Investment heavyweight VanEck has predicted that the base valuation of Ethereum layer 2 (L2) ETH/USD networks could surpass $1 trillion by the end of this decade.
What Happened: VanEck conducted a comprehensive evaluation of 46 L2 networks across five crucial areas and expects the rise of “thousands” of rollups, as reported by CoinDesk on Thursday. Currently, Arbitrum boasts the most substantial ecosystem with over $18 billion in locked tokens, holding a significant portion of the $36 billion locked across all networks.
VanEck’s analysts, Patrick Bush and Matthew Sigel, predict that Ethereum will eventually secure 60% of the market share across all public blockchains. This estimation is based on the volume of assets within the Ethereum ecosystem.
The future growth of L2 networks will rely on several factors including transaction pricing, developer and user experience, trust assumptions, and ecosystem size, as per VanEck. Despite this, the firm maintains a “generally bearish” stance on the long-term prospects of several networks due to anticipated fierce competition.
The firm also warned of potential risks including an oversupply of L2 tokens. VanEck predicts a possible struggle for the crypto market to absorb an additional $100 billion in Future Delivery Value (FDV) of L2 tokens expected to enter the market in the next year to year and a half.
Why It Matters: These predictions come amid financial experts like Raoul Pal‘s optimism about the rapid adoption rate of cryptocurrencies. Pal asserted that cryptocurrencies are “still being adopted at twice the speed of the Internet.”
However, potential backdoors in all Ethereum L2s were acknowledged by Ethereum founder Vitalik Buterin in August. These “training wheels,” as Buterin termed them, could pose a significant risk to the projected growth and valuation of Ethereum’s Layer 2 networks.
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