Ethereum Layer 2 Networks Just Set A New Record

The total value locked (TVL) on Ethereum layer-2 networks recently hit a new all-time high in January, a testament to the continued adoption of Ethereum. Layer 2 networks sit on top of the Ethereum blockchain and help scale it by processing transactions off-chain before sending data back to the main blockchain. 

According to data from L2BEAT, a layer-2 analytics platform, the TVL on these scaling solutions recently reached an all-time high of $21.16 billion, representing a 340% growth from the same day last year. 

2023 was a great year for Ethereum, as the altcoin and its scaling solutions registered a steady increase in TVL despite strong competition from other networks like Solana and Cardano. Data from L2Beat shows the TVL on these scaling solutions started in 2023 with $4.81 billion but grew steadily throughout to end the year at $19.98 billion dollars, a 315% growth. 

This growth was particularly exacerbated in the last quarter of 2023 and continued into 2024. The TVL grew by $1.18 billion in the first three days of January to reach $21.16 on January 3, its current all-time high.

At the time of writing, the TVL is now at $20.41 billion, still up by 3.82% in the past seven days. A large fraction of this layer-2 TVL can be attributed to Arbitrum One, with the scaling solution currently having $10.05 billion worth of cryptocurrencies locked. 

OP Mainnet, formerly called Optimism, is second with a current TVL of $5.84 billion. 57% of this TVL is composed of OP tokens, compared to Arbitrum One, whose ARB token constitutes only 36% of the TVL. 

This massive growth shows that Ethereum users are flocking to layer 2 networks to escape high gas fees and congestion on the mainnet. Ethereum’s TVL also witnessed steady growth throughout the year, adding $7.6 billion in the last quarter of 2023. Data from DeFiLlama shows the TVL on Ethereum is now at $28.532 billion.

However, Ethereum has seen its daily active addresses and transaction count plunge in the last few months. Data from Artemis revealed the network is currently being surpassed by Solana and Sui in terms of daily transaction count. Recent competition from Solana prompted an analyst to describe Ethereum as digging its own grave by relying too much on its layer-2 networks for scalability.

Some layer-2 chains are also currently processing more transactions than Ethereum itself. L2BEAT puts the monthly transactions on zkSync Era and Arbitrum at 39.91 million and 35.54 million respectively, ahead of Ethereum’s count of 33.91 million transactions.