The Top 10 Ethereum Layer 2 Crypto Projects in 2024
In the midst of every crypto bull market, Ethereum mainnet transactions tend to become expensive. To address this issue, numerous projects have been diligently working on developing more affordable, faster, and more efficient layer 2 (L2) networks.
This article delves into a technical examination of the top Ethereum layer 2 crypto projects that show the most promise in 2024. Various factors such as tokenomics, network activity, market capitalization, technology, and more have been taken into consideration.
The Top Ethereum Layer 2 Projects Based on Market Capitalization
Coin Market Capitalization Description
Polygon $7.40 billion Utilizes sidechains and a Plasma framework to enhance transaction speed and reduce costs.
Immutable X $3.57 billion Focuses on NFTs, employing ZK-Rollups for instant trade confirmation, massive scalability, and zero gas fees.
Mantle $3.38 billion Developed with modular architecture using optimistic rollups; offers low fees, high throughput, and EVM compatibility.
Arbitrum $3.27 billion Utilizes Optimistic Rollups to achieve high throughput and low fees.
Optimism $2.81 billion Leverages Optimistic Rollups, providing near-instant transaction finality and lower gas fees, while maintaining Ethereum-level security.
dYdX $1.17 billion Decentralized trading platform utilizing StarkWare’s ZK-Rollups for high-speed, low-cost, secure trading of perpetual contracts on Ethereum.
Loopring $385 million Utilizes ZK-Rollups; focuses on scalable, secure, low-fee trading and payments on Ethereum.
Eclipse $3.98 million Utilizes Solana Virtual Machine, Ethereum for settlement, and RISC Zero for privacy, enhancing scalability and efficiency.
Blast N/D Enhances scalability and efficiency with native yield generation for ETH and stablecoins; supports various DeFi applications.
Shibarium N/D Developed by the Shiba Inu community; aimed at improving scalability and reducing transaction costs for SHIB ecosystem.
The Best Layer 2 Coins to Invest in Now
The finest Ethereum layer 2 projects provide high scalability, low transaction fees, high throughput capacity, strong security, and compatibility with the Ethereum mainnet. Here are the top layer 2 crypto projects in 2024:
Arbitrum — Ideal for low-cost transactions
Polygon — Most versatile Ethereum scaling solution
Optimism — Best for EVM equivalence
Blast — Most innovative Ethereum L2 project
Loopring — Best for building decentralized exchanges
Eclipse — Ideal for transaction speed
Mantle — Ideal for decentralization
Immutable X — Ideal for NFTs and gaming
dYdX — Ideal for decentralized perpetual trading
Shibarium — Ideal for community-driven projects
Analyzing the Best Layer 2 Tokens
Now that we have outlined our layer 2 tokens list, let’s delve deeper into each token, exploring their unique features and what gives them such potential.
1. Arbitrum (ARB) — Best for Low-Cost Transactions
Arbitrum stands out as the premier Ethereum layer 2 project for low-cost transactions, thanks to its advanced scaling technology. It significantly reduces gas fees, making transactions more cost-effective compared to other L2 solutions such as Optimism. This cost efficiency is made possible through its optimistic rollup technology, which groups multiple transactions before submitting them to the Ethereum mainnet, minimizing fees.
Arbitrum supports Ethereum-compatible smart contracts and decentralized applications (dApps) without compromising speed or performance. Its ecosystem comprises Arbitrum One and Arbitrum Nova, both leveraging the Arbitrum Nitro stack to boost throughput and reduce costs. With over $2.97 billion in Total Value Locked (TVL), it boasts one of the highest TVLs among L2 solutions.
Distinctive features include decentralized governance through the ARB token, enabling users to vote on network upgrades and other proposals. This governance model is complemented by Arbitrum’s security, derived from Ethereum’s consensus. Additionally, Arbitrum’s AnyTrust chains offer ultra-low transaction fees, making it ideal for applications like gaming and social platforms.
2. Polygon (MATIC) — Most Versatile Ethereum Scaling Solution
Polygon shines as the most versatile Ethereum L2, providing a range of technologies for scaling Ethereum. Its versatility stems from supporting multiple scaling techniques, including Polygon PoS, zkEVM, and Polygon Miden, catering to diverse developer needs and use cases.
