Ethereum L2s Surpass Non-Ethereum Chains in Value Locked

Ethereum L2s Achieve Historic Milestone

Ethereum Layer 2 (L2) networks have reached a significant milestone by surpassing non-Ethereum blockchains in the total value locked (TVL). As of early 2024, Ethereum L2 protocols hold $20.7 billion, compared to $19.6 billion for all other blockchains. This achievement marks a pivotal moment in the evolution of Ethereum's ecosystem.

Understanding L2 Metrics

The TVL metrics for Ethereum L2s differ from those of Layer 1 (L1) blockchains. For L2s, the value reflects the aggregated assets, including native tokens, while for L1s, it indicates assets locked in decentralized applications. This distinction is crucial for accurately interpreting the growth and impact of Ethereum's L2 networks.

Growth and Predictions

Back in 2021, many were skeptical about L2s surpassing L1s, with only a minority predicting it would never happen. At that time, L2s were significantly smaller than L1s, a gap that widened during the crypto winter and the Terra/Luna collapse in 2022. However, by January 2024, L2s have not only closed this gap but have surpassed L1s in TVL.

Arbitrum's Dominance

Arbitrum, a leading Ethereum L2 network, is nearing a 50% share of the L2 ecosystem's TVL. The ecosystem is concentrated, with Arbitrum and four other networks—OP Mainnet, Base, Metis Andromeda, and Manta Pacific—accounting for over 90% of the total TVL. Arbitrum's resurgence in dominance highlights its growing influence within the Ethereum L2 space.

The remarkable growth of Ethereum's L2 networks underscores the dynamic and evolving nature of blockchain technology. As these networks continue to expand, they play a crucial role in the broader cryptocurrency landscape.