices and benefits. The most recent is Mara, a cryptocurrency startup with an emphasis on Africa that will soon introduce Mara Chain, an eagerly awaited Ethereum layer 2 chain.

The coordinator of Metis’ decentralization, Elena Sinelnikova, claims that users were deeply affected by Ethereum’s high gas prices during the bull market, which made them look for alternatives when demand began to increase.

The bull market during that period caused Ethereum to be highly nonscaleable during peak times, resulting in slow and expensive transactions. It was unsustainable because the transaction fees alone would run into the hundreds of dollars for a single transaction.

The successful marketing campaigns that layer 2 networks’ development teams ran during the bear market were another factor in their success. An increase in user activity has drawn more participants and raised layer 2 network yields as a result of effective marketing.

According to Sinelnikova, “They are deploying capital to attract new users and to attract new business into DeFi.”

“DeFi people are naturally drawn to places with high yields; this is the nature of business, and they come from all ecosystems.”

Insiders assert that although layer-2 solutions have become more well-liked in the past year due to their improved scalability, they frequently result in a decentralization trade-off.

“Centralized sequencer nodes are used at the execution layer, where transactions are processed, raising concerns about potential censorship or government interference.” According to Kelsey McGuire, Chief Growth Officer of layer-1 network Shardeum, “this centralized aspect in layer-2 implementations challenges the core principles of decentralization and trustlessness that have underpinned the blockchain space.”

McGuire believes that layer 1 protocols will be improved as a result of competition from layer 2 solutions, which will boost the functionality and throughput of the core blockchain layers.

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