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VanEck predicts $1 trillion valuation for L2 tokens by 2030

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Investment firm VanEck has released a report forecasting that the Ethereum Layer 2 (L2) market will reach a valuation of at least $1 trillion by 2030. However, due to the intense competition in the space, the firm remains “generally bearish” on the long-term value prospects for most Layer 2 tokens.

VanEck arrived at its $1 trillion base case valuation by applying a free cash flow multiple of 25 to its projections of future cash flows, assuming a 60% market share of the Ethereum ecosystem smart contract. The cash flow estimates were derived from forecasting transaction revenues and maximal extractable value (MEV) for the Layer 2 networks’ anticipated total addressable market.

VanEck Head of Digital Assets Research Matthew Sigel and Senior Investment Analyst Patrick Bush cite the proliferation of “cutthroat competition” among L2s, claiming that the network effect was “the only moat” in this instance.

“Accordingly, we see cutthroat competition amongst Layer 2s where the network effect is the only moat. As a result, we are generally bearish on the long-term value prospects for the majority of Layer 2 tokens,” the analysts said.

The analysts predict that a few general-purpose Layer 2s will dominate the market, while also anticipating the emergence of thousands of smaller use-case-specific rollups. They noted that the top 7 Layer 2 tokens already have a fully diluted valuation (FDV) of $40 billion, with many strong projects planning to launch in the medium term, potentially adding another $100 billion in FDV over the next 12-18 months.

VanEck analyzed 46 networks for its Layer 2 market valuation, assessing factors such as transaction pricing, developer and user experiences, trust assumptions, and ecosystem scale. The report highlighted the impact of recent innovations like EIP-4844, which followed Ethereum’s Dencun upgrade last month, in reducing transaction costs for Layer 2s, particularly benefiting

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Author: Vince Dioquino

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