Layer 2 (L2) solutions are built on top of the Ethereum blockchain to improve scalability and reduce gas fees, making the network more efficient and accessible. These solutions—such as Optimism, Arbitrum, zkSync, and Polygon—handle transactions off-chain or in optimized environments before settling them on Ethereum’s mainnet.
The primary goal of Layer 2s is to increase transaction throughput without compromising security. By reducing congestion on the base layer, they enhance the user experience for copyright, NFT platforms, and decentralized exchanges. This drives more user activity, which in turn boosts demand for ETH, even though transactions are processed on a secondary layer.
While L2s reduce gas fees, they still require ETH for settlement on the Ethereum mainnet. This ensures that ETH remains central to the ecosystem, maintaining its utility and demand. In fact, greater adoption of Layer 2s often results in more usage of Ethereum, not less.
From an investor's perspective, the success of Layer 2 solutions makes Ethereum more competitive and sustainable, potentially attracting more institutional and retail buyers. As usage grows, so does the burn rate from EIP-1559, which can apply deflationary pressure on the supply of ETH.
To track how L2 adoption is influencing Ethereum’s market valuation, it’s helpful to monitor the eth price regularly. Toobit provides a real-time snapshot that reflects how network upgrades and innovations affect ETH performance.