Polygon PoS enhances transaction throughput and reduces gas fees by processing transactions on a sidechain. zkEVM, an open-source ZK-Rollup, ensures high scalability and low costs with Ethereum Virtual Machine (EVM) compatibility. Polygon ID offers blockchain-native identity solutions. AggLayer promises trustless cross-chain interoperability. Polygon 2.0 introduces POL, a hyperproductive token facilitating staking and governance across multiple chains. It aims to unify liquidity and scalability via zero-knowledge (ZK) technology. With a current market cap of $7.40 billion and a circulating supply of 9.28 billion MATIC, Polygon remains a leading choice for developers seeking scalable and versatile solutions.
3. Optimism (OP) — Best for EVM Equivalence
Optimism is hailed as the top Ethereum Layer 2 project for EVM equivalence. Its design ensures compatibility with Ethereum’s smart contracts and dApps without requiring modifications, making it an ideal choice for developers aiming for efficient deployment on Ethereum.
Optimism utilizes Optimistic Rollups to achieve scalability and reduce transaction costs. By processing transactions off-chain and only recording the results on Ethereum, it maintains high throughput while leveraging Ethereum’s security. Its ecosystem supports various projects, reflecting its versatility and robust infrastructure.
Unique features include its OP token, which supports governance and incentivizes network participation. Optimism’s roadmap includes continuous improvements to its infrastructure, aiming to enhance performance and expand its ecosystem. With a strong community and a clear vision, Optimism remains a top choice among Ethereum L2s.
4. Blast (BLAST) — Most Innovative Ethereum L2 Project
Blast stands out as the most innovative Ethereum scaling solution due to its unique yield generation mechanism. Unlike other L2s, Blast offers native yield on ETH and stablecoins like USDC, USDT, and DAI, directly integrating Ethereum’s staking and Treasury Bill protocols. This feature allows users to earn passive income without additional steps.
Blast uses an optimistic rollup mechanism to ensure EVM compatibility. This allows seamless deployment of dApps without modifications. Its auto-rebasing feature for ETH and USDB simplifies yield accrual, making it user-friendly for both developers and end-users.
Additionally, it features a gas revenue-sharing model that redistributes net gas fees to dApp developers. Having reached over $500 million in TVL shortly after launch, Blast demonstrated significant growth and potential.
5. Loopring (LRC) — Best for Building Decentralized Exchanges (DEXs)
Loopring, a blockchain-agnostic protocol, was specifically designed for building decentralized exchanges. It provides DEXs with features like order rings, which match multiple orders circularly to optimize liquidity and efficiency. Unique features include its ability to process trades off-chain while settling them on-chain, blending the efficiency of centralized exchanges with the security of decentralized platforms.
Loopring leverages zero-knowledge rollups to batch multiple transactions off-chain and produce cryptographic proofs verified on the Ethereum mainnet. This ensures Ethereum-grade security while reducing gas fees and increasing transaction throughput.
The LRC token is integral for staking, governance, and earning a share of protocol fees, ensuring network security and community involvement. Loopring remains a top choice for secure and scalable Ethereum transactions.
6. Eclipse — Best for Transaction Speed
Eclipse is one of the best Ethereum L2 projects for transaction speed. Its unparalleled throughput is made possible by leveraging the Solana Virtual Machine (SVM) for execution, which processes transactions faster than the EVM. This allows Eclipse to handle a high volume of transactions with minimal latency, making it ideal for applications requiring fast processing times.
Eclipse settles on Ethereum, ensuring robust security by using Ethereum’s validating bridge to confirm transaction validity and order. This combination of Solana’s speed and Ethereum’s security makes Eclipse highly efficient and secure. It also utilizes Celestia for data availability, providing scalable bandwidth that far exceeds current Ethereum capabilities.
Unique features of Eclipse include its use of RISC Zero for efficient zero-knowledge fraud proofs and a register-based design that simplifies proving. Additionally, Eclipse doesn’t plan to have its own token, instead using ETH for gas fees, simplifying integration with Ethereum’s DeFi and NFT ecosystems.
7. Mantle (MNT) — Best for Decentralization
Mantle is the best Layer 2 for decentralization due to its unique governance model and architecture. Mantle is a DAO-governed network, meaning key decisions are made by MNT token holders, ensuring a decentralized and community-driven development process. This governance structure, combined with its modular design, enables high levels of decentralization and flexibility.
Mantle’s architecture separates transaction execution, data availability, and transaction finality into distinct modules. It uses Optimistic Rollups for scaling, which compresses transactions and settles them on Ethereum, significantly reducing gas fees and enhancing throughput. Mantle also employs EigenDA for decentralized data availability, further promoting a decentralized framework.
