Layer 2 Statistics and Trends

Layer 2 Statistics and Trends

Discover the top Layer 2 trends on Ethereum for 2023. Our analysis provides insights into TVL, sequencer centralization, and more.

Ethereum's Layer 2 solutions are marking a new era of growth and innovation. With a surge in total value locked, the trust and preference for these platforms are palpable. The ascent of Optimistic Rollups and the strategic pivot of alternative Layer 1 blockchains to Ethereum's Layer 2 showcase a transformative shift in the ecosystem.

However, as with any evolution, challenges like potential centralization loom. This post delves into the heart of Layer 2's latest statistics, trends, and concerns, painting a vivid picture of its influential role in shaping Ethereum's future.

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1. Layer 2 Total Value Locked is Over $10 Billion

Layer 2 solutions on Ethereum have been making significant strides, and the numbers are a testament to their growing importance in the ecosystem. As of 8th August, the total value locked (TVL) across various Layer 2 platforms has crossed the $10 billion mark. Here's a breakdown of the top players and their contributions:

  1. Arbitrum One: With a TVL of $6.01 billion, it holds a dominant market share of 56.98% and is an Optimistic Rollup.
  2. OP Mainnet: Holding $2.85 billion in TVL, it accounts for 27.01% of the market. It's based on Optimistic Rollup technology, catering to a universal audience.
  3. zkSync Era: With a TVL of $429 million, it has a market share of 4.06%. Employing ZK Rollup technology, it's in Stage 0 and serves a universal purpose.
  4. dYdX: This exchange-focused platform has locked $337 million, capturing 3.19% of the market. It uses ZK Rollup technology.
  5. Base: With a TVL of $145 million, it holds 1.37% of the market. It's also an Optimistic Rollup.

2. Optimistic Rollups are more Popular than zkRollup’s

Optimistic Rollups have clearly taken the lead in the Ethereum Layer 2 solution landscape, with platforms like Arbitrum One and OP Mainnet collectively locking in a staggering $8.86 billion, which translates to a combined market share of approximately 84%. This dominance is a testament to their early adoption and seamless integration with existing Ethereum infrastructure.

On the other hand, zkRollups, represented by platforms such as zkSync Era, dYdX, and Starknet, have a combined Total Value Locked (TVL) of around $879 million, making up roughly 8.3% of the market share. While they currently trail Optimistic Rollups in adoption, their unique scalability and efficiency features suggest a promising future in the Ethereum ecosystem

GMX is the Highest TVL Application on Layer 2

3. GMX is the Highest TVL Application on Layer 2

GMX stands out as the premier application on Layer 2 with a Total Value Locked (TVL) of $540 million. This positions GMX at the forefront, significantly ahead of other prominent applications like Uniswap V3 and Radiant, which have TVLs of $263.38 million and $191.69 million, respectively. The dominance of GMX in the Layer 2 landscape is evident, highlighting its significant role and trust within the Ethereum Layer 2 ecosystem.

4. Centralized Exchanges are Deploying to Layer 2

Centralized exchanges recognise the potential of Layer 2 solutions and are actively deploying to this advanced infrastructure. A notable example is Coinbase, which has launched its Base Layer 2, an optimistic rollup utilizing the OP stack. This initiative has already garnered significant traction, with over $146 million in total value locked (TVL). 

Another prominent instance is Mantle, an Optimistic L2 with over $90 million in TVL developed and overseen by the team and community associated with Bybit. These moves by major centralized exchanges underscore the growing importance of Layer 2 in enhancing scalability and efficiency in the crypto ecosystem.

Base Layer 2

5. Arbitrum and zkSync Have the Most Bridged ETH

Layer 2 solutions, Arbitrum and zkSync, are at the forefront regarding the amount of Ethereum bridged. Arbitrum boasts the highest Total Value Bridged (TVB) of 2,744,190 ETH, while zkSync follows closely with a TVB of 1,251,438 ETH. These figures underscore the trust and adoption these platforms have garnered in the decentralized space. Other Layer 2 solutions, such as StarkNet and Optimism, also show substantial activity, with TVBs of 195,953 ETH and 581,339 ETH, respectively. 

The high volume of bridged ETH indicates the growing preference of users and developers for Layer 2 solutions, seeking scalability and reduced transaction costs. The data, sourced from analytics by @gm365, further emphasizes the dynamic evolution of Ethereum's ecosystem, with Layer 2 platforms playing a pivotal role.

Layer 2 Bridged ETH

6. Alternative Layer 1’s Migrating to EVM Layer 2’s

The migration of alternative Layer 1 blockchain to Ethereum's Layer 2 solutions underscores a strategic shift in the blockchain ecosystem. Celo, developed by CLabs, exemplifies this trend with its proposal to transition from a standalone Layer 1 to an Ethereum Layer 2. This move isn't just about interoperability or developer convenience; it's fundamentally about cost-efficiency. 

By transitioning to Layer 2, platforms like Celo can sidestep the hefty expenses associated with issuing inflationary staking rewards to incentivize validators on their native networks. Instead, they can leverage Ethereum's established security at a fraction of the cost, effectively "renting" Ethereum's robust security infrastructure rather than building and maintaining their own.

Celo's proposed shift to Ethereum's Layer 2, using Optimism's OP Stack, is a testament to this cost-saving strategy. The migration not only promises enhanced liquidity sharing and a seamless developer experience but also signifies a broader industry recognition of the economic advantages of Layer 2 solutions. By tapping into Ethereum's security, alternative Layer 1 platforms can redirect resources from network maintenance to innovation and growth, marking a pivotal moment in blockchain evolution.

CELO Layer 2 transition

7. Layer 2 Sequencers Exhibit Centralization Concerns

A deep dive into the Layer 2 landscape reveals potential centralization risks, especially concerning sequencers. Sequencers are pivotal in the Layer 2 architecture, responsible for ordering and batching transactions before they're finalized on the main chain. Their mode of operation and failure mechanisms can greatly influence the decentralization and security of the Layer 2 solution.

For instance, platforms like Arbitrum One" OP Mainnet, and Base utilize a self-sequencing mechanism. This means they control their own transaction ordering, which could lead to potential centralization. If these sequencers fail, the platforms have mechanisms like "Self propose" or "Cannot withdraw", which can impact user funds and platform operability.

On the other hand, solutions like zkSync Era, dYdX" and Immutable X rely on various mechanisms like "Enqueue via L1" or "Force via L1" in case of sequencer failures. These methods can offer more security but might also introduce latency or complexity. It's crucial for users and developers to understand these nuances, as the choice of Layer 2 solution can significantly impact the decentralization, security, and user experience of their applications.

Layer 2 Sequencers

Bottom Line

Layer 2 solutions are reshaping Ethereum's landscape, offering enhanced scalability and reduced transaction fees. As the ecosystem evolves, it's evident that Layer 2 platforms like Arbitrum and zkSync are gaining significant traction, with billions in total value locked. However, as with any emerging technology, there are challenges to navigate, such as potential centralization concerns around sequencers. Users and developers must remain vigilant, understanding the nuances of each Layer 2 solution to make informed decisions. The future of Ethereum looks promising, with Layer 2 solutions at the forefront of its evolution.

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