Layer 2 tokens have impacted the industry on a great level as major projects on this chain have recorded massive jumps in their respective values. The L2 is widely used to transfer between adjacent data nodes with faster transaction speed and security.
The L2 is also referred to as an off-chain network or a new technology built on top of an existing blockchain (Layer 1). The main goal of it is to solve the difficulties involving transaction speed and scalability that are faced by major Layer 1 networks. The ecosystem is committed to transforming the industry and is scaling to new heights with constant innovation in it.
Overview:
With the birth of Ethereum, a new ecosystem was introduced to the world, the Layer-1 blockchain. Ethereum, with a market dominance of 17.1% has played a major role in the diversification of the ecosystem as it has homed many major blockchains on it, which are referred to as the Layer-2 ecosystem.
With a market cap of $15.42 Billion, L2 is predicted to play a massive role in the future of blockchain adoption.
The Active Addresses for the Layer 2 tokens have been on a constant rise, with major tokens recording new highs this year, indicating an increasing demand for the ecosystem. Layer 2 has more than 12 Million active users presently and is on the rise each day.
Moreover, tokens worth more than $13 Billion are currently locked (TVL) by the users. This highlights strong fundamentals for the project as many users believe in the future of this technology.
Layer 2 has played an important role in the future of the decentralized finance system. This blockchain technology will play a vital role in the future as it can store important data in the most complex encrypted manner for maximum security. A person can not only store data but also use it in their day-to-day life.
Factors To Take Into Consideration:
Before entering into the world of cryptocurrencies, it is best suggested to understand a few important factors that affect the price action of a selected token as it may help you with making better investment decisions.
Below are a few listed factors to be taken into consideration while investing:
- Market Capitalization: Popularly referred to as Market cap plays a vital role as it helps the investor understand the value of the token in the market.
- Technology: Understanding blockchain technology in the crypto industry is important as it will help you understand the fundamentals of the project such as consensus mechanism, scalability, and security measures.
- Adaptation of the Network: If the network is being used by significant users as a mode of transaction, then the blockchain is considered to be a potential project.
- Historical Performance: Analyzing the historical data of the token is crucial as it helps us understand the credibility of the project in various market conditions.
- Roadmap: This gives us insights into the company’s plan for the year which includes its upgrades, partnerships, and adoptions.
Current Market Situation:
Despite constant setbacks, the Layer 2 tokens have successfully regained the lost momentum it once had. Positively, the investors are seasoned and are optimistic about the future of it.
Historic sentiments show a repetitive trend where the tokens are seen following a particular pattern and display resurgence, which results in the industry recording massive growth. The market is presently in a stabilizing phase, which can be considered a good time for long-term investment.
With the market stabilizing, a belief is created around the crypto space for high-potential projects to play a major role in transforming the world. Hence, it attracts more investors who are willing to be a part of this transfusion, which ultimately boosts the market valuation.
Top L2 Tokens To Look For 2024:
Arbitrum
Since its launch in 2021, Arbitrum has become one of the most preferred blockchains in the L2 ecosystem. With a market cap of $1.36 Billion, ARB is ranked 47 on the list of CMC.
This was also one of the first decentralized perpetual exchanges to offer trading with leverage by using a non-custodial exchange.
Arbitrum has approximately $3 Billion in TVL and close to $1.5 Billion in stablecoins, making it a hot pick for the upcoming bull run as investors have started to gain confidence in this project.
The ARB project is the latest among the pack and is predicted to achieve its target of $5 in the upcoming bull cycle.
Polygon
The leading blockchain on Ethereum’s Layer 2, with a market cap of just over $7 Billion. Polygon is one of the top tokens in the crypto industry and has a TVL of $1.20 Billion with $1.2 Billion in stablecoins.
Polygon has partnered with some of the world’s most renewed brands like Nike and Starbucks. It solves major scalability issues in the Ethereum ecosystem, making it a vital project on the L2.
With the launch of the first zkEVM, which was the first Ethereum Virtual Machine (EVM), Polygon has set a benchmark to integrate smart contracts and tools.
Although MATIC’s price trades at a discount of 73.15%, it has a significant impact on the ecosystem, making it an important project in the L2 ecosystem.
Immutable
The prime goal of immutable is to provide a safe and secure decentralized infrastructure for developers to create next-generation crypto gaming, which is connected to the Ethereum mainnet.
Immutable presently has a market cap of $1.74 Billion, but the project is expected to play a significant in the gaming sector making it potentially a high-value token for the future.
With the potential of revolutionizing the gaming sector forever, IMX has already gained significant market attention and has a target of $7 in the upcoming bull cycle, making it a hot pick.
dYdX (ethDYDX)
A perpetual exchange of Ethereum’s Layer 2 blockchain, this project has the potential to boost scalability and house infinite users on its blockchain. It ensures quick and secure withdrawals and deposits while offering the highest level of anonymity.
