Global fund manager VanECK predicts that Ethereum Layer 2 (L2) networks could reach a value of over $1 trillion by 2030. Despite this optimistic forecast, VanECK remains cautious about the long-term prospects of some of these networks.

VanECK assessed 46 L2 networks across various key areas and anticipates the emergence of “thousands” of new networks in the near future. The primary challenge for Ethereum is its limited capacity to process, store, and compute data for financial transactions. To address this bottleneck, much of the data processing and computation is being offloaded to Layer-2 blockchains.

The analysts at VanECK estimate that Ethereum could capture 60% of the market share across all public blockchains. With this market share, they predict a $1 trillion market cap for L2 networks alone. While Ethereum excels in smart contracts, scalability remains a critical hurdle as transaction fees and processing times increase with higher usage.

Recent developments on Ethereum focus on improving the network’s ability to process L2 transaction data, such as the Dencun upgrade and the introduction of a data-saving feature called “Blobs.” Analysts believe that L2 networks will generate more revenue than the mainnet, as they offer better transaction efficiency and user experience.

Despite their optimism for L2 networks, analysts are bearish on the long-term value prospects of the majority of these networks. They emphasize cutthroat competition among L2s, where the network effect is the primary differentiator. The top seven L2 networks currently account for $40 billion in total value locked, a figure expected to rise to $100 billion with the launch of new projects in the next 18 months.

Looking ahead, analysts foresee a future with thousands of use-case-specific L2 solutions and a few major players in the broader market. They also anticipate the rise of general-purpose chains due to the network effect enhancing their value as more users join. Additionally, they highlight the shift towards the zero-knowledge framework (ZKU) as a pivotal evolution in the L2 ecosystem.

VanECK’s prediction coincides with its anticipation of a decision from the SEC regarding its Ethereum ETF filing. As the cryptocurrency landscape continues to evolve, the potential of Ethereum Layer 2 networks remains a topic of interest for investors and enthusiasts alike.

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