Layer 2 Ethereum: Report on the year 2024
January 17, 2025
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Despite renewed interest in the cryptocurrency sector in 2024, activity on layer 2 blockchains was not particularly stimulated and remained rather disparate. This report offers you an in-depth analysis of these layer 2 blockchains from a financial and on-chain activity perspective, as well as a comparison of the various Rollup sectors, including Optimistic, ZK, Validium and Based.
Introduction and Context
As a Layer 1 blockchain supporting the implementation of over 200 Layer 2 networks, Ethereum (ETH) is undeniably a reference point for data availability. The fee reduction observed on rollups since March 2024 largely results from effective technical decisions made possible by proto-danksharding (EIP-4844).
On March 13, 2024, Ethereum deployed the Deneb and Cancun updates, commonly referred to as Dencun. These updates introduced a set of nine Ethereum Improvement Proposals (EIPs), the most significant being EIP-4844, which implements proto-danksharding and the so-called “data blobs.” The goal is to drastically reduce transaction costs on Layer 2s and improve their scalability.
Since the Dencun update and subsequent fee reduction, Ethereum's Layer 2 solutions have seen a surge of activity, attracting a significant influx of new networks, developers, and users. From Ethereum’s ecosystem perspective, this is a notable success—aligned with the roadmap—but it also presents a conundrum for investors seeking the most promising network.
Before delving deeper into this 2024 report, it is essential to clarify the key terms used throughout:
- Optimistic Rollup: Rollups that implement "optimistic" transaction verification, assuming validity unless a fraud proof is submitted during a typical seven-day withdrawal period. The advantages are lower costs and faster speeds compared to ZK proof systems.
- ZK Rollup: Rollups that use Zero Knowledge Proofs (ZKP) for mathematical verification of transactions, enabling near-instantaneous withdrawals without relying on fraud proofs. Technological advances are consistently reducing ZKP costs, and many believe this technology represents the future of Layer 2. However, an Optimistic Rollup can transition to ZK in the future.
- Based Rollup: Rollups that use Ethereum validators as sequencers, fully leveraging Ethereum's security without requiring a centralized sequencer. These can be either Optimistic or ZK rollups.
- Validium: Rollups (either ZK or Optimistic) that do not publish data availability on Ethereum but instead on faster and cheaper solutions like Celestia or EigenDA. While this compromises security, it enhances speed and reduces costs. Since only the rollup state verification is published on Ethereum and not the data availability, Vitalik Buterin argues that Validiums should not be classified as Layer 2 but rather as standalone rollups.
→ Read our 2024 report on Ethereum (ETH):
Ethereum Layer 2 Market Overview
Despite Bitcoin (BTC) surging 121% in 2024, most altcoins underperformed significantly, with many posting negative returns. Ethereum Layer 2 blockchains faced particular challenges as no asset outperformed Bitcoin, and only one finished the year in positive territory: Mantle (MNT) with a 70% increase.
In 2024, several Layer 2 networks launched their tokens, often distributed via community airdrops: Mode, Starknet, zkSync, Blast, and Scroll. At first glance, these distributions underperformed in the market, with token prices plummeting between -50% and -80%. Despite a rebound towards year-end, they still closed in the red:
- Mode (MODE): -26%;
- Starknet (STRK): -72%;
- zkSync (ZK): -7%;
- Blast (BLAST): -65%;
- Scroll (SCR): -12%.
Long-established networks, namely Optimism (OP) and Arbitrum (ARB), also struggled due to general confusion surrounding Ethereum's ecosystem direction and increasing competition (both internal and external). OP dropped by 41%, while ARB declined by 44% in 2024.
The financial performance of the Layer 2 sector was particularly disappointing in 2024, reflecting a fragmented investor focus across numerous networks. User activity, while not drastically reduced, was divided among an increasing number of networks. The standout performer was Base, but this did not translate into financial gains, as Coinbase's blockchain does not (yet) have a token.
→ Find our 2024 report on layer 1 blockchains :
Review of Optimistic Rollups
This year, Base emerged as the undeniable winner in terms of TVL, activity, and recognition, attracting a growing number of quality projects. Coinbase's Layer 2 network recently surpassed $4 billion in TVL, overtaking Arbitrum ($3.5 billion). However, Arbitrum continues to hold its ground as a DeFi leader while expanding its ecosystem of L2s and L3s through Orbit Chains.
Optimism ranks third in TVL, with approximately $800 million, maintaining stable activity throughout 2024. However, Optimism’s real strength lies in the Superchain, which has attracted increasingly high-quality Layer 2s, including Base, Mode, Ink, and Zora. While Arbitrum surpasses Optimism in TVL, the Superchain appears to outpace Orbit Chains in dynamism since early 2024.
Among new Layer 2 networks launched in 2024, Blast stands out for capturing user attention and attracting airdrop hunters. Initiated by Pacman (creator of the Blur NFT marketplace), Blast's TVL initially soared to over $2 billion before plummeting following the BLAST token airdrop. Its TVL now hovers around $500 million, ranking fourth.
Mode and Worldchain, two networks participating in Optimism’s Superchain, had contrasting starts. Mode has struggled to attract users, while Worldchain, launched on October 17, 2024, shows promising growth but remains limited in DeFi activity. These dynamics may shift with the Superchain’s planned completion in 2025, reducing fragmentation among users and liquidity across Layer 2s.
