Ethereum Slows And Transaction Fees Are Expensive, VanEck Predicts Layer-2 Crypto Projects Have A Bright Future

Ethereum is still constrained by its expensive transaction fees. (Photo; Doc. CryptoNexa)

JAKARTA The scalability challenges faced by Ethereum, such as high transaction costs and slow processing times, open up opportunities for Layer 2 solutions. Only information, Layer-2 technology in the blockchain world is an additional layer or protocol built on the existing blockchain infrastructure, also known as Layer-1.

These layer-2 projects arise as solutions to problems called blockchain triemma', namely scalability, decentralization and security issues, as experienced by Ethereum.

Recently, investment company VanEck, Layer 2 market is predicted to reach a fantastic valuation of US$1 trillion (around Rp15.8 quadrillion) by 2030. VanEck's report takes into account the basic valuation of US$1 trillion for Layer 2 using the free cash flow ratio (FCF) 25 on future cash flow projections.

The assumption used is Ethereum's smart contract market share of 60%. Estimates of cash flow are generated by projecting transaction revenue (transaction inclusion on blockchain) and maximum value that can be extracted (income from transaction sorting) for the Layer 2's total reachable market.

VanEck estimates that the net income for the Layer 2 market by 2030 will reach 41 billion US dollars (approximately IDR 585 trillion), resulting in a full-diluted valuation of 1.02 trillion US dollars after implementing the FCF ratio. In comparison, CoinGecko data shows that current market capitalization for Layer 2 tokens is only 33.3 billion US dollars (approximately IDR 476 trillion).

Solutions To Ethereum's Problems

Layer 2 technology offers a promising solution to address Ethereum's scalability problems. By batching transactions outside the main blockchain, Layer 2 allows for a much higher transaction volume and much cheaper cost. Ethereum's security is maintained as Layer 2 remains connected to the main blockchain.

The positive impact of Layer 2 is already visible. The share of Ethereum's basic chain transactions in the ecosystem has dropped drastically as a result of the use of Layer 2. This shows that Layer 2 is increasingly being adopted by users and developers who want to take advantage of their advantages.

The VanEck report shows the great potential of Layer 2's market in solving Ethereum's scalability problems. With a predicted valuation of US$1 trillion by 2030, Layer 2 could be a solution that leads Ethereum to a wider adoption rate.