The DYDX token is presently trading at around $3.5 with a discount of 88%. The price had recorded an ATH of $27.78 during the previous run and is expected to do the same in the upcoming one, making it a 10x potential investment for the future.
Optimism
Optimison (OP) has a market cap of $1.6 Billion, with a Total Value Locked of $1 Billion with over $600 Million in stablecoins. Moreover, OP has over 100K daily users on its platform.
Optimism follows the path of Arbitrum, resulting in this token gaining significant market attention. Further, the airdrop during early 2023 has boosted the presence of the token in the industry.
This blockchain also homes Sam Altman’s Worldcoin, making it the center of attraction for the market and indicating strong fundaments.
Optimism is of a kind project with the power to integrate and fund third-party development proposals, making it prone to partnerships and funding. The token is predicted to record a double-digit score in the upcoming run which brings it into the watcher’s list.
Mantle
Mantle (MNT) has a market cap of close to $1.6 Billion, a TVL of $24 Million with $5 Million in stablecoins. It works on a unique model to expand its scalability which further helps its user with a better user experience.
Mantle focuses on the mass adoption of decentralized governance. It works on a voting system for all its decisions, which is done through its native token $MNT.
Working with Uniswap V3, this blockchain has many plans for the upcoming year concerning efficiency, making it a potential buy for the upcoming cycle.
The MNT price is considered to be a steal deal as it is presently trading below the $1 mark. The price trading with a discount of just over 14% is expected to record a new ATH with a target of $3 in the coming time.
Loopring
Launched in the year 2017, LRC has a market cap of approximately $300 Million. Its prime goal is to help its users with security and cost-efficient transactions.
LRC claims to cost only 1/100th of Ethereum, making it a vital blockchain for this segment. Following the integration of ZKRollups, the project now holds a capacity of 2,000 TPS.
Loopring price had recorded a high of $3.83 during the previous run and is presently trading at a discount of 93%, but the project has the potential to change the cross-border transaction process, making it a high-value token for the future.
Cronos
Launched in the year 2019, The CRO has a market cap of approximately $2.33 Billion. Its main goal is to facilitate transactions using a custom blockchain.
Cronos is trading at a discount of 90% from its previous ATH of $0.9698 with a TVL of $782 Million on its chain, making it a high-potential coin for the future.
NEO
Its main goal is for those to stake the right to vote for the upcoming decision. With a market cap of $774 Million, the NEO token is expected to reach a new high during the coming cycle.
NEO price had recorded a high of $196.85 during the previous following when the coin cut over 97% in value, but this project plays an important role in the DeFi space, as it can process 10,000 transactions per second.
Tips For Investing:
Blockchain technology is on a path to change the world and it is highly impossible to contain this change. Cryptocurrencies are constantly evolving and are still in the early stages of adoption.
Layer 2 is considered to be a revolutionary move in the Fintech world as it has introduced important financial systems on its blockchain.
Following are some of the investing tips to maximize your profits:
- Diversify your portfolio: It is best suggested to invest money across different cryptocurrencies to minimize your risk and it also helps one protect their portfolio.
- Stay updated: keeping yourself updated on the current affairs of the industry will give you an idea of when to stock up or sell a token.
- Trusted platforms: Only choose weel establish platforms to buy, sell, and store tokens. Opt for platforms with better security features.
- Knowledge: Study the fundamentals and the long-term plan of a project to understand the workings of blockchain technology.
- DYOR: Make sure to understand what you are entering into, and do thorough research before investing in it.
Risk Management:
- Security Risk: Hacking has turned out to be one of the major concerns in the crypto space as it threatens the security of a wallet.
- Market Volatility: The crypto industry is highly volatile and, regulations play an important role in volatility as they can ignite massive price pumps and dumps at the same time.
- Market Manipulation: Pump-and-dump schemes, insider trading, and whale movements are some examples of such situations.
- Crypto Regulations: Various countries and constantly working on this evolution. New laws or change in the old ones, can impact the price significantly.
Conclusion:
Layer 2 is one of the most important parts of this new face of the Decentralized world. The technology has been evolving each day with exploring new possibilities to achieve, but due to various reasons, they are still considered as a risky investment.
Each of these projects has a significant role in the working of this vast ecosystem which offers different solutions concerning scalability, security, and its mechanism.
The projects selected for this article were purely chosen based on their Market cap, ranking, trading volume, all-time high and all-time low, TVL, and Roadmap.
Note:
Understanding the crypto market takes a lot of patience, dedication, analytical skills, and knowledge. One must make moves with the help of calculation and caution as this industry is very dynamic. The market displays remarkable potential but at the same time possesses significant risk.
Make sure to do your research before investing and only invest the money one can afford to lose, as the market displays massive price actions in short time frames due to its volatile nature, which can make fortunes for one but at the same time liquidate your portfolio in fractions.
Source: https://coinpedia.org/top-10/layer-2-crypto-coins/