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Top 10 Ethereum Layer 2 Crypto Projects in 2024

Elliott Lee
Last updated: | 19 min read

Every time the crypto bull market kicks in, Ethereum mainnet transactions become expensive. As such, several projects have made significant progress in creating cheaper, faster, and more functional layer 2 networks.

This article provides a technical overview of the best Ethereum layer 2 crypto projects with the most potential in 2024. We consider factors like tokenomics, network activity, market cap, technology, and more.

The Best Ethereum Layer 2 Projects by Market Cap

Coin

Market Capitalization

Description

Polygon

$7.40 billion

Uses sidechains and a Plasma framework to increase transaction speed and reduce costs.

Immutable X

$3.57 billion

Focuses on NFTs, using ZK-Rollups for instant trade confirmation, massive scalability, and zero gas fees.

Mantle

$3.38 billion

Built with modular architecture using optimistic rollups; offers low fees, high throughput, and EVM compatibility.

Arbitrum

$3.27 billion

Uses Optimistic Rollups to achieve high throughput and low fees.

Optimism

$2.81 billion

Uses Optimistic Rollups, providing near-instant transaction finality and lower gas fees, while ensuring Ethereum-level security.

dYdX

$1.17 billion

Decentralized trading platform leveraging StarkWare’s ZK-Rollups for high-speed, low-cost, secure trading of perpetual contracts on Ethereum.

Loopring

$385 million

Uses ZK-Rollups; focused on scalable, secure, low-fee trading and payments on Ethereum.

Eclipse

$3.98 million

Uses Solana Virtual Machine, Ethereum for settlement, and RISC Zero for privacy, enhancing scalability and efficiency.

Blast

N/D

Enhances scalability and efficiency with native yield generation for ETH and stablecoins; supports various DeFi applications.

Shibarium

N/D

Developed by the Shiba Inu community; aimed at improving scalability and reducing transaction costs for SHIB ecosystem.

The Best Layer 2 Coins to Buy Now

The best Ethereum layer 2 projects offer high scalability, low transaction fees, high throughput capacity, strong security, and compatibility with the Ethereum mainnet. Here are the best layer 2 crypto projects in 2024:

  1. Arbitrum — Best for low-cost transactions
  2. Polygon — Most versatile Ethereum scaling solution
  3. Optimism — Best for EVM-equivalence
  4. Blast — Most innovative Ethereum L2 project
  5. Loopring — Best for security
  6. Eclipse — Best for transaction speed
  7. Mantle — Best for decentralization
  8. Immutable X — Best for NFTs
  9. dYdX — Best for decentralized perpetual trading
  10. Shibarium — Best for community-driven projects

Analyzing the Best Layer 2 Tokens

Now that we have provided our layer 2 tokens list, let’s dive deeper into each token, what makes them unique and what gives them such potential.

1. Arbitrum — Best for Low-Cost Transactions

Abrtirum is a top-rated layer-two scaling solution, currently second only to Polygon by market cap. However, Arbitrum sits top of our list of best layer 2 blockchain tokens due to its network activity to market cap ratio.best layer 2 blockchain tokens

Since its launch in March 2021, Arbitrum has become one of the most used Ethereum layer two rollups. There are 435 protocols active on the Arbtirum chain, 120K daily active users, a $2.8 billion TVL and a whopping $1.5 billion in locked stablecoins.

This is significant, considering the Arbitrum token’s market cap is just $1.29 billion. Furthermore, the platform has generated over $120K in revenue in the last 24 hours.

With the crypto bull run expected to occur soon, much of the stablecoin value on the network may trickle into $ARB as investors gain confidence in the market’s direction.

On top of the deep liquidity, low transaction fees, and a vast ecosystem comprising hundreds of dApps, one of Arbitrum’s main draws is its trailblazing GMX protocol. This is one of the first decentralised perpetual exchanges enabling users to trade with leverage using a non-custodial exchange.

best layer 2 blockchain tokensGMX exploded in popularity amid the collapse of FTX, where significant amounts of retail and institutional funds were lost due to irresponsible fund custodians.

To process transactions, Arbitrum utilises optimistic rollup technology for reporting to the Ethereum mainnet. This facilitates transactions for minimal fees and increases transparency but comes at a trade-off of delayed transaction finality and increased centralisation compared to zkRollups.

Looking at Arbitrum’s tokenomics, one thing to be aware of is that only 12.5% of its tokens are circulating. The token will follow a monthly unlock beginning in March 2024 and ending in 2027.

