Ethereum’s L2 Renaissance Spells Trouble for Competitors
Alternative Layer-1 networks that aim to challenge Ethereum (ETH) may be facing an uncertain future, as per insights from Jamie Coutts, a cryptocurrency market analyst at Bloomberg.
Coutts suggests that the rise of Ethereum L2 solutions is gradually eroding the market share of Ethereum’s competitors. He points out that the adoption of L2s has led to Ethereum regaining market dominance from its Alternative Layer-1 (Alt-L1) counterparts.
👉The rise in L2s has meant that the Ethereum network has started to regain market share from the Alt-L1 peers.
👉In the past year Active Address L2 growth outpaced Alt-L1's by 2x (albeit from a lower base) pic.twitter.com/qdIIE9eH9V— Jamie Coutts CMT (@Jamie1Coutts) October 4, 2023
Over the past year, the growth of active addresses on L2s has outpaced that of Alt-L1s, albeit starting from a lower baseline.
Coutts also highlights various challenges that alternative smart contract platforms face that pose risks to their long-term viability. These challenges encompass inflationary token economics, congested block space, and the strong network effects contributing to Ethereum’s growth.
Despite a consistent upward trend in transaction fees generated by these blockchain platforms, Coutts believes that many of them could fade into obscurity in the coming years.
He notes that, despite the ongoing bearish market sentiment, the demand for block space continues to rise over the long term. Nonetheless, the cryptocurrency industry faces significant self-imposed issues, and it is likely that only a small subset of platforms will remain relevant in the near future.
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Coutts also points out that a significant number of alternative Layer-1 networks may not be generating sufficient transaction fees to guarantee the security and sustainability of their networks. As he puts it, while the positive outlook for Ethereum remains intact, there is a more pessimistic outlook for many Alt-L1s.
Due to a lack of demand and less-than-ideal tokenomics, these platforms will likely face challenges in the foreseeable future.
Alexander Stefanov
Reporter at CoinsPress
Alex is an experienced finance journalist and a cryptocurrency and blockchain enthusiast. With over five years of experience covering the industry, he deeply understands the complex and constantly evolving world of digital assets. His insightful and thought-provoking articles provide readers with a clear picture of the latest developments and trends in the market. His passionate approach allows him to break down complex ideas into accessible and insightful content. Follow up on his content to be up to date with the most important trends and topics - stay ahead of the curve with CoinsPress.
