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L1 vs L2: Will Ethereum emerge unscathed?

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The ever-evolving landscape of the cryptocurrency sector continues to captivate enthusiasts worldwide. One intriguing development is the burgeoning rivalry between Layer 1 (L1) networks and Layer 2 (L2) solutions.

Is your portfolio green? Check out the Ethereum Profit Calculator

In a sector notorious for its fierce competition, the recent surge in L2 solutions stirred speculation about its potential to disrupt the reigning L1 networks.

Despite the established dominance of L1 networks and cryptocurrencies, the spotlight shifted onto the rising prominence of L2s, casting a shadow over the market share of their predecessors.

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Crypto analyst Jamie Coutts’ data indicated that L2 adoption was growing at a faster rate than expected. This growth could prove to be beneficial for the Ethereum [ETH] network. However, it could harm L1s cryptocurrencies in the short term.

The dual surprise of faster L2 adoption and less than expected cannibalization of the L1 financials has⬆️our confidence in #Ethereum's potential to accrue more value than alternative L1s over the cycle.
A🧵on the changing dynamics of $ETHs network fundamentals from the⬆️in L2s pic.twitter.com/LVDsvDkI3m

— Jamie Coutts CMT (@Jamie1Coutts) August 9, 2023

Within an intricate web of cryptocurrency dynamics, the value beneath the surface is often masked by price fluctuations. The resurgence of growth in L1 networks owes credit to the burgeoning influence of L2 solutions, coupled with a more lenient monetary tightening environment.

Surprisingly, the sector managed to remain deflationary, even during the bear market, with a pre-Merge inflation rate of 4%. Remarkably, despite cooling market activity, Ethereum staking witnessed a noteworthy 38% upsurge over a mere three-month period.

Ethereum’s resolute ambition to amplify its scalability via L2 rollups became evident through on-chain insights. Amidst a decline in L1 activity over the past year, utilization of the network surged, propelling its financials into a phase of unprecedented prosperity.

The past year witnessed a migration of activity to L2 solutions, reshaping the Ethereum landscape remarkably. With a staggering increase of 245% in active addresses, L2 adoption introduced hundreds of thousands of new users to Web3.

Source: Bloomberg

As L2 adoption gathered momentum, Ethereum’s economic landscape underwent a transformation in terms of fees as well. The surge in L2 fees, averaging $600,000 daily, has not only mitigated cannibalized L1 revenue but has also catalyzed the amplification of network effects.

L1 fees, underpinned by rollups, were projected to represent a substantial chunk of total fees, reaching 20% by the end of the year and a staggering 50% within the next three years, according to the data. However, this growth could be hindered by the progress of L2s.

The ascendancy of L2s brought consequential shifts in the realm of NFTs as well. The lower fee costs of L2 NFT marketplaces prompted an 80% reduction in total NFT activity on L1 networks, causing a decline in sales volumes for the same.

Source: Artemis

In terms of market cap, both L1 and L2 tokens witnessed similar levels of growth. However, Optimism [OP] stood out in this regard and witnessed the most month-on-month activity according to Santiment’s data.

Source: Santiment

On the social front, it was seen that the weighted sentiment for both protocols was improving. However, the only exception was Arbitrum, which was the only protocol that witnessed a decline in this area.

Source; Santiment

Beyond the borders of the L2 domain, the Ethereum ecosystem stands to benefit from the burgeoning growth of L2 solutions, heralding a potential era of prosperity.

Due to the progress made by layer 2 solutions, the volume of activity that they could bring to the Ethereum network could be extremely large. Because of this, gas usage and revenue accrued by Ethereum will remain consistent.

At press time, ETH was trading at $1850. The number of addresses holding ETH has increased over the past week, signaling increased interest in cryptocurrency.

Realistic or not, here’s ETH’s market cap in BTC’s terms

The MVRV ratio for Ethereum during this period declined, showcasing that most addresses holding ETH were not profitable at press time.

The falling MVRV ratio of ETH suggested that the likelihood of ETH being sold was relatively much lower due to lack of an incentive to sell.

