Investment Performance and Prospects Analysis of Ethereum L2 Solutions

In the past few years, Layer 2 (L2) solutions on Ethereum have made significant progress, with a total value locked (TVL) exceeding $40 billion, up from just $10 billion a year ago. However, despite L2's huge advancements in technology and usage, as liquidity investments, the performance of L2 tokens has generally been poor. Two years ago, the only listed L2s were Optimism and Polygon whose fully diluted valuations (FDV) accounted for 8% of ETH. Now we have Arbitrum, Starkware, zkSync and other L2 projects whose FDVs account for 9% of ETH. Every new listing of an L2 token essentially dilutes the valuation of previously listed ones.

Currently, the total FDV of major L2 tokens is about $40 billion with annualized costs at $40 million; their valuation multiple is approximately 1000 times which contrasts sharply with large DeFi protocols that usually have valuation multiples between 15-60 times. As more L2 projects are launched to market,the FDV of L2 tokens may continue to face pressure and dilution.