VanEck predicts Ethereum layer 2s will achieve a $1 trillion market capitalization by 2030.

Analysts from investment manager VanEck predict that Ethereum’s layer 2 scaling networks will reach a market capitalization of $1 trillion in six years. These networks will consist of thousands of chains designed for specific use cases. The analysts attribute the success of layer 2 blockchains to Ethereum’s limited capacity to process and store data. Currently, there are 46 Ethereum layer 2s with a total value of $39 billion locked, with the largest being Arbirtum with $18 billion. Ethereum’s dominance in smart contracts is hindered by scalability issues, resulting in high transaction fees and processing times during periods of high usage. Ethereum is actively working on improving its ability to process layer-2 transaction data, as seen in its recent Dencun update. The analysts believe that there is potential for significantly higher revenues to be generated on layer 2s compared to the base Ethereum network. However, they express bearish sentiment towards the long-term value of most layer 2-related tokens due to intense competition. The top seven Ethereum layer 2 tokens already have a fully diluted valuation of $40 billion, and this is expected to increase to $100 billion with the launch of several strong projects in the next 18 months. The analysts predict a future where there are thousands of use-case-specific layer 2s, with only a few major players in the general-purpose market. These networks will be segmented by sector, application, or function, with some chains dedicated to specific purposes such as decentralized social media. The value of the general-purpose chains will be driven by the network effect, where more users increase their value. The analysts also expect most roll-ups to eventually adopt the zero-knowledge framework (ZKU) due to its advantages.