⚡The Race to Scale Ethereum (by the numbers)

Layer 2 In-Depth Analysis and Comparison

Since the explosion of DeFi 4 years ago and the ensuing explosion in Ethereum gas fees, debate has raged over how to scale the on-chain ecosystem. To onboard billions of people to crypto, there need to be solutions that are cheap, fast, and seamless.

Broadly speaking, the debate settled into 3 camps:

1. High-throughput, monolithic chains (Solana, Sui, etc)

2. Layer 2s that settle onto Ethereum (Arbitrum, Optimism, Base, etc)

3. Interoperable app-chains (Polkadot, Cosmos, Avalanche, etc)

Since then, at various times, it’s looked like one or another of these camps would win. To briefly recap:

• Spring 2021: Polkadot was a top performer as investors anticipated parachain launches.

• Summer 2021: Solana exploded in usage and price.

• Spring 2022: Terra and other Cosmos chains gained traction, with Terra becoming one of the largest DeFi chains.

• Early 2023: The Arbitrum ecosystem led the way as attention focused on Ethereum’s Shanghai upgrade.

• Fall 2023: Solana was one of the first major tokens to pump going into this newest bull run.

Now, as we sit in June 2024, there are reasons to think that Ethereum L2s are primed to shine once more:

The ETH ETFs have been approved, providing institutional legitimacy and a price buoy to the Ethereum ecosystem.

The recent Dencun upgrade has reduced transaction fees on L2s to pennies.

Both deposits and activity on Ethereum L2s have roughly 4Xed in the past year.

TPS on all L2s combined is up

Value Locked (deposits) in all L2s recently hit an all-time high

In short, Ethereum L2s have more catalysts, lower fees, and growing adoption.

However, while this trend might be clear, what’s less clear is which Layer 2s will win. There are more than 15 Layer 2 protocols built on Ethereum, and it seems more are launched each month. Enough that even full-time analysts have difficulty keeping track of them. All of these chains have their own ecosystems, backers, and incentives programs (points, tokens, grants, etc).

What to do?

Finding the right ecosystem at the right time could lead to huge gains:

• Lucrative airdrops

• Multi-bagger tokens

Choosing the right chain to focus on will give you the best return for your time and capital

The goal of this article is to:

• Compare each L2 using the same objective metrics

• Identify unique opportunities within each L2

• Identify the unique advantages for each L2

• Build a framework for evaluating these L2s

With the total user base of Ethereum Layer 2s growing, the winning chains stand to capture massive usage.

Layer 2 user growth is no joke

Layer 2 Deep Dives in Order

1. Arbitrum

2. Polygon

3. Optimism

4. Base

5. Blast

6. Mantle

7. Linea