Quick Links
Layer 2 solutions continued to grow in 2023 with their TVL reaching a staggering $14 billion in 2023. Prominent protocols announced major updates, for instance, Polygon launched their own ZK EVM chain. Notably, Coinbase introduced Base, a technically Layer 2 blockchain constructed atop Ethereum, leveraging OP Stack software from the established Optimism network.
Key Statistics
- Total Value Locked (TVL)
The TVL in layer 2 solutions surged from $4.4 billion to a staggering $14 billion at the time of writing. Arbitrum led the cartel with $2.1 billion in TVL followed by Polygon with $829.6 million, Optimism with $772.9 million and Base with $279.9 million in TVL respectively. Notably, the top 4 Layer-2 infrastructures also secured their spot in the list of Top 10 Chains by TVL.
- Average Daily Transactions
There were around 1.04 million transactions on Ethereum on a daily basis since 2023. On the flip side, Polygon registered a whopping 2.61 million daily transactions. This clearly highlights the extensive ecosystem of Polygon. Arbitrum and Optimism had 722.4k and 432.9k average daily transactions respectively.
- Cumulative Unique Addresses
Polygon dominated with ~385.8 million unique addresses, followed by Optimism with 62 million and Base with 55.1 million. Despite Arbitrum’s longer tenure since June 2021, it accrued only 14.5 million unique addresses, compared to Base’s 55 million addresses since its launch in June 2023. An interesting thing to observe here is that while Polygon has 8 times more wallet addresses its TVL is similar to Optimism.
Trends and Future Outlook
Layer-2s have made significant developments, garnering overwhelming support due to minimal fees and high TPS. 2023 witnessed groundbreaking efforts to optimize rollup technology, and it is expected that in 2024, L2s will draw significant activity on their infrastructure.
Arbitrum
Arbitrum developed Arbitrum One for high-security use cases like DeFi, Arbitrum Nova to cater to games, NFTs, and social applications (with slightly lower decentralization) and Arbitrum Orbit to allow anyone to make their own blockchain (app chain/L3).
They have adopted a step-up approach for market penetration. While ranking lower on the Unique Addresses metric, the average Daily Transactions count (722.4k) signifies a higher activation rate of the community. In their endeavor to support developers to build on it, they have allocated resources and grants which surely will multiply the business potential of Arbitrum.
Polygon
Polygon has made leaps and bounds in terms of the tech stack they have developed over the bear market. They launched their ZK EVM chain, Polygon 2.0 which is a network of ZK-powered L2 chains, unified via a novel cross-chain coordination protocol and a Polygon ID solution that allows users and dApps to interact through self sovereign identity maintaining privacy.
As Zero Knowledge Proofs gain widespread adoption, Polygon’s pioneering implementation of this innovative technology positions it to capitalize on a first-mover advantage and witness immense traction.
Optimism
Optimism experienced growth in TVL and Addresses during the year. Base utilizing the OP stack is poised to attract other infrastructures in 2024. Base chain will share a percentage of the fees earned through transactions to the Optimism Collective to be a part of the Superchain. Hence, Optimism as an infrastructure would benefit from the shared user base that interacts with it.
Base
Base incubated by Coinbase has access to Coinbase’s 110 million verified users and the opportunity to leverage Coinbase’s brand with its vast network of investors, builders and connections. Base can be imagined as a decentralised layer that Coinbase could utilize to build a “trusted open financial system” as per its mission statement.
Having launched in June 2023, it has been able to grab ~ $300 million TVL on its chain and 55.1 million cumulative addresses. Base as a chain could see multifold progress in 2024, however, as Coinbase share (COIN) is listed, it would make it difficult for Base to launch its token and they would not be able to leverage the token as a User Acquisition instrument.
Expert Opinion
Ravikant Agrawal, Director of Growth, Polygon Labs
I feel bullish on innovation progressing towards unifying liquidity and interoperability among blockchain networks. This will redefine UI, making seamless experiences for end-users and inching closer to make blockchain invisible. Expect synthesis of blockchain technology, identity and AI to uncover more viable use cases in 2024. It will be also interesting to watch how funding, adoption by institutional players and regulatory guidelines come along in 2024.
Crypto Outlook 2024
2023 was a roller-coaster ride for the crypto sphere, marked by dynamic shifts, innovative advancements, and transformative trends that reshaped the industry’s landscape. Our Crypto Outlook Report for 2024 reflects on the highs, lows, and pivotal moments that defined the past year, while also peering into the horizon to forecast the exciting potential and emerging patterns set to influence the year ahead, with insights from industry leaders at Stepn, Enjin, Hacken, SuperScrypt, and more.
Click here to read the full report!
