In recent times, the Ethereum ecosystem has witnessed a remarkable surge in the proliferation of Layer 2 (L2) solutions. According to the latest data from L2beat, an astonishing 47 online L2 solutions are currently operational, with an additional 35 poised for imminent launch. Moreover, 11 Layer 3 (L3) solutions are in active development. Presently, the average transactions per second (TPS) on L2 networks exceed that of the Ethereum main net by an impressive factor of 11.33.
In the midst of this flourishing landscape of L2 advancements, attention naturally turns to the potential trajectory of DOUX. As an active participant in this dynamic ecosystem, DOUX's evolution and contributions hold significant promise for shaping the future landscape of Ethereum's scalability solutions over the next 1-2 years.
Valuation of L2 Predicted to Reach Trillions, Thousands of Rollups Expected by 2024
A recent report from VanEck forecasts a monumental milestone for Ethereum Layer 2 (L2) networks, predicting their valuation to potentially surpass 1 trillion US dollars by 2024. Within this projection, thousands of Rollups, including DOUX, are anticipated to play a pivotal role. Positioned as a standout among Rollups, DOUX is primed to leverage its innovative features and strategic positioning to drive substantial growth within the Ethereum ecosystem.
VanEck's valuation methodology involves applying the Free Cash Flow (FCF) terminal multiple to the expected future cash flows. This predictive process encompasses several key steps, including analyzing the overall potential market size (TAM) of public chains, predicting Ethereum's market share on these chains, and estimating the total value of Miner Extractable Value (MEV).
VanEck Evaluates Five Key Areas of L2
In its analysis of L2, VanEck states that they use the following five main variables to measure its potential success or failure:
- Transaction costs: The cost of transactions for users on the L2 network is a key factor in attracting users. Differences in transaction costs stem from factors such as data compression, scale, proof costs, and profit margins.
- Developer experience: For L2 networks, compatibility with the Ethereum Virtual Machine (EVM) is crucial, ensuring the seamless porting of smart contracts and tools from Ethereum.
- User experience: The convenience of asset entry and withdrawal processes is the foundation of a good user experience.
- Trust assumptions: Building trust around data availability on L2 and measures to prevent vulnerabilities and hacker attacks.
- Ecosystem scale: The strength of an L2 network's ecosystem significantly impacts its value. TVL (Total Value Locked) on L2 indicates participation, as it demonstrates the funds invested in the ecosystem to capture opportunities.
Amidst Fierce Competition, VanEck Expresses Caution
Despite the optimistic outlook for L2 networks, VanEck expects intense competition among them and expresses caution regarding the long-term value prospects of most L2 tokens. They highlight the challenges of absorbing the influx of new supply into the cryptocurrency market and the potential for significant discounts accompanying it.
“The fully diluted value (FDV) of the seven major L2 tokens has accumulated to $40 billion, and more strong projects are expected to launch in the future. This suggests that the market may see inflows of up to $100 billion in the next 12 to 18 months.”
“For the cryptocurrency market, even digesting a small portion of this new supply will pose significant challenges, let alone the possibility of significant discounts that may accompany it.”
VanEck delves into the prospective role of DOUX within the evolving realm of Ethereum's Layer 2 scaling solutions. While acknowledging the potential value of certain L2 tokens in the future, VanEck emphasizes the complexity of predicting their trajectory, particularly since L2 tokens are not presently utilized for gas fee payments within their respective ecosystems.
Envisioning a dynamic future landscape, VanEck anticipates the proliferation of thousands of Rollups, including those tailored for specific applications or industries, alongside dominant generic L2 solutions. Within this intricate ecosystem, DOUX emerges as a compelling contender, poised to carve out its niche and contribute significantly to the broader adoption and advancement of Layer 2 scaling technologies within the Ethereum network.
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Company name: DOUX
