Ethereum Layer 2 transaction volume surges driven by system upgrades, increasing partnerships


  • Ethereum Layer 2 chains have seen a spike in the total value of assets locked in the past thirty days. 
  • The upcoming Dencun upgrade includes EIP-4844, which is key to cost reduction for Layer 2 chains. 
  • Partnerships and Ethereum ecosystem upgrades are likely drivers of the Layer 2 narrative in Q1 2024. 

Ethereum ecosystem’s scaling solutions, Layer 2 chains, have observed a steady increase in their transaction volume since the beginning of the year. The rising relevance and utility of these Layer 2 chains can be attributed to the upcoming transaction cost decline with the Ethereum ecosystem upgrade and the rising number of relevant partnerships. 

Also read: Polygon unveils AggLayer: A solution to long-standing Ethereum Layer 2 challenges

Ethereum Layer 2 chains see spikes in transaction volume and TVL

The Total Value Locked (TVL) of assets in zkSync, an Ethereum Layer 2 chain, is approaching 750 million. The metric has been in an uptrend in the past 30 days and despite a small decrease in the past 24 hours, the uptrend is consistent. 

Other Layer 2 chains, including Polygon, Arbitrum and Optimism, among others, have observed a similar trend of TVL increase in the same timeframe. 

zkSync

zkSync Daily TVL. Source: TokenTerminal

The rising TVL is a sign of higher adoption and utility of the Layer 2 chains. The likely driver of these gains is the upcoming Ethereum upgrade, Dencun. The upgrade is packed with various Ethereum Improvement Proposals (EIPS), of which EIP-4844 (also known as proto-danksharding) is key to Layer 2 protocols.

EIP-4844 is expected to introduce “blobs” that reduce the storage burden on the Ethereum mainnet and make fees cheaper for rollups and Layer 2 chains. Dencun upgrade goes live on March 13. 

The second catalyst that has sparked the 91% increase in Layer 2 transaction volumes is the partnerships by L2 projects.

ETH

Ethereum Layer 2 transaction volumes. Source: IntoTheBlock

Arbitrum recently announced a long-term partnership with Robinhood. This is expected to broaden ARB users’ access to the Web3 ecosystem and onboard Robinhood users, offering them a feature to swap their tokens on Arbitrum-based DEXes. 

Another key L2, Metis has announced its strategic partnerships with Chainlink, Eigen Layer, Renzo Protocol and DeFi Kingdoms. These partnerships are focused on making Metis a self-sustainable Layer 2 chain. 

 


Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Join Telegram

Recommended content


Recommended Content

Editors’ Picks

SEC doubles down on TRON's Justin Sun lawsuit dismissing claims over jurisdiction

SEC doubles down on TRON's Justin Sun lawsuit dismissing claims over jurisdiction

The SEC says it has jurisdiction to bring Justin Sun to court as he traveled extensively to the US. Sun asked to dismiss the suit, arguing that the SEC was targeting actions taken outside the US.

More TRON News

XRP fails to break past $0.50, posting 20% weekly losses

XRP fails to break past $0.50, posting 20% weekly losses

XRP trades range-bound below $0.50 for a sixth consecutive day, accumulating 20% losses in the last seven days. Ripple is expected to file its response to the SEC’s remedies-related opening brief by April 22. 

More Ripple News

ImmutableX extends recovery despite $69 million IMX token unlock

ImmutableX extends recovery despite $69 million IMX token unlock

ImmutableX unlocked 34.19 million IMX tokens worth over $69 million early on Friday. IMX circulating supply increased over 2% following the unlock. The Layer 2 blockchain token’s price added nearly 3% to its value on April 19. 

More Cryptocurrencies News

Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in Premium

Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in

Bitcoin price briefly slipped below the $60,000 level for the last three days, attracting buyers in this area as the fourth BTC halving is due in a few hours. Is the halving priced in for Bitcoin? Or will the pioneer crypto note more gains in the coming days? 

More Bitcoin News

Bitcoin: BTC post-halving rally could be partially priced in Premium

Bitcoin: BTC post-halving rally could be partially priced in

Bitcoin (BTC) price briefly slipped below the $60,000 level for the last three days, attracting buyers in this area as the fourth BTC halving is due in a few hours. Is the halving priced in for Bitcoin? Or will the pioneer crypto note more gains in the coming days? 

Read full analysis

BTC

ETH

XRP