Ethereum Layer 2 TVL Clocks 205% Growth in 2024, Hitting Record Highs

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As a seasoned crypto investor with a knack for spotting promising opportunities, I must say that the Ethereum ecosystem has been nothing short of impressive this year. The surge in TVL on Layer 2 platforms like Arbitrum and Base is a testament to the growing interest and confidence in Ethereum-native assets.

Despite facing criticism, the Ethereum network has consistently performed exceptionally well. The surge in the combined total value locked (TVL) within Layer 2 platforms – reaching an impressive 205% year-on-year growth and a record high of $51 billion – underscores growing investor interest and strong asset value expansion within Ethereum-based assets.

Starting at approximately $16.6 billion in November 2023, the value locked (TVL) on Ethereum’s Layer-2 has experienced an impressive increase of 205%, currently standing at around $51 billion, according to recent data from L2BEATS.

Courtesy: L2BEAT

Solutions for Ethereum Layer 2 have significantly contributed to improving the network’s ability to handle a larger volume of transactions by shifting them to secondary chains. This not only lessens the strain and risk of congestion on the main Ethereum network but also decreases wait times and transaction costs at the same time.

As a researcher delving into the world of Ethereum, I’ve encountered a perspective shared by certain industry professionals suggesting potential cannibalism among L2 solutions. This could theoretically impact Ethereum’s primary network revenue and potentially stifle the growth of Ether’s price.

Top Two Ethereum Layer Networks: Arbitrum and Base

The significant factors pushing Ethereum Layer 2’s Total Value Locked (TVL) beyond its record level of $51 billion are Arbitrum and Base. As the dominant player in Layer 2, Arbitrum itself accounts for over $18.3 billion worth of TVL, representing a substantial 35% share of the entire TVL.

In addition, Coinbase Layer 2 (L2) network Base is the second-largest L2 network with a total value locked (TVL) of $11.4 billion, accounting for approximately 22% of the overall cumulative L2 TVL. During the week leading up to November 28, Arbitrum’s TVL surged by more than 12%, while Base experienced an increase of 11.4%.

On November 26th, Base achieved an unprecedented transaction speed of 106 per second (TPS), a milestone that occurred as its Total Value Locked (TVL) surpassed $10 billion for the first time. Moreover, Base has just passed the 1 billion mark in total transactions, largely driven by the persistent memecoin craze during this bull market phase.

How Dencun Upgrade Contributed to L2 Fee Stabilization

After the significant change known as The Ethereym Merge in 2022, transforming Ethereum into a Proof-of-Stake network, there was another major overhaul called Dencun that took place in March 2024.

In his remarks, Nick Dodson, the co-founder and head of Fuel Labs, highlighted the significant part they played in maintaining fee consistency within Layer 2 network systems. In simpler terms, he stated that they helped keep transaction costs steady across these networks.

Regarding EIP-4844, many discussions revolve around reducing fees, but in essence, it’s primarily about maintaining stable fees. The main focus is on increasing capacity and scaling, rather than significantly decreasing fees.

After implementing upgrades, various Ethereum Layer 2 systems like Starknet, Optimism, Base, and Zora OP Mainnet observed a significant decrease of approximately 99% in average transaction costs.

The open interest in CME’s ether futures has nearly doubled since the election.

All-time highs by a wide margin, with futures premiums trailing above BTC for the past few days.

— Vetle Lunde (@VetleLunde) November 25, 2024

Currently, Ethereum’s price (ETH) is rebounding and has surpassed its previous week’s low of $3,000 by approximately 15%. This recovery trend comes as the open interest in Ethereum futures contracts on the CME exchange reaches a new record high. This surge indicates that investors are increasingly optimistic about Ethereum’s future, with the next significant hurdle being a push towards $4,000. Following this milestone, Ethereum may aim for a fresh all-time high.

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2024-11-28 19:08