This could impact the price of Arbitrum, but it is also worth noting that 43% of tokens are in the Arbtrum treasury, which the Arbitrum DAO controls. Essentially, these tokens will only be sold if the community feels it will benefit the ecosystem in the long term.

2. Polygon — Most Versatile Ethereum Scaling Solution

Polygon is the number one Ethereum layer two blockchains by many metrics. It has 350K daily active users – even higher than Ethereum’s with just over 300K. On top of that, it has 465 protocols and a $1.19 billion TVL with $1.2 billion in stablecoins. best layer 2 blockchain tokens

As such, Polygon benefits from a network effect, where the amount of users, liquidity, and protocols helps further benefit the network, enabling low-term growth. This is because the factors mentioned above will generally attract more investments and developers, which help advance the ecosystem even more.

One of the exciting things about Polygon is that it has attracted significant enterprise adoption from the likes of Starbucks, Nike and Reddit.

In recent months, Polygon launched its Polygon zkEVM, the first Ethereum virtual machine (EVM) compatible zkRollup to integrate smart contracts and developer tools.

zkRollups are a novel technology providing near-instant finality, more decentralisation and use less data on the layer 1 chain than optimistic rollups.

best layer 2 blockchain tokens

However, they are more challenging to implement than optimistic rollups. Polygon’s zkEVM is currently running and functional, with many dApps already deployed on the network, like Quickswap and Balancer.

This shows that the Polygon ecosystem is at the forefront of crypto innovation, and its native token, $MATIC, could have a bright future.

Polygon has a $5.4 billion market cap, with 93.1% of tokens circulating. As a result, Polygon is less likely to experience strong sell pressure compared to newer layer two projects.

3. Optimism — Best for EVM-Equivalence

Due to the spectacular popularity of Arbitrum, Optimism often falls under the radar of crypto investors. This is partly due to the vast amount of dApps on Arbitrum and the popular airdrop which occurred early in 2023.

best layer 2 blockchain tokensHowever, Optimism should not be underestimated. It boasts comparable tokenomics and statistics to Arbitrum, with over 100K daily users, $1 billion TVL and over $600 million in stablecoins. The platform has generated $89K in revenue over the past 24 hours and has 179 protocols.

While these numbers fall slightly short of Arbitrum’s, Optimism has recently made up for this by attracting some of the industry’s most prominent players.

Recently, ChatGPT Co-Founder Sam Altman launched Worldcoin on the Optimism blockchain. Furthermore, Coinbase’s new layer 2 blockchain, Base Protocol, leverages Optimism’s technology stack.

best layer 2 blockchain tokensThe ability to attract impactful teams to use the Optimism network signifies it holds long-term potential.

Optimism currently sits at a $1 billion market cap, with 16% of tokens circulating. With this in mind, and considering its $1 billion TVL, its ratio of TVL to market cap is slightly worse than Arbitrum’s. Nevertheless, its network adoption from esteemed industry players may offset this discrepancy.

4. Blast — Most Innovative Ethereum L2 Project

Blast is one of the best Ethereum layer 2 projects due to its comprehensive approach to enhancing blockchain scalability and efficiency. It tackles high transaction fees and network congestion effectively, making Ethereum more user-friendly and cost-efficient.

What sets Blast apart is its native yield generation for ETH and stablecoins, a feature not commonly found in other L2 solutions. This allows users to earn returns directly within the ecosystem without having to stake their assets. This streamlines the DeFi experience without relying on external protocols.

Blast’s robust infrastructure supports a wide range of DeFi applications, facilitating efficient asset transfers, trading, and yield farming. Its user-friendly design makes it accessible to both novice and experienced users, ensuring broad adoption.

By integrating yield generation natively and focusing on user experience, Blast stands out as the most innovative project in the Ethereum L2 space, solidifying its position as a top-tier solution for scalability.

5. Loopring — Best for Security

Loopring is a highly scalable layer 2 blockchain with its origins dating back to 2017. The platform aims to provide low-cost, secure transactions and claims to process up to 2,025 TPS.best layer 2 blockchain tokens

Earlier versions of Loopring were capable of just two or three TPS, but its incorporation of zkRollups has led to a vastly more scalable network.

According to its website, transactions of Loopring are roughly 1/00th the cost of the Ethereum network, but its usage of zkProofs means users benefit from complete Ethereum-level security.

The blockchain boasts a native app called Loopring Layer 2 App, which features an automated market maker (AMM), order book exchange, and a payments solution so users can send and receive crypto for a fraction of the cost as on the Ethereum mainnet.best layer 2 blockchain tokens

It also features an innovative native wallet powered by a social recovery mechanism, so users do not need to store seed phrases to recover their accounts.