Additionally, the Mantle EcoFund and Grants Program support new projects, fostering innovation within the ecosystem. This combination of decentralization, modularity, and robust developer support positions Mantle as a leading Ethereum L2 project.
8. Immutable X (IMX) — Best for NFTs and Blockchain Gaming
Immutable X is the best Ethereum layer 2 solution for NFTs due to its gas-free minting and trading, combined with instant transaction speeds and scalability. Using StarkWare’s ZK-Rollup technology, Immutable X enables high-volume NFT transactions without compromising security, making it ideal for creators and traders seeking cost efficiency and performance.
Immutable X offers a carbon-neutral platform, contributing to its appeal among environmentally conscious developers and users. The platform provides an API-driven approach, allowing easy integration for developers without deep blockchain knowledge. This feature, along with a global order book that propagates NFTs across multiple marketplaces, enhances the platform’s usability and reach.
Notable differentiators include the Immutable X Marketplace, which supports gas-free transactions, and the $IMX token for staking, governance, and transaction fees. The platform also hosts various high-profile gaming projects like Gods Unchained and Illuvium, leveraging its scalable and secure infrastructure to support next-generation Web3 games.
9. dYdX (DYDX) — Best for Decentralized Perpetual Trading
dYdX is the best Ethereum layer 2 project for decentralized perpetual trading due to its unique off-chain order handling and on-chain state changes. This design significantly improves throughput and reduces gas fees, making it ideal for high-frequency traders and market makers who frequently update their orders.
dYdX supports margin and perpetual trading with up to 20x leverage, catering to professional traders seeking advanced trading tools. Key characteristics of dYdX include its non-custodial nature, ensuring users maintain control over their assets. It uses ZK-Rollups to increase scalability while preserving Ethereum’s security.
Distinctive features of dYdX include its decentralized governance via the $DYDX token, which allows the community to propose and vote on protocol upgrades. Additionally, the platform’s transition to dYdX v4 on the Cosmos SDK aims to further decentralize and enhance performance.
10. Shibarium (SHIBARIUM) — Best for Community-Driven Projects
Shibarium is the best L2 for community-driven projects due to its strong focus on decentralization and community engagement. It uses a proof-of-participation (PoP) consensus mechanism, ensuring validators are selected based on their stake, fostering a fair and community-centric environment. This approach reduces computational costs and promotes a more scalable and cost-effective transaction platform.
Shibarium enhances the Shiba Inu ecosystem by providing faster transaction speeds and significantly lower fees. Transactions that might cost over $20 on Ethereum can be reduced to just $0.01 on Shibarium, making it highly attractive for dApps. Additionally, each transaction burns SHIB tokens, adding a deflationary aspect to the ecosystem and potentially increasing the value of SHIB, one of the best meme coins in 2024.
Unique features of Shibarium include its support for a wide range of projects, from DEXs like ShibaSwap to metaverse initiatives. The platform’s governance model relies on the BONE token, used for staking and participating in decision-making processes. Shibarium’s integration with the EVM ensures compatibility and interoperability with existing Ethereum dApps, further promoting its adoption and utility.
What Is Blockchain Layer 2?
Simply put, a layer 2 blockchain is a network that processes transactions off a layer 1 chain to enhance scalability. There are various types of layer twos, such as rollups, sidechains, state/payment channels, plasma chains, and validiums. However, the most common types of layer 2s on Ethereum are rollups and sidechains.
Regarding Bitcoin, the primary layer two is the Lightning Network, a payment channel that allows users to set up two-way peer-to-peer microchannels. However, for now, we will focus on Ethereum layer 2s, as this is where the most opportunities lie regarding layer two coins to buy. Let’s explore the most common types of Ethereum layer 2s and how they operate.
Rollup Layer 2s
There are two types of rollups, optimistic rollups and zero-knowledge rollups (zkRollups). While they have differences in centralization, finality, and data storage, their basic principle works similarly.
The rollups bundle hundreds of separate transactions and report them to the layer 1 in a single transaction. As such, the fees accrued only amount to one transaction, making transacting on a rollup a fraction of the cost of on a layer 1.
While rollup transactions are computed on a separate blockchain, they are reported to and stored on the main chain for finality. As a result, rollups are guaranteed the same security as the main chain because altering a final transaction on the rollup chain would also mean changing the transaction on the main chain.
Many new rollup layer 2s have emerged recently, with some of the most popular being Arbitrum, Optimism, and StarkWare. However, legacy layer 2s like Polygon and Loopring have also transitioned to rollups.
