The rise of Layer 2 solutions may be diverting institutional investors’ interest from Ethereum. Some venture capital experts believe that investing in Ethereum is becoming less attractive due to the rapid development of technologies that optimize its use.
Increased competition for Ethereum
- The rise of Layer 2: Solutions like Optimism, Arbitrum, and zkSync offer faster and cheaper transactions, reducing the need to use Ethereum directly.
- Impact on investments: Capital that could have been invested directly in Ethereum is now turning to these new infrastructures that improve the network’s efficiency.
A change in dynamics in the ecosystem
- Diversification of opportunities: Instead of investing heavily in Ethereum, venture capital funds are favoring more specialized Layer 2 projects and decentralized applications.
- Less pressure on the main network: With some activity shifted to Layer 2, Ethereum sees reduced congestion, but also lower transaction fees, which could affect demand for its native token, ETH.
Opportunities and challenges
Opportunities:
- Development of a larger and more efficient ecosystem around Ethereum.
- Increased adoption of Layer 2 solutions by businesses and users.
Challenges:
- Lower valuation of ETH as a basic investment.
- Risk of market fragmentation with the proliferation of Layer 2 solutions.
Conclusion
While Ethereum remains a key benchmark in the cryptocurrency world, the rise of Layer 2 solutions is reshuffling the investment landscape. The future of the network will depend on its ability to adapt to this new landscape and maintain its key role in decentralized finance.