Loopring’s market cap is $248 million, with $77 million TVL and a 96.87% circulating supply. Considering its proven track record, continued innovation and relatively low market cap, Loopring could be one of the best cryptos to buy now.

Furthermore, Loopring has released a developer portal in recent weeks, making it easier and faster for developers to build on the network. Attracting new developers is crucial for blockchains because a chain thriving with new developer innovation usually attracts new users soon after.

6. Eclipse — Best for Transaction Speed

Eclipse is a cutting-edge Ethereum L2 solution, distinguished by its innovative integration of the Solana Virtual Machine (SVM). This unique combination leverages Ethereum’s reliable settlement and SVM’s robust execution capabilities, ensuring high transaction volumes are handled efficiently and securely.

By incorporating Celestia for data accessibility and RISC Zero for privacy-focused transaction verifications, Eclipse delivers a holistic approach to blockchain scalability.

One of Eclipse’s standout features is its exceptional transaction speed. The SVM enables rapid execution of transactions, significantly outpacing traditional L2 solutions. This makes Eclipse ideal for applications requiring swift transaction processing without compromising security.

By harmonizing the strengths of Ethereum and Solana, Eclipse sets a new standard for transaction speed in the Ethereum ecosystem, positioning itself as a leading L2 solution for users and developers seeking unparalleled efficiency and performance.

7. Mantle — Best for Decentralization

Mantle is a layer 2 crypto focused on mass adoption and decentralised governance. Its native token, $MNT, is used for voting on the network for all decisions ranging from new initiatives to managing the project’s treasury.best layer 2 blockchain tokens

The Mantle website dubs the network “hyper scalable” since it uses an innovative modular solution to expand its scalability to 600TPS.

Mantle’s TVL is currently $38, but this has climbed significantly after averaging around $5 million in July.

According to DeFiLlama, the top dApp on Mantle is Agni Finance, a native DEX with $22 million TVL.

Agni Finance is a Uniswap V3 fork which offers capital-efficient liquidity and will soon be deploying a launchpad for new projects to launch on the Mantle blockchain.

best layer 2 blockchain tokens

Mantle is one of the newest layer 2s on our list, with its token launching in July. So far, it has amassed a $1.3 billion market cap, with 52% of tokens circulating.

Interestingly, the Mantle treasury holds a $2 billion valuation. This provides the project with a significant runway to fund future ecosystem development, and it has already launched a grant program to stimulate its growth.

8. Immutable X — Best for NFTs

Immutable X is an Ethereum L2 blockchain aiming to serve blockchain gaming with scalable, secure and decentralised infrastructure connected to the Ethereum mainnet.best layer 2 blockchain tokens

The network provides builders with the tools and infrastructure to create the next generation of crypto gaming. It features countless developer tools like API’s and software development kits (SDKs). This makes building on Immutable X seamless and quick, attributing to its vast growth, with projects like Guild of Guardians and Gods Unchained already building there.

A blockchain gaming market forecast by MarketsandMarkets estimates a whopping compound annual growth rate (CAGR) of 70.3% between 2022 and 2027. This puts the estimated market size at around $70 billion by 2027.

Immutable X is the leading L2 solution facilitating blockchain gaming within the Ethereum ecosystem. Therefore, its token (IMX) could present significant upside potential.

Another unique feature of Immutable X is its development of “Immutable Passports”, a passwordless, non-custodial wallet which can be created automatically. The complexity of wallets is a significant barrier to mass adoption, particularly in the gaming sector, since gamers are not accustomed to creating wallets, managing seed phrases etc.

best layer 2 blockchain tokens

Reddit undertook a similar solution with its “Digitial Avatar” NFTs, which onboarded 10 million users without them needing to manage a wallet since Reddit did it for them.

Immutable X also offers many other products like a scalable NFT minting tool and an NFT order book which maximises NFT liquidity and distribution by sharing orders across multiple marketplaces.

The $IMX market cap is currently $673 million. Currently, 56% of tokens are circulating, and the vesting schedule will continue into the end of 2025.

9. dYdX — Best for Decentralized Perpetual Trading

One of the more interesting hypotheses about the future of crypto is that every dApp will have its own layer 2 blockchain, leveraging the main layer 1 chain for finality and security. dYdX, a decentralised perpetual exchange, has embraced this theory, building a layer two for maximum scalability and functionality.best layer 2 blockchain tokens

The dYdX layer 2 blockchain is used for leverage trading and has amassed a significant user base. According to its website, over 500K traders have used the chain in the last 24 hours, accruing a $1.6 billion 24-hour trading volume.