Sidechains
Sidechains operate differently from rollups in that they maintain their own network state using their own consensus mechanism. As such, they do not benefit from layer one security the same way rollups do, but this comes with the advantage of not storing data on the layer 1.
Instead of reporting transactions to the layer 1, sidechains run in parallel with the layer one, using bridges to transfer assets between the chains. Sidechains are becoming less used as the emergence of rollups grows.
The most well-known sidechain is Polygon, although, as we discussed earlier, it has recently launched a zkRollup chain, zkEVM.
Blockchain Layer 1 vs Layer 2
Comparing blockchain layer 1 vs layer 2 is a vast topic with much to discuss. However, we will simplify it by focusing on the benefits of an alternative layer 1 (an Ethereum competitor) compared to the benefits of launching as a layer 2 blockchain.
The first consideration is the network effect. A project that launches as a layer 2 already has access to a thriving ecosystem with an established network effect. As a result, there are already dApps, users, and liquidity that the layer 2 can tap into. On the other hand, layer 1s generally have to build from the ground up.
Furthermore, layer 1 blockchains are eager to attract new layer 2s to help with scalability and strengthen the ecosystem. As a result, layer 2s can often receive grants and expert assistance in developing, testing, and launching their blockchain.
However, one of the main issues for layer 2s is the lack of flexibility compared to launching a layer 1 chain. With a layer 1 chain (such as Cardano), developers can be as innovative and experimental as they like.
However, Cardano has taken years and billions of dollars to build and has yet to reach its expectations.
In conclusion, layer 2 chains are often more straightforward to create, offering an established network effect comprising developers, users, and liquidity. Therefore, layer 2 token prices could potentially explode much faster.
Why Invest in Layer 2 Blockchain Coins?
As witnessed with the Polygon MATIC price in the last bull run, resolving the scalability issue in crypto can be a highly lucrative use case. With that in mind, here are the reasons to buy layer 2 coins.
Upcoming Bull Market
With the Bitcoin halving set to occur in April 2024, many analysts predict that the next crypto bull run is about to begin. Gas fees on Ethereum often soar to exorbitant prices during the peak of the bull run, forcing many users to seek more affordable means of transacting.
As a result, layer 2s are in a favorable position to capture a significant portion of the upcoming bull run liquidity, potentially leading to higher layer 2 blockchain coins’ prices.
Ethereum Has Long-term Layer 2 Plans
According to the Ethereum website, Danksharding, a planned upgrade, aims to facilitate even cheaper rollup transactions by reducing the data they need to store on the main Ethereum chain.
This will provide much more potential to the capabilities and use cases of layer 2s and help increase their prices.
“Pick-and-Shovel” Strategy
Pick-and-Shovel investing refers to buying an asset that provides tools or infrastructure rather than investing in a product itself. The benefit is that it offers a more diverse approach since it inadvertently includes exposure to all the products (or, in this case, dApps) that use it.
By buying a layer 2, investors gain exposure to all the dApps built upon the network, presenting a great way to diversify further. Furthermore, projects like Immutable X, designed specifically for NFTs and gaming, could prove an efficient way to diversify into those sectors.
High Upside Potential
While Bitcoin and Ethereum sit at market caps well over $100 billion, the largest layer 2 by market cap is Polygon, which is just over $5 billion. Furthermore, many layer 2s on our list have less than $1 billion market caps.
Although they could present a higher risk, low market cap layer 2s could provide vastly more upside potential than well-established coins like Bitcoin or Ethereum.
How to Decide Which Layer 2 Blockchain Tokens to Invest in
Deciding which layer 2 to invest in can be overwhelming. However, we have broken down the main things worth considering below.
Market Cap
As with any asset class, market cap plays a significant role in the potential of a crypto. Each project has a ceiling based on the market’s liquidity and the individual project’s importance.
Therefore, understanding a project’s significance and comparing it to its market cap is a great way to decide which tokens are best to buy.
Network Effect
The best way to determine a project’s significance is to understand its network effect. This comes down to considering factors like its daily active users, daily revenue, number of protocols (and success of protocols), number of developers, and total value locked on the chain.
A chain that scores high for each but has a relatively low market cap may fare a better investment.
Tokenomics
It is also essential to consider tokenomics. Factors like the level of utility that the token provides, the circulating supply, and the vesting schedule all play a significant role in the success of a project.
Conclusion
Layer 2s represent some of the most high-potential cryptos on
