Ethereum Layer 2 Options Evolve After Dropping $2B in a Month
Does this show the Importance of Ethereum in the Cryptocurrency Industry?
Ethereum has a long history of playing an important part in the cryptocurrency industry, and its influence has now expanded to include applications for decentralised finance (DeFi) and non-fungible tokens (NFT). In spite of the astounding innovation that Ethereum has made available, its scalability has been severely constrained as the chain’s capabilities have increased.
Positive Expectations Regarding Ethereum’s Layer 2 Solutions
Layer 2 (L2) technologies were developed in order to alleviate the load that was being placed on Ethereum’s mainnet. These technologies allow transactions and other activities to be carried out off-chain, and then they are later reconciled with the mainnet. These L2 solutions can be implemented specifically for the Ethereum blockchain to scale the DeFi applications through off-chain processing, while at the same time maintaining the security standards and decentralisation that the mainnet is famous for.
Recent Advances Made on the Industry’s Leading L2 Platforms
The Optimism project, which is an L2 based on the Optimistic rollup, has only recently begun an airdrop of its native token, OP. This airdrop was supposed to bring in a Total Value Locked (TVL) of $908 million, however market enthusiasm fell short of expectations. However, this is not merely a token issue; rather, it represents the birth of a bigger governance framework called the “Optimism Collective,” which is intended to expand over the course of the subsequent quarters.
During the airdrop, unfortunately, some customers were able to claim their OP tokens before the official launch due to some technical difficulties, which caused a selloff. As a consequence of this, the value of the OP token in trade fell from $4.5 to $1.38 in the span of 72 hours, representing a reduction of 70%.
On the similar topic, Boba Network, another L2 platform that claims a TVL over $81 million, announced aspirations to become a multi-chain network by extending beyond Ethereum. This would allow Boba Network to provide its own cryptocurrencies in addition to Ethereum. Boba Network is beginning to connect with other EVM-compatible chains by collaborating with Fantom and Moonbeam, a Polkadot parachain. This will enable decentralised applications (Dapps) to access cloud-based data repositories that are equipped with Hybrid Compute capabilities.
Ethereum, in addition to L2 Solutions
Although L2 solutions have been available from 2019, it wasn’t until 2021 that they began to see significant adoption rates. The L2 solutions reached their zenith in April 2022, when their Total Value Locked (TVL) reached a staggering $7.2 billion. Unfortunately, as a result of a market meltdown on May 9th, the TVL dropped to $5.04 per share.
At the same moment, the value of Ethereum began to decline, falling by 33.52% to its current level of roughly $1,760 and trading in the market. Due to the fact that the market for Ethereum is still in a bearish position, it has been challenging for the chain to emerge from it.
The relevance of the market in determining investment patterns is demonstrated by the connection that exists between Ethereum and L2 solutions. In the event that the market environment surrounding Ethereum improves, the TVL in L2 solutions may also increase. This, in turn, may entice additional investments into the chain.
