In 2021, TVL (Total Value Locked) in the Ethereum Layer Two (L2) network has grown steadily as the acceptance of such protocols increases. Layer 2 is the general term for solutions for scaling applications in the Ethereum Mainnet (Layer 1).
By removing transactions from the mainnet, these Layer 2 solutions serve to flatten the mainnet and offer much higher transaction throughput and, most importantly, lower transaction fees. These benefits have helped them gain more adoption in 2021.
TVL in Ethereum solution L2 meets ATH
As of January 1st, only $ 48.2 million is locked on all Ethereum L2 solutions. However, as of November 21, the cumulative value of the L2 solutions is now $ 6.13 billion – the highest ever.
The new ATH solution for Ethereum L2 comes after rising 13.26% over the past 7 days.
Total Value Locked (TVL) in Ethereum L2 from November 21. Source: L2Beat
The new ATH of the L2 solutions arose as a result of the increased capital inflow from institutions into these protocols. For example, in September we reported that around $ 2 billion had gone into arbitrum.
Top L2 contributor
Arbitrum, an L2 solution that enables Ethereum users to process their transactions over the Ethereum mainnet, is the largest contributor at $ 2.67 billion, or 43.5%.
The decentralized derivatives exchange dYdX is the second largest contributor to L2 at $ 975 million, while the Boba Network ranks third at $ 863 million. Looprings L2 DEX ranks fourth at $ 580 million.
Why should you care?
L2 solutions play an essential role in the growth of the Ethereum network, a fact that is becoming more apparent with the rapid growth of L2 solutions.