Ethereum L2 Ecosystem Surpasses Non-Ethereum Blockchains in Value

Ethereum L2s Achieve Historic Milestone

Ethereum's second-layer networks (L2s) have reached a significant milestone by surpassing the total value locked (TVL) of all non-Ethereum blockchains. As of early 2024, Ethereum L2s hold $20.7 billion, compared to $19.6 billion for other blockchains. This achievement highlights the growing importance and adoption of Ethereum L2 solutions.

Understanding the Metrics

The valuation metrics differ between L1 and L2 networks. For L2s, the TVL includes native tokens and assets, while for L1s, the focus is on assets locked within decentralized applications. This distinction is crucial for understanding the comparative values of these blockchain ecosystems.

Growth of L2s Despite Challenges

Back in September 2021, predictions about the "L2-over-L1" flippening varied, with many doubting its occurrence. At that time, L2s were significantly smaller than L1s, especially during the crypto winter and the Terra/Luna collapse in early 2022. Despite these challenges, Ethereum L2s have grown exponentially, marking an all-time high in TVL at the start of 2024.

Arbitrum's Dominance

Arbitrum (ARB) has been pivotal in this growth, approaching a 50% dominance within the Ethereum L2 ecosystem. Alongside Arbitrum, networks like OP Mainnet, Base, Metis Andromeda, and Manta Pacific comprise over 90% of the L2s' total value. Arbitrum's resurgence and impending dominance illustrate the concentrated nature of the L2 landscape.

In summary, the Ethereum L2 ecosystem's recent achievements underscore its expanding influence and the shifting dynamics within the blockchain industry. As L2 solutions continue to evolve, their impact on the broader blockchain environment remains significant.