Source: Santiment

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    CRYPTO SCAM RECOVERY SUCCESSFUL – A TESTIMONIAL OF LOST PASSWORD TO YOUR DIGITAL WALLET BACK. My name is Robert Alfred, Am from Australia. I’m sharing my experience in the hope that it helps others who have been victims of crypto scams. A few months ago, I fell victim to a fraudulent crypto investment scheme linked to a broker company. I had invested heavily during a time when Bitcoin prices were rising, thinking it was a good opportunity. Unfortunately, I was scammed out of $120,000 AUD and the broker denied me access to my digital wallet and assets. It was a devastating experience that caused many sleepless nights. Crypto scams are increasingly common and often involve fake trading platforms, phishing attacks, and misleading investment opportunities. In my desperation, a friend from the crypto community recommended Capital Crypto Recovery Service, known for helping victims recover lost or stolen funds. After doing some research and reading multiple positive reviews, I reached out to Capital Crypto Recovery. I provided all the necessary information—wallet addresses, transaction history, and communication logs. Their expert team responded immediately and began investigating. Using advanced blockchain tracking techniques, they were able to trace the stolen Dogecoin, identify the scammer’s wallet, and coordinate with relevant authorities to freeze the funds before they could be moved. Incredibly, within 24 hours, Capital Crypto Recovery successfully recovered the majority of my stolen crypto assets. I was beyond relieved and truly grateful. Their professionalism, transparency, and constant communication throughout the process gave me hope during a very difficult time. If you’ve been a victim of a crypto scam, I highly recommend them with full confidence contacting: 📧 Email: [email protected] 📱 Telegram: @Capitalcryptorecover Contact: [email protected] 📞 Call/Text: +1 (336) 390-6684 🌐 Website: https://recovercapital.wixsite.com/capital-crypto-rec-1

  • 14.10.25 08:46 robertalfred175

    CRYPTO SCAM RECOVERY SUCCESSFUL – A TESTIMONIAL OF LOST PASSWORD TO YOUR DIGITAL WALLET BACK. My name is Robert Alfred, Am from Australia. I’m sharing my experience in the hope that it helps others who have been victims of crypto scams. A few months ago, I fell victim to a fraudulent crypto investment scheme linked to a broker company. I had invested heavily during a time when Bitcoin prices were rising, thinking it was a good opportunity. Unfortunately, I was scammed out of $120,000 AUD and the broker denied me access to my digital wallet and assets. It was a devastating experience that caused many sleepless nights. Crypto scams are increasingly common and often involve fake trading platforms, phishing attacks, and misleading investment opportunities. In my desperation, a friend from the crypto community recommended Capital Crypto Recovery Service, known for helping victims recover lost or stolen funds. After doing some research and reading multiple positive reviews, I reached out to Capital Crypto Recovery. I provided all the necessary information—wallet addresses, transaction history, and communication logs. Their expert team responded immediately and began investigating. Using advanced blockchain tracking techniques, they were able to trace the stolen Dogecoin, identify the scammer’s wallet, and coordinate with relevant authorities to freeze the funds before they could be moved. Incredibly, within 24 hours, Capital Crypto Recovery successfully recovered the majority of my stolen crypto assets. I was beyond relieved and truly grateful. Their professionalism, transparency, and constant communication throughout the process gave me hope during a very difficult time. If you’ve been a victim of a crypto scam, I highly recommend them with full confidence contacting: 📧 Email: [email protected] 📱 Telegram: @Capitalcryptorecover Contact: [email protected] 📞 Call/Text: +1 (336) 390-6684 🌐 Website: https://recovercapital.wixsite.com/capital-crypto-rec-1

