VanECK predicts Ethereum Layer 2 networks to reach a staggering $1 trillion in the next 6 years.
VanECK, a global fund manager, is optimistic about the potential of Ethereum Layer 2 (L2) networks, projecting that their value could surpass $1 trillion by 2030.
While VanECK has ambitious goals for L2s, it also expressed a cautious outlook on the long-term prospects of some of these networks. The company evaluated 46 L2 networks across five key areas and expects numerous more networks to emerge in the near future.
According to VanECK’s analysts, Ethereum’s main challenge lies in its limited capacity to handle financial transactions and process data. To address this bottleneck, the solution is offloading data processing and computation to Layer-2 blockchains.
The analysts estimated that Ethereum has the potential to capture 60% of the market share among all public blockchains. Based on this assumption and the volume of assets within the Ethereum ecosystem, they predict a market cap of $1 trillion for L2 networks alone.
Despite its dominance in smart contracts, Ethereum faces scalability issues, as transaction fees and processing times increase with higher usage. The report emphasized that Ethereum’s development is currently focused on improving its ability to process L2 transaction data, exemplified by the recent Dencun upgrade that lowered L2 transaction fees through the use of a specialized data-saving feature called “Blobs.”
As a result, VanECK’s analysts believe that L2 networks will generate significantly more revenue than the mainnet, as they offer superior transaction efficiency and user experience. However, they maintain a bearish stance on the long-term value prospects of most L2 tokens due to fierce competition and the network effect serving as the primary competitive advantage.
The analysts noted that the top seven L2 networks already account for a substantial $40 billion in total value locked, a figure expected to reach $100 billion as several notable projects are set to launch in the next 18 months.
Looking ahead, the analysts envision a future where thousands of use-case-specific L2 solutions dominate the market, alongside a few major players. They also anticipate the rise of a few general-purpose chains that gain prominence as more users join, driven by the network effect.
Additionally, the analysts highlighted the inevitable shift towards the zero-knowledge framework (ZKU) for most roll-ups, citing its numerous advantages and considering it a pivotal evolution in the L2 ecosystem.
VanECK’s prediction coincides with its anticipation of a decision from the SEC regarding its Ethereum ETF filing.
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