Gate Ventures and Cryptomeria Capital Unveil the Future of Layer 2 in Their Latest Report
In Brief
Cryptomeria Capital and Gate Ventures’ report analyzes Layer 2 infrastructure solutions, focusing on Ethereum and Bitcoin-based ones, highlighting developments, challenges, and future prospects for L2 rollups.
The latest report by Cryptomeria Capital and Gate Ventures provides a comprehensive analysis of the L2 infrastructure solutions, with a focus on Ethereum and Bitcoin-based ones. The report highlights key developments, challenges, and future prospects for L2 rollups, which are essential in addressing the scalability and usability challenges faced by Layer 1 blockchains like Ethereum and Bitcoin.
Ethereum Layer 2 Growth and Adoption
L2 rollups on Ethereum have outpaced the main Ethereum network in user activity for over a year, demonstrating their growing importance within the ecosystem. In 2024, Layer 2 solutions experienced a notable surge in activity, with daily transactions peaking at 17 million in August—an increase of 150% since January. This rapid growth signals increasing adoption of L2 platforms as users seek scalable and cost-efficient alternatives to Layer 1.
The report also underscores the growing role of L2 networks in hosting stablecoins, surpassing other prominent blockchains like Solana and Binance Smart Chain (BSC). L2s now hold more stablecoins than these networks combined, with a 150% lead over Solana and a 94% advantage over BSC. This trend reinforces the position of Ethereum’s L2 ecosystem as a key player in DeFi.
Despite this progress, the report notes that there is still a significant gap between the number of crypto asset holders and daily active users. With around 580 million asset holders globally, only 15 million daily active wallets were recorded in mid-2024. This gap highlights the ongoing challenge of translating crypto ownership into regular network activity, though it also signals substantial room for growth.
Challenges and Innovations in Ethereum Layer 2
The rise of Optimistic and ZK Rollups has been a critical driver of Ethereum’s Layer 2 ecosystem. Optimistic Rollups focus on off-chain transaction processing, easing the load on the Ethereum mainnet, while ZK Rollups offer scalability solutions through cryptographic proofs. However, the report emphasizes the challenges ZK Rollups face in terms of technical complexity and user experience, with projects like zkSync, Scroll, and Linea working to address these issues.
Furthermore, not all L2 projects are expected to succeed in the long term. The report stresses the importance of focusing on promising technologies and ecosystems, acknowledging that some projects may not achieve widespread adoption.
Key Developments on Leading L2 Platforms
The report highlights several L2 networks that have experienced significant growth:
Base Network has shown remarkable growth, with a 700% increase in daily transactions over the last six months, driven primarily by decentralized social media and meme-related activity. With over 201,000 users, Base has quickly become a major player in the Ethereum L2 ecosystem, holding the second-largest share of L2 stablecoins after Arbitrum.
Another rising star is Blast, which has processed over 121 million total transactions and reached a peak of 2.72 million daily transactions. Despite some volatility in TVL following its token generation event, Blast has stabilized and is now a key platform for DeFi protocols.
Initially one of the most active L2 networks in early 2024, Linea experienced a decline in user engagement later in the year due in part to transaction concentration in decentralized mail and anti-fraud activities.
Bitcoin Layer 2 Developments
The report also examines the growing role of Layer 2 solutions on the Bitcoin network. In 2024, over 25 Bitcoin Layer 2 solutions and sidechains were launched, providing enhanced scalability, programmability, and security for dApps, DeFi, and tokenization. These L2 solutions are crucial for building Bitcoin-based permissionless applications that can offer the same security guarantees as Bitcoin’s base layer.
Technologies like State Channels, Sidechains, and Rollups are at the core of Bitcoin L2 development. These technologies enable faster, more efficient transactions and decentralized applications by offloading transactions from Bitcoin’s main chain. One standout project is Bitlayer, which supports Ethereum smart contract migration to Bitcoin and facilitates cross-chain transfers.
Other noteworthy developments include:
Rootstock processed over 13 million transactions and supports more than 25 decentralized applications. It also integrates with Ethereum, enhancing interoperability and the ability to develop on multiple chains.
Stacks has completed a significant upgrade to its network, improving transaction throughput by 120 times and reducing confirmation times. It is also preparing to launch a new programmable Bitcoin asset called sBTC, which will enable decentralized BTC transfers on the Stacks network.
The Future of Layer 2 Solutions
Cryptomeria Capital’s report provides valuable insights into the rapid growth and ongoing challenges in the Layer 2 ecosystem. Both Ethereum and Bitcoin-based L2 solutions are becoming critical for scaling blockchain networks and improving user experiences.
The competition among L2 projects remains fierce, and not all solutions will succeed in the long term. Continued innovation, usability improvements, and developer engagement will be crucial for the next phase of growth in the Layer 2 space. Layer 2 platforms are on track to become an integral part of the blockchain landscape, offering scalable and efficient solutions for both Ethereum and Bitcoin ecosystems.
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About The Author
Victoria is a writer on a variety of technology topics including Web3.0, AI and cryptocurrencies. Her extensive experience allows her to write insightful articles for the wider audience.
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Victoria is a writer on a variety of technology topics including Web3.0, AI and cryptocurrencies. Her extensive experience allows her to write insightful articles for the wider audience.
