Ethereum completed the biggest upgrade after the Merge in March 2023, known as Shanghai hard fork or Shapella, which enables users to withdraw the ether they staked over the last few years. Many crypto enthusiasts have named this upgrade a historic milestone because it aims to make transactions faster and more affordable.
The Merge and Shapella positively affected the price of Ethereum and all its Layer 2 projects. Investors believe that subsequent developments could also push the value of Ethereum-based projects further and recommend new market players to turn their attention to the most popular solutions developed on the network. A rise in the value of Ethereum Layer 2 projects could encourage traders to buy Ethereum to gain access to these innovative applications.
What are Ethereum Layer 2 projects?
Ethereum Layer 2 projects are created to solve the scalability problems the main Ethereum blockchain experiences. It’s attached to the Layer 1 blockchain, which allows it to complete operations and report them to the primary chain. Crypto specialists compare Layer 2 solutions to streets leading to the main avenue. When the Ethereum main network gets congested due to increased traffic, Layer 2 solutions offload the traffic by taking some of it.
The existing Layer 2 projects allow Ethereum to boost transaction speed without affecting its security or decentralization while enabling developers to create new apps, lowering gas fees, and offering improved user experience.
Layer 2 projects expected to perform well after Shapella
Investing in Ethereum-based projects after Shapella makes sense because Ethereum is the most anticipated blockchain that could overtake Bitcoin and cause the Flippening. As mentioned earlier, Layer 2 solutions aim to solve scalability problems related to the main chain, which could hasten the Flippening. Investors who’re looking for opportunities should check the following well-established projects.
Polygon
Everyone interested in Ethereum knows about Polygon’s existence because it’s one of the largest crypto projects based on the Ethereum network. It was developed as a sidechain that runs in parallel with the main Ethereum blockchain, enabling lower transaction costs and faster transactions. Investors can bridge their cryptos to Polygon if they want to interact with the decentralized apps that are exclusive to the ecosystem.
Polygon’s principal chain is a PoS sidechain that can vote on blockchain upgrades and validate transactions. The project provides developers with a Polygon software development kit if they want to build sidechains. The sidechain currently allows developers to use ZK-rollup, optimistic rollup, and plasma as construction scalability methods.
Uniswap
Uniswap is another well-known name in the crypto world, which created a buzz over the last few months because it released v3. The v3 of the decentralized exchange protocol implies an update focusing on concentrated liquidity, which allows providers to establish the conditions for which they could receive fees. The update’s main purpose is to enable liquidity providers to set price ranges.
V3 was launched on the Optimistic Ethereum network, which is known for being a scaling solution superior to the Layer 1 Protocol because it cuts gas fees, reduces slippage, and enables near-instant transactions.
Mantle
Mantle is another project worth considering if you want to add interesting projects to your portfolio because it’s the first modular Layer 2 protocol established on Ethereum and was developed by a decentralized autonomous organization. The solution can expand the utility of BitDAO’s native token BIT because BitDAO incubates it.
Mantle’s modular structure enables it to complete several kinds of actions and transactions in different layers managed by network users through a decentralized data availability layer and Ethereum rollups. Due to this, the solution can offer lower gas fees for all apps created on Mantle.
Mantle was built with the purpose of decentralizing the sequencer and enabling multiple Sequencer nodes to get and use BIT rewards. Its features make it less prone to operational and security risks that usually affect other rollup models.
MakerDAO
This is another unique project because it was the first decentralized lending protocol in the market. Its native token is the stablecoin Dai. Stablecoins have gained popularity lately. After all, they are digital currencies whose value remains stable regardless of the market’s fluctuations because they’re pegged to another asset.
The peg is a great advantage for lending protocols because it enables people to take loans without fearing that they’ll have to pay more due to market volatility and fluctuations in the crypto market.
Dai is different from other stablecoins like Tether or USDC because it’s not pegged to a traditional asset, but Eth fully backs it. The average stablecoins are pegged by traditional assets, which drives scrutiny over their legitimacy in time. Dai is a trustless stablecoin because people can audit and verify it by checking the ETH equivalent in their national currency terms.
Arbitrum
Arbitrum was developed to solve the congestion on the Ethereum network by increasing the speed of transactions to 40,000 transactions per second and cutting the associated fees to less than two cents.
Arbitrum uses optimistic rollups to validate smart contracts, but it stands apart in the sector for its EVM compatibility. The project allows DApp developers to create applications within its mainnet without using a special coding language. The protocol uses the same coding language used for developing smart contracts on Ethereum, so Ethereum developers can easily switch to Arbitrum.
At this point, Arbitrum lacks a native token, and until one is created, the easiest way to invest in Layer 2 is by engaging with projects native on its rollup. GMX is the largest DeFi project existent on Arbitrum, so it’s a worthy candidate to consider. It’s the governance and utility token developed for the decentralized exchange GMX and deployed on the Arbitrum network.
Final words
As the relevance of the cryptocurrency sector expands, Ethereum is expected to gain more popularity worldwide because it’s the second-largest cryptocurrency by market cap. Its large-scale implementations will provide investors with lucrative opportunities. Its projects can be like boot camps where they explore the benefits of engaging with blockchain technology and alternative investment methods.
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