Ethereum’s (ETH) salvation? Layer 2 solutions have been gaining momentum in recent months. The value locked in on the protocols has just reached a new record.
It’s no news to anyone that Ethereum (ETH) fees have become prohibitively expensive in recent months, and the trend doesn’t seem to be reversing. In November, average fees hit record highs, rising by +700% over the last four months.
The use of second layer solutions, or layer 2, has therefore become commonplace if one wishes to interact with the network without paying exorbitant fees.
Hence the breakthrough in total locked-in value (TVL) on layer 2, which has reached a new record in recent days. According to data from L2Beat, over 1.28 million ETH were locked up at the weekend, representing $5.6 billion at the time.
This corresponds to an increase of +7.4% over the last seven days. Layer 2 Arbitrum is the clear leader in terms of value locked in. It has a market share of over 47%. It is followed by dYdX, with 17%, and Loopring in third place, with 10%
Layer 2 ranking by locked value (Source: L2beat.com)
Ethereum criticized in the face of its competitors
At present, a simple ERC-20 token transfer on the Ethereum network can cost users more than $40. As of November 9, the average fee was over $62, and the increase has been ongoing
Progression of average transaction fees on Ethereum (Source: Messari)
Some critics therefore argue that the network only becomes affordable if an external solution is used, as the first layer is too expensive. Several leading figures have expressed their disillusionment with the payment network, including Zhu Su, CEO of Three Arrows Capital
Yes I have abandoned Ethereum despite supporting it in the past.
Yes Ethereum has abandoned its users despite supporting them in the past.
The idea of sitting around jerking off watching the burn and concocting purity tests, while zero newcomers can afford the chain, is gross.
– Zhu Su (@zhusu) November 21, 2021
Yes, I have abandoned Ethereum despite supporting it in the past. Yes, Ethereum has abandoned its users, although it supported them in the past. […] No newcomer can afford to use the blockchain.
So the question is whether Ethereum will manage to maintain its first-mover advantage as its competitors begin to gain momentum. The race towards Ethereum 2.0 and proof of stake is in any case more crucial than ever for the second largest cryptocurrency of the moment.
