Exercise and whole worth locked (TVL) on Ethereum Layer 2s have grown quickly in 2024, however some analysts stay cautious of liquidity fragmentation.
Ethereum Layer 2 (L2) metrics have surged all through 2024, with transactions per second (TPS) and whole worth locked (TVL) growing steadily during the last 6 months. Nevertheless, new Layer 2s are being introduced repeatedly, and a few analysts are nervous about liquidity fragmentation points.
The spike in Layer 2 utilization converged with catalysts similar to EIP- 4844 and the launch of Blast. Following its launch on February 29, Blast is now the sixth largest chain by TVL. In the meantime, the implementation of EIP-4844 led to a big improve in transactions per block on different L2s.
Liquidity Fragmentation
DeFi Maestro, a strategist at Mantle, took to social media and posted, “Everyone seems to be launching their very own chain. Monitoring developments within the DeFi area fairly carefully as the issue of liquidity fragmentation and person consideration turns into extra extreme.”
Liquidity fragmentation is an idea in DeFi through which energetic liquidity is thinly unfold throughout a wide range of chains and protocols. As a consequence of a low focus of quantity, this will result in market and protocol inefficiencies.
This comes on the again of Aave unveiling its imaginative and prescient for Aave Community, a local Layer 2 answer for Aave Protocol and its GHO stablecoin.
Layer 2s Impact on Ethereum
Regardless of the elevated utilization of Layer 2 options, ETH has been inflationary during the last 30 days. Ether’s provide is presently growing at a charge of 0.51% per yr, which might result in a 612,000 ETH surplus on an annualized foundation.
Of their present type, Ethereum L2s acquire transactional worth resulting from their excessive utilization whereas inheriting the safety of ETH mainnet. Nevertheless, the quantity of whole ETH burned stays considerably decrease than if related exercise had been to happen on mainnet.