Finally, three highly anticipated Layer 2 networks are set to debut in 2025: Unichain (by Uniswap) and Soneium (by Sony). Both benefit from their prestige in Web2 (Sony) or Web3 (Uniswap) and have also chosen to join the Superchain ecosystem.
Review of ZK Rollups
The year 2024 was heavily scrutinized for ZK Rollup solutions, especially with the highly anticipated airdrops from zkSync, Starknet, Linea, and Scroll, the four main representatives of this Layer 2 category for Ethereum.
As often seen in the cryptocurrency ecosystem, fundamentals are often overshadowed by marketing. While ZK Rollups are considered the most promising Layer 2 technology for Ethereum’s future, they did not particularly impress in 2024.
Scroll experienced one of the best TVL growth rates in 2024, increasing from approximately $20 million to nearly $1 billion. However, after the October airdrop, the network saw a significant drop in activity, reducing its TVL to below $200 million, ranking it third among ZK Rollups.
The zkSync airdrop, conducted in June 2024, reinforced the bearish trend for the network. Once considered one of the most promising projects, zkSync now holds around $100 million in TVL, placing it fourth among ZK Rollups. However, its Elastic Chain development continues and is expected to be completed by 2025.
In second place, Starknet also held its airdrop in February 2024. Following a decline in STRK prices and a temporary reduction in on-chain activity, Starknet has gradually regained momentum through DeFi protocol growth. Its TVL increased from approximately $40 million to $300 million by year-end 2024, maintaining stability since April.
Leading the pack, Linea consistently attracted users throughout 2024, supported by relatively high on-chain activity. However, the ecosystem has not been universally embraced by the community due to the pending promise of an airdrop, potentially arriving in Q1 2025. Linea's TVL climbed from $55 million to over $700 million in July, ending the year at approximately $450 million.
Among the most anticipated projects for 2025 are Aztec (focused on privacy), Kakarot (a ZK EVM by Starknet), and Fluent, a Layer 2 capable of utilizing multiple virtual machines, including EVM and SVM.
Review of Based Rollups
In 2024, Based Rollups began realizing their potential as a key element in Ethereum’s future. Unlike traditional models, these networks rely directly on Ethereum validators as sequencers, eliminating the need for centralized sequencers (a characteristic of most current Rollups). This approach reduces centralization risks while increasing network resilience and transparency.
This year saw the launch of the first Based Rollup: Taiko. In brief, Taiko combines the security of a ZK Rollup with the advantages of a decentralized sequencer. Ranked 13th in TVL but 2nd in activity, Taiko quickly gained attention within the Ethereum community. Its performance highlights the advantages of Based Rollups: fast transactions, data integrity, and an enhanced user experience.
Other promising projects, such as Unifi (Puffer's ZK Based Rollup) and Rise (announcing an ultra-fast Layer 2), are already generating significant expectations. For 2025, the future of Based Rollups will depend on addressing technical challenges, particularly scalability and standardization, while convincing developers and users of their added value.
Review of Validium
Another category of "Rollups" gained significant attention in 2024: Validiums. The quotation marks are intentional, as many, including Vitalik Buterin, argue that Validiums should not be considered Rollups. Before delving deeper, let’s briefly explain what they are.
Unlike traditional Rollups, Validiums do not publish data availability on Ethereum but instead on specialized external solutions like Celestia or EigenDA. This compromise in security (as Validiums do not benefit from Ethereum’s security) allows for much faster transactions and significantly lower costs, catering to specific use cases.
In 2024, Mantle emerged as the undisputed leader among Validiums, with steadily growing TVL. This success is attributed to its adoption in large-scale DeFi projects such as Uniswap, Ethena, and Ondo Finance, combined with robust infrastructure. Manta and Metis occupy the second and third positions in TVL rankings, though their activity remains stable but relatively low.
The recent launch of Eclipse, a new Validium, has generated interest despite limited user activity. However, expectations for this project in 2025 highlight the potential of Validiums, which will undoubtedly be closely watched in the coming months. Among anticipated projects, M2 by Movement Labs stands out with its combination of EVM and Move language, while Swell focuses on liquid restaking, a rapidly growing niche.
Comparison of Validium and Rollups
The fundamental difference between Validiums and traditional Rollups (Optimistic or ZK) lies in data management. Rollups publish data availability on Ethereum, providing superior security and decentralization, though often at the expense of higher fees. In theory, this would also affect validation times, but centralized sequencers in most Rollups currently mitigate this aspect.
Conversely, Validiums outsource data availability to external solutions like Celestia or EigenDA, sacrificing some security to achieve significantly improved cost and speed performance.
This distinction makes Validiums ideal for applications where Ethereum’s full security is not a priority, such as blockchain games or Web3 applications like DePIN. However, for use cases requiring maximum trust and enhanced immutability, such as DeFi, Rollups remain the preferred solution.
In conclusion, while Validiums do not replace traditional Rollups, they bring valuable flexibility to the Ethereum ecosystem. By combining speed, reduced costs, and sufficient security for many applications, these solutions continue to expand possibilities for developers and users alike.
→ To go further, discover our analysis of MegaETH, the blockchain that raised $10 million in seconds:
