Despite worries about network congestion and elevated gas fees, Ethereum’s long-term bullish stance is emphasized by borovik.eth, a partner at Rollbit, who shared insights on X on December 26. The optimistic outlook is driven by key factors such as Ethereum’s robust developer ecosystem, its significance in the broader blockchain landscape, and the introduction of various Layer-2 solutions (L2s).
Could Increased Layer-2 Activity Propel Ethereum to New Heights?
Despite the surging performance of layer-1 coins like Solana (OSL) and Cardano (ADA) in 2023, Borovik.eth maintains a contrarian and positive outlook on ETH. The analyst believes that Ethereum’s scaling challenges are manageable, expressing confidence that developers will find permanent solutions in the long term.
With this optimistic perspective, the partner at Rollbit anticipates a robust recovery for ETH in the upcoming sessions, citing the extensive development efforts, particularly in the realm of layer-2 scaling solutions for the pioneering smart contract platform. Borovik.eth highlights the favorable positioning of Ethereum, backed by the support of major companies like Coinbase and venture capitalists, who are investing in the development of layer-2 off-chain options.
As of December 26, ETH continues to follow an upward trend, although it is cooling off after substantial gains in Q4 2023. Despite underperforming compared to certain layer-1 platforms like Injective Protocol (INJ) and Solana (SOL), which achieved new highs in 2023, ETH’s current spot rates are below $2,400, a crucial resistance level. Overcoming this resistance could propel ETH toward $3,500 or higher in the coming months.
The notable rise in SOL’s valuation, particularly in the second half of 2023, has prompted comparisons with ETH. Nevertheless, most traders remain optimistic, with Arthur Hayes suggesting a shift of funds from SOL to ETH, providing an endorsement for the second most valuable cryptocurrency by market capitalization.
Layer-2 solutions on the Ethereum network oversee more than $18.8 billion.
While Ethereum grapples with challenges related to on-chain scaling, dedicated developers are actively addressing this issue. The introduction of layer-2 off-chain solutions, particularly utilizing rollups, has played a pivotal role in tackling this challenge. Notably, solutions like Arbitrum and Optimism have significantly relieved strain on the mainnet, leading to a reduction in gas fees. According to L2Beat, the total value locked (TVL) in layer-2 protocols has surpassed $18 billion. Presently, there are 34 active projects, with an additional 23 in development.
Major players, such as Coinbase, are embracing layer-2 solutions to enhance user transactions through platforms like Base, enabling cost-effective transactions while relying on the Ethereum mainnet for security. Borovik.eth highlights that over 60% of Base’s revenue is derived from rollup fees, underscoring the significance of scaling solutions and Ethereum’s central role in this ecosystem.
Anticipated for integration next year, the Dencun Upgrade is poised to further reduce layer-2 fees. Developers are targeting the mid-January 2024 timeframe for the release of this update on the Goerli test network.