  • 14.10.25 08:46 robertalfred175

    CRYPTO SCAM RECOVERY SUCCESSFUL – A TESTIMONIAL OF LOST PASSWORD TO YOUR DIGITAL WALLET BACK. My name is Robert Alfred, Am from Australia. I’m sharing my experience in the hope that it helps others who have been victims of crypto scams. A few months ago, I fell victim to a fraudulent crypto investment scheme linked to a broker company. I had invested heavily during a time when Bitcoin prices were rising, thinking it was a good opportunity. Unfortunately, I was scammed out of $120,000 AUD and the broker denied me access to my digital wallet and assets. It was a devastating experience that caused many sleepless nights. Crypto scams are increasingly common and often involve fake trading platforms, phishing attacks, and misleading investment opportunities. In my desperation, a friend from the crypto community recommended Capital Crypto Recovery Service, known for helping victims recover lost or stolen funds. After doing some research and reading multiple positive reviews, I reached out to Capital Crypto Recovery. I provided all the necessary information—wallet addresses, transaction history, and communication logs. Their expert team responded immediately and began investigating. Using advanced blockchain tracking techniques, they were able to trace the stolen Dogecoin, identify the scammer’s wallet, and coordinate with relevant authorities to freeze the funds before they could be moved. Incredibly, within 24 hours, Capital Crypto Recovery successfully recovered the majority of my stolen crypto assets. I was beyond relieved and truly grateful. Their professionalism, transparency, and constant communication throughout the process gave me hope during a very difficult time. If you’ve been a victim of a crypto scam, I highly recommend them with full confidence contacting: 📧 Email: [email protected] 📱 Telegram: @Capitalcryptorecover Contact: [email protected] 📞 Call/Text: +1 (336) 390-6684 🌐 Website: https://recovercapital.wixsite.com/capital-crypto-rec-1

  • 15.10.25 18:07 crypto

    Cryptocurrency's digital realm presents many opportunities, but it also conceals complex frauds. It is quite painful to lose your cryptocurrency to scam. You can feel harassed and lost as a result. If you have been the victim of a cryptocurrency scam, this guide explains what to do ASAP. Following these procedures will help you avoid further issues or get your money back. Communication with Marie ([email protected] and WhatsApp: +1 7127594675) can make all the difference.

  • 15.10.25 21:52 harristhomas7376

    "In the crypto world, this is great news I want to share. Last year, I fell victim to a scam disguised as a safe investment option. I have invested in crypto trading platforms for about 10yrs thinking I was ensuring myself a retirement income, only to find that all my assets were either frozen, I believed my assets were secure — until I discovered that my BTC funds had been frozen and withdrawals were impossible. It was a devastating moment when I realized I had been scammed, and I thought my Bitcoin was gone forever, Everything changed when a close friend recommended the Capital Crypto Recover Service. Their professionalism, expertise, and dedication enabled me to recover my lost Bitcoin funds back — more than €560.000 DEM to my BTC wallet. What once felt impossible became a reality thanks to their support. If you have lost Bitcoin through scams, hacking, failed withdrawals, or similar challenges, don’t lose hope. I strongly recommend Capital Crypto Recover Service to anyone seeking a reliable and effective solution for recovering any wallet assets. They have a proven track record of successful reputation in recovering lost password assets for their clients and can help you navigate the process of recovering your funds. Don’t let scammers get away with your hard-earned money – contact Email: [email protected] Phone CALL/Text Number: +1 (336) 390-6684 Contact: [email protected] Website: https://recovercapital.wixsite.com/capital-crypto-rec-1

  • 15.10.25 21:52 harristhomas7376

    "In the crypto world, this is great news I want to share. Last year, I fell victim to a scam disguised as a safe investment option. I have invested in crypto trading platforms for about 10yrs thinking I was ensuring myself a retirement income, only to find that all my assets were either frozen, I believed my assets were secure — until I discovered that my BTC funds had been frozen and withdrawals were impossible. It was a devastating moment when I realized I had been scammed, and I thought my Bitcoin was gone forever, Everything changed when a close friend recommended the Capital Crypto Recover Service. Their professionalism, expertise, and dedication enabled me to recover my lost Bitcoin funds back — more than €560.000 DEM to my BTC wallet. What once felt impossible became a reality thanks to their support. If you have lost Bitcoin through scams, hacking, failed withdrawals, or similar challenges, don’t lose hope. I strongly recommend Capital Crypto Recover Service to anyone seeking a reliable and effective solution for recovering any wallet assets. They have a proven track record of successful reputation in recovering lost password assets for their clients and can help you navigate the process of recovering your funds. Don’t let scammers get away with your hard-earned money – contact Email: [email protected] Phone CALL/Text Number: +1 (336) 390-6684 Contact: [email protected] Website: https://recovercapital.wixsite.com/capital-crypto-rec-1

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