Its platform offers low fees with no gas costs, quick withdrawals, lighting fast trade execution and much more.

The native token, $dYdX, is used to participate in staking pools, liquidity providing and governance.

Currently, the $dYdX market cap is $304 million, with 15% of tokens in circulation. It also has $344 million TVL. The platform is backed by some of the most prominent venture capitalist (VC) firms in crypto, including Andreessen Horowitz, a16zcrypto, Paradigm, Polychain and many more.

best layer 2 blockchain tokensConsidering its institutional backing, dYdX undoubtedly has the funding and support of enough experienced individuals to succeed long-term.

The flagship product for dYdX is its L2 trading web app. It enables users to trade crypto derivatives for many assets, including Bitcoin, Ethereum, Cardano, Dogecoin, BNB and much more.

Interestingly, dYdX is currently migrating to the Cosmos ecosystem. This is to further aid its scalability and build a new, fully-customisable blockchain from the ground up, all while tapping into the Cosmos ecosystem liquidity.

10. Shibarium — Best for Community-Driven Projects

While Shiba Inu was initially considered a joke meme coin, it has begun transitioning to a legitimate DeFi ecosystem. On 16 August, the project launched its layer 2 blockchain, Shibarium. best layer 2 blockchain tokens

The exciting thing about the project is that the Shiba Inu ecosystem already comprises several in-demand dApps like its ShibaSwap DEX, Shib the Metaverse, an NFT collection and more.

With this in mind, many of these dApps could be integrated into the network, quickly drawing a large user base.

Furthermore, Shiba Inu already has 10 million holders. This provides Shiba Inu with a formidable community. If they embrace Shibarium, it could quickly become one of the top layer 2 networks by TVL and users, attracting more development.

best layer 2 blockchain tokensFollowing its launch, Shibarium was almost instantly on the receiving end of significant FUD. However, a recent blog post clarified the confusion, highlighting that the FUD was caused by a fake screenshot rather than tangible issues on the Shibarium network.

Ultimately, as one of the best meme coins, Shiba Inu stands well-equipped to transition into one of the top DeFi ecosystems.

What Is Blockchain Layer 2?

Simply put, a layer 2 blockchain is a network which processes transactions off a layer 1 chain to help improve scalability.

There are numerous types of layer twos, such as rollups, sidechains, state/payment channels, plasma chains and validiums. However, the most common types of layer 2s on Ethereum are rollups and sidechains.

Regarding Bitcoin, the main layer two is Lightning Network, a payment channel that enables users to set up two-way paper-to-peer microchannels.

However, we will stick to Ethereum layer 2’s for now, as this is where the most opportunities lie regarding layer two coins to buy.

Let’s look at the most common types of Ethereum layer 2s and how they work.

Rollup Layer 2s

There are two types of rollups, optimistic rollups and zero knowledge rollups (zkRollups). While they have differences in centralisation, finality and data storage, their basic principle works similarly.

The rollups bundle hundreds of separate transactions and report them to the layer 1 in a single transaction. As such, the fees accrued only amount to one transaction, making transacting on a rollup a fraction of the cost of on a layer 1.

While rollup transactions are computed on a separate blockchain, they are reported to and stored on the main chain for finality. As a result, rollups are guaranteed the same security as the main chain because altering a final transaction on the rollup chain would also mean changing the transaction on the main chain.

Many new rollup layer 2s have emerged recently, with some of the most popular being Arbitrum, Optimism and StarkWare. However, legacy layer 2s like Polygon and Loopring have also transitioned to rollups.

Sidechains

Sidechains work differently from rollups in that they maintain their own network state using their own consensus mechanism. As such, they do not benefit from layer one security the same way rollups do, but this comes with the advantage of not storing data on the layer 1.

Instead of reporting transactions to the layer 1, sidechains run in parallel with the layer one, using bridges to transfer assets between the chains. Sidechains are becoming less used as the emergence of rollups grows.

The most well-known sidechain is Polygon, although, as we discussed earlier, it has recently launched a zkRollup chain, zkEVM.

Blockchain Layer 1 vs Layer 2

Blockchain layer 1 vs layer 2 is a broad topic with much to discuss. However, we will keep it simple by focusing on the benefits of an alternative layer 1 (an Ethereum competitor) compared to the benefits of launching as a layer 2 blockchain.

The first consideration is the network effect. A project which launches as a layer 2 already has access to a thriving ecosystem with an established network effect. As a result, there are already dApps, users and liquidity, which the layer 2 can tap into. On the other hand, layer 1s generally have to build from the ground up.

