- Ethereum Layer-2s have proven to be a solid line of defense against Layer-1s.
- Ethereum’s TVL outperformed Solana and Avalanche and could also target market capitalization.
The 2021 bull run revealed some major downsides in Ethereum [ETH] blockchain. Thanks to this, the term ‘Ethereum killer’ gained traction as a way to describe the many layers of competition striving for first place by trying to overthrow the network’s dominance.
How much is 1,10,100 ETHs worth today?
Fast forward to the present, Ethereum is still the most dominant PoS blockchain in some key areas. Layer Blockchains like Solana [SOL] and avalanche [AVAX] have therefore not succeeded in dethroning Ethereum.
The latter’s secret weapon may be its Layer-2 networks, which has allowed it to overcome the previously existing scalability limitations.
A recent grayscale analysis revealed that optimism [OP]Basis and Arbitrum [ARB]three Ethereum Layer-2s, have surpassed Avalanche and Solana in TVL.
This is because Ethereum is already miles ahead of its competition in terms of adoption and the dApps that operate on its network.
????After a period of strong growth, the best performing Layer 2s #Arbitrum, #Optimism And #BASING surpassing Ethereum rival Layer 1s such as Solana and Avalanche in terms of total value locked (TVL) as of September 25.
Here’s why that’s important. (1/6) pic.twitter.com/DpTJyLQ5Nj— Grayscale (@Grayscale) September 29, 2023
Layer-2 networks successfully help Ethereum overcome its previous limitations. The L2s facilitate transaction processing, allowing the dApps to operate efficiently and cost-effectively. There is one key component that has allowed Layer-2 networks to surpass some Layer-1 blockchains.
While the latter need to build their own dApps and customer base, Layer-2s benefit from Ethereum’s pre-existing dApps, of which there are plenty. Moreover, the same Layer-2s can also attract dApps themselves.
Layer 2 blockchains process transactions from dApps and then ‘batch’ them together before sending a compressed version back to the main network for settlement, acting as a side road or even a dedicated bus lane that augments a major highway. (2/6)
— Grayscale (@Grayscale) September 29, 2023
Can Ethereum Layer-2s Secure Market Capitalization Dominance?
These observations confirmed that Ethereum was still capable of robust supply and demand at the time of writing. But while Layer-2 networks saw robust TVL growth, they still lagged behind Solana and Avalanche in market capitalization.
Source: Santiment
According to the latest data, Solana’s market cap was just over $8.8 billion, while Avalanche had a market cap of $3.27 billion at the time of writing. Of the aforementioned Layer-1s, Arbitrum came closest at $1.17 billion, followed by Optimism at $1.06 billion.
Base had the lowest market cap among them, at $530 million.
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It makes sense that the Layer-2 networks would have lower market caps, as their counterparts are Layer-1 networks that have been around longer. Nevertheless, the Layer-2 market caps highlighted their rapid growth.
Judging from these factors, it’s possible they could be closer to Solana and Avalanche. These numbers also highlight the fact that it is now harder to beat Ethereum than ever before.