Ethereum Layer 2 Networks Hit $30B TVL

Ethereum layer-2 networks reached a new milestone on Feb. 28, hitting $30 billion of total value locked (TVL) within their contracts, according to data from the blockchain analytics platform L2Beat.

Arbitrum leads the surge with 45.37% of the total TVL, representing $13.66B, followed by OP Mainnet at 25.08%, or $7.55B. Other notable contributors include Manta Pacific at $1.91B, Starknet at $1.36B, and Base at $978B. Moreover, Ethereum is up over 15% over the last week to trade at $3,345, a new multi-month high.

In a research report on Monday, Bernstein analysts Mahika Sapra and Gautam Chhugani highlighted the growth of Ethereum’s DeFi ecosystem and layer-2 networks as important factors strengthening ETH’s market resilience compared to Bitcoin.

At present, the total ETH held on exchanges is at an all-time low of just 11% of the total supply, as per the report. A large amount of ETH remains locked in staking pools, DeFi smart contracts, and other Layer-2s. Meanwhile, Ether has shown a significant 33% increase year-to-date, surpassing its larger counterpart, Bitcoin.

They stated:

“With the growth of ETH transaction fees based on higher blockchain activity (more DeFi, NFTs, tokens), more ETH holders are incentivized to stake their ETH. Ethereum finds itself locked in smart contracts, leading to a reflexive feedback loop of increased demand.”

Ethereum Takes Center Stage

The anticipation of spot Bitcoin ETF approval drove Bitcoin’s increase, potentially attracting a massive influx of capital last year. However, as time passes following the approval of the BTC ETFs, the attention is slowing down, and the focus is shifting towards Ethereum. The ETH community eagerly awaits the launch of spot Ethereum ETFs, as several companies have applied to offer them following the launch of Bitcoin ETFs. Analysts predict that ETH ETFs will go live in May 2024.

The significant growth in Ethereum L2 TVL shows the growing adoption and usage of Layer 2 solutions. This increase is also partly attributed to the heightened anticipation surrounding Ethereum’s upcoming Dencun upgrade. Dencun will introduce major gas fee reductions, greater storage efficiency, and an enhanced developer experience.