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Adoption of Layer-2 could be the catalyst for the next crypto turning point

A anonymous Redditor has made a data-driven forecast that layer-2 solutions, predominantly on Ethereum, will be the next significant phase of development in the blockchain industry.

The industry is moving away from bridging between L1 blockchains and toward Layer-2 blockchains, which are “straight out of the gate, more secure and decentralized than alt-L1s and are built to employ sound money on a truly neutral platform,” according to the May 22 post.

“L2 adoption is happening now, even if it is slow and in bursts. Behind the scenes, L2’s are improving reliability, decreasing fees, and increasing accessibility. L2’s are still building and improving, and that’s fantastic.”

An Layer-2 scaling solution uses the security of an L1 chain, such as Ethereum (ETH), to reduce traffic by ‘rolling up’ multiple transactions into a single package that can be settled all at once.

Users put off by exorbitant fees have flocked to other L1 chains like Solana (SOL), which offers relatively inexpensive and quick transactions.

At the time of writing, the average SOL transaction costs roughly $0.0025, while ETH transactions cost about $1.30. According to the DeFi Llama blockchain monitoring, demand for Ethereum block space has remained massively dominating, with its $73.89 billion total value locked (TVL) outweighing Solana’s $4.24 billion. Furthermore, Solana has recently experienced dependability concerns.

According to L2beat, Arbitrum is the largest Layer-2 on Ethereum, with $2.65 billion in TVL. The total value of the Ethereum Layer-2 ecosystem is $4.77 billion. If the right circumstances come together to divert users and cash away from other L1s, these numbers might explode.

On Layer-2s, several significant decentralized apps (Dapps) have already been deployed. SushiSwap (SUSHI), a decentralized exchange (DEX), and Curve (CRV), a yield aggregator, are both on Arbitrum. Synthetix (SNX), a crypto derivatives platform, and DEX Uniswap (UNI) are also on Optimism.

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Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. Crypto is not a legal tender and is subject to market risks. Readers are advised to seek expert advice and read offer document(s) along with related important literature on the subject carefully before making any kind of investment whatsoever. Crypto market predictions are speculative and any investment made shall be at the sole cost and risk of the readers.