Why VanEck Predicted $1 Trillion Valuation For Ethereum Layer-2s

VanEck, a leading investment management firm, has projected a monumental $1 trillion valuation for Ethereum’s Layer-2 (L2) networks by 2030.

This bold forecast highlights the significant role L2 solutions play in scaling the Ethereum network, addressing its core scalability challenges.

How Ethereum Layer-2s Can Collectively Achieve $1 Trillion Valuation?

According to CoinMarketCap data, the current market capitalization of L2 solutions stands at $28 billion. If VanEck’s prediction comes true, it would mean a nearly four times increase in the L2 solutions’ valuation in the next six years.

The analysis is based on the assumption that Ethereum ecosystem smart contracts will have a market share of 60%.

Read more: A Beginner’s Guide to Layer-2 Scaling Solutions

L2 Valuation – Base CaseEthereum Ecosystem Smart Contract Market Share60%L2 Economics Estimated Revenue 2030 ($ million)$48,659Global Tax Rate on Crypto15%Sequencer Cut1%Value to Tokenholders in 2030 ($ million)$40,947Future cash flow terminal multiple25L2 fully-diluted valuation 2030 ($ million)$1,023,681

VanEck’s analysis meticulously evaluates L2 solutions across various dimensions, such as transaction pricing, developer and user experience, trust assumptions, and ecosystem size. L2 blockchains, by processing transactions off the Ethereum mainnet, provide a more efficient method of handling data.

These networks employ strategies like roll-ups to bundle transactions, thereby facilitating smoother interactions with Ethereum.

Moreover, the report distinguishes between optimistic roll-ups (ORUs) and zero-knowledge roll-ups (ZKUs), the two principal types of L2 solutions. ORUs presume transactions to be valid unless proven otherwise. Meanwhile, ZKUs use cryptographic proofs to confirm transaction authenticity, eliminating the need for extensive validation.

Economically, L2s derive revenue from transaction fees, with mechanisms like priority fees and sequencing models influencing their financial frameworks. The creation of Blob Space, a specialized data layer for L2 transaction postings, signifies a significant advancement in reducing costs and boosting efficiency for these networks.

VanEck’s valuation prediction is based on an in-depth examination of potential revenue streams, taking into account factors like transaction volume, smart contract platform market share, and the projected growth of assets secured by the Ethereum ecosystem.

Read more: Layer-2 Crypto Projects for 2024: The Top Picks

Although the L2 sector might face competitive challenges, dominant networks are expected to achieve substantial valuation increases.