On top of that, layer 1 blockchains are eager to attract new layer 2s to help with scalability and strengthen the ecosystem. As a result, layer 2s can often receive grants and expert assistance developing, testing and launching their blockchain.

However, one of the main issues for layer 2s is the lack of flexibility compared to launching a layer 1 chain. With a layer 1 chain (such as Cardano), the developers can be as innovative and experimental as they like.

However, Cardano has taken years and billions of dollars to build and has yet to reach its expectations.

In conclusion, layer 2 chains are often more straightforward to create, offering an established network effect comprising developers, users and liquidity. Therefore, layer 2 token prices could potentially explode much faster.

Why Invest in Layer 2 Blockchain Coins?

As we saw with the Polygon MATIC price in the last bull run, helping solve the scalability issue in crypto can be a very lucrative use case. With that in mind, here are the reasons to buy layer 2 coins.

Upcoming Bull Market

With the Bitcoin halving set to occur in April 2024, many analysts forecast that the next crypto bull run is set to commence soon. Gas fees on Ethereum often reach exorbitant prices during the peak of the bull run, forcing many users to seek cheaper means of transacting.

As a result, layer 2s are in an advantageous position to capture much of the upcoming bull run liquidity, potentially leading to higher layer 2 blockchain coins’ prices.

Ethereum Has Long-term Layer 2 Plans

According to the Ethereum website, Danksharding, a planned upgrade, seeks to facilitate even cheaper rollup transactions by reducing the data they need to store on the main Ethereum chain.

In turn, this will provide much more potential to the capabilities and use cases of layer 2s and help increase their prices.

“Pick-and-Shovel” Strategy

Pick-and-Shovel investing refers to buying an asset that provides tools or infrastructure rather than investing in a product itself. The benefit is that it offers a more diverse approach since it inadvertently includes exposure to all the products (or, in this case, dApps) that use it.

By buying a layer 2, investors gain exposure to all the dApps built upon the network, presenting a great way to diversify further. Furthermore, projects like Immutable X, designed specifically for NFTs and gaming, could prove an efficient way to diversify into those sectors.

High Upside Potential

While Bitcoin and Ethereum sit at market caps well over $100 billion, the largest layer 2 by market cap is Polygon, which is at just over $5 billion. Furthermore, many layer 2’s on our list have less than $1 billion market caps.

Although they could present a higher risk, low market cap layer 2s could provide vastly more upside potential than well-established coins like Bitcoin or Ethereum.

How to Decide Which Layer 2 Blockchain Tokens to Invest in

Deciding which layer 2 to invest in can be overwhelming. However, we have broken down the main things worth considering below.

Market Cap

As with any asset class, market cap plays an impactful role in the potential of a crypto. Each project has a ceiling based on the market’s liquidity and the individual project’s importance.

Therefore, understanding a project’s significance and comparing it to its market cap is a great way to decide which tokens are best to buy.

Network Effect

The best way to determine a project’s significance is to understand its network effect. This comes down to considering factors like its daily active users, daily revenue, number of protocols (and success of protocols), number of developers and total value locked on the chain.

A chain that scores high for each but has a relatively low market cap may fare a better investment.

Tokenomics

It is also essential to consider tokenomics. Factors like the level of utility that the token provides, the circulating supply and the vesting schedule all play a significant role in the success of a project.

Conclusion

Layer 2s are some of the most high-potential cryptos on the market today. However, after thoroughly examining the eight best layer 2 blockchain tokens, we found that Arbitrum could be the best layer 2 on the market today.

It benefits from a strong network effect with 435 dApps and over 120K daily active users. Furthermore, its market cap is around $1 billion, significantly less than our next top pick, Polygon.

FAQs

What are the layer 2 blockchains?

There are countless layer 2 blockchains spanning multiple blockchains, including Ethereum and Bitcoin. However, our analysis found the top layer 2 networks to be Arbitrum, Polygon, Immutable X, dYdX, Loopring and Shiba Inu’s Shibarium.

What is the best layer 2 crypto to invest in?

According to our analysis of the best layer 2 tokens, Arbitrum is currently the best layer 2 to invest in, followed by Polygon. That said, all investments carry risk, and choosing whether or not to buy an asset must be the choice of the individual investor.

Is Polkadot a layer 2 blockchain?

Polkadot is a “layer 0” blockchain, facilitating data transmission between up to 100 integrated layer 1 chains known as parachains. That said, besides some technical differences, parachains can be considered similar to layer two chains on other networks.

References