Ethereum Layer 2 locks nearly $40 billion in assets as Dencun upgrade looms

Ethereum Layer 2 projects, those that scale the underlying blockchain and are built on top of Ether, locked in $38.98 billion in cryptocurrencies ahead of a key technical upgrade. The Dencun upgrade, scheduled to occur on Wednesday, is the most significant upgrade in the Ethereum ecosystem since the Merge. 

Also read: Ethereum Layer 2 tokens dip as Dencun Hard Fork looms: MATIC, IMX, OP, ARB, MNT see sharp corrections

Layer 2 tokens see massive spike in TVL

Ethereum Layer 2 tokens see a resurgence in the narrative’s popularity as the Dencun upgrade draws close. Of all the technical improvements that the Hard Fork proposes to bring to the Ethereum mainnet, the reduction in transaction cost for L2 tokens is the most significant one for the Ether and L2 community. 

L2 TVL rose to $38.98 billion on Wednesday, hitting a key milestone, while the mainnet prepares for the Dencun rollout. The countdown for the Dencun upgrade can be seen here. 

TVL increase in Ethereum Layer 2 chains. Source: L2Beat

The surge in TVL is important since it represents the increasing relevance of these projects and the rise in participants locking in their cryptocurrencies on L2 chains in the current market cycle. 

Value locked in Ethereum Layer 2 chains. Source: L2Beat

Crypto expert Eric.eth, behind the X handle @econoar, stresses the importance of L2s to the extent of saying, “L2 is Ethereum.” The crypto analyst wrote that picturing a world in which all transactions are performed on the base chain, or Ethereum’s mainnet, is a false reality. Eric.eth states the community values the fact that anyone can run an Ethereum node, stressing on decentralization in Ethereum. The expert supports the narrative of L2 chains scaling Ethereum while taking advantage of the altcoin’s security infrastructure.  

The projected transaction cost of a decentralized exchange swap after the Dencun upgrade will decline for various L2 chains, as seen in the image below.

Projected Gas Costs of a DEX Swap. Source: IntoTheBlock

Ethereum price is $4,056 at the time of writing, sustaining above the psychologically important $4,000 level.