Layer 2 tokens are extending their long-term growth trend as they become key to the expansion of the Ethereum ecosystem. L2 services, which are compatible with ETH, are enjoying increased liquidity. Their native tokens also successfully trade in centralized markets but have an expanding share on DEX hubs.
Uniswap, the leader in DEX swaps and trades, noted that L2 tokens outperformed in May 2024, compared to the same month of 2023.
Ethereum-compatible L2 is also more active, while the launch of Bitcoin Layer 2 is still at the experimental stage, with no agreed format for the tokens. L2 projects are accelerating their competition, both between older chains and new arrivals that are quickly adding users and transactions.
Layer 2 networks are essential for decentralized projects, and have successfully taken some of the overload from the Ethereum network. L2 is used for gaming, NFT, Web3 identities, as well as for decentralized finance.
Uniswap Gets Volume Boost in May
Uniswap also noted a boost in DEX trading, expanding its liquidity to $6.34B. Based on inflows from 17 blockchains, Uniswap’s volume grew by more than 14% in the past month.
Uniswap itself is a hub for L2 networks, which carry the various exchange versions. Increased volumes mean each version receives inflows of liquidity and more active trades.
Also read: Uniswap Labs Responds to SEC Wells Notice, Denies Crypto Tokens Are Securities
Over the past two years, Uniswap also expanded its presence on L2 projects. The biggest effect came from the expansion of Arbitrum and Base, the native Coinbase chain. New, smaller chains are trying to repeat the success of those two networks and expand their influence on Uniswap.
Layer 2 Expands to $25B in Value
Layer 2 assets are quietly growing, retaining as much value as possible. As of May 2024, experts estimate the entire market to be around $25B. Most L2 assets remain highly liquid but rely on trends and narratives in order to go through a more active rally.
L2 projects are adopting ZK-rollup technology, promising a layer of confidentiality.
Also read: Investing in Layer 2: Top Crypto Projects Drawing Major Investor Interest
The L2 landscape also shifted over the past year. While Polygon remains a leader, ImmutableX gained importance.
Arbitrum and Optimism also grew their user base and social media presence. Mantle and Starknet became contenders for some of the most active L2 tokens.
ZK Sync Era Brings Increased Transaction Count
One of the most notable L2 to appear in 2024 is ZK Sync Era. The L2 blockchain also plays on the narrative of confidentiality.
ZK Sync Era is one of the newly added blockchains to cooperate with the Uniswap brand. In the past year, the relatively new L2 project saw a boom in fees and transaction counts. But for now, ZK Sync Era cannot replace Polygon based on active wallets.
Polygon remains the go-to L2 blockchain for multiple activities, including DeFi, gaming, NFT trading and more, due to its early launch and relatively low fees.
At the same time, ZK Sync Era is expanding, with updates coming daily. Most of the TVL on ZK Sync Era started to grow in the past two months and is still lower than $160M.
L2 usage also grew after the introduction of account abstraction and the option to use one identity across multiple chains. L2 networks are also compatible with Ethereum, making bridging easier. The presence of multiple Uniswap versions on L2 networks also means traders can use arbitrage to find the best liquid pairs.
Also read: Uniswap Price Prediction 2024-2030: Will UNI Keep Steady?
L2 still has a growing effect on Uniswap, and for now, ETH and USDT are still the top trades, along with wBTC and other DeFi projects based on Ethereum. Uniswap is also becoming the leading app among L2 blockchains, taking up as much as $60B in value. Since 2022, Uniswap has boosted its influence with its multi-chain strategy, becoming a source of economic activity where other types of apps failed.
Cryptopolitan reporting by Hristina Vasileva
