Due to the heavy use of Ethereum, there were network bottlenecks and a viable solution was needed. Layer 2 solutions developed for this help maintain compatibility with Ethereum and make Blockchain cheaper and faster to use. According to crypto expert RJ Fulton, some altcoins have proven to be leaders in the Layer 2 space.
The race between Tier 2 altcoins heats up
It has become clear that over the past few years, Ethereum (ETH) has seen significant growth. But as a result of becoming one of the most popular blockchains in the world, its network has been plagued with slow transaction speeds and costly fees. This extreme congestion has created demand for efficient Tier 2 scaling solutions. Layer 2 scaling solutions are built on top of the Ethereum Blockchain to enable faster and cheaper transactions while maintaining the decentralization and security features of the blockchain.
There are currently a handful of Layer 2 scaling solutions aimed at solving Ethereum’s problems. But the three most prominent solutions today, as well as those with the most long-term potential, are Arbitrum (ARB), Optimism (OP) and Polygon (MATIC). Each of these solutions works a little differently and therefore has its own pros and cons. Let’s see what sets these altcoins apart and what makes them deserve your hard-earned money.
A comparison for Tier 2 altcoins
To begin with, it should be clarified that all these Layer 2 solutions are trying to achieve the same thing: making Ethereum faster and cheaper. For the most part, they all use similar processes. But they differ slightly in how they actually scale Ethereum. These differences can be extremely technical and would probably be best reserved for discussion for another day. But the key factor to understand is that all these solutions offer trade-offs depending on what they prioritize.
For example, Arbitrum and Optimism both use rollups that combine batches of transactions into a single transaction. But Arbitrum does this a bit slower, but significantly cheaper than Optimism. Looking at Polygon, the way it uses a side-chain to process transactions makes it less decentralized than Optimism or Arbitrum.
However, Arbitrum and Polygon have strong compatibility with Ethereum. This makes them great options for developers looking to build decentralized applications. Each solution has its own advantages and disadvantages. But to really understand which ones are most in demand, we can look at some statistics.
An evaluation on the data
To measure each solution, it can be helpful to compare simple metrics such as speed and transaction costs, as these are essentially two reasons for demand for a Tier 2 solution.
Polygon can process up to 65,000 transactions per second while maintaining low fees that typically range from $0.1 to $0.5 depending on the transaction size. Arbitrum allows for 40,000 transactions per second, with fees ranging from $0.5 to $0.7. Optimism is capable of processing 2,000 transactions per second, and fees are slightly higher compared to Arbitrum and Polygon, ranging from $0.6 to $0.9.
Other statistics, such as the number of wallets, the number of transactions, and the total value locked, can also help paint a clearer picture of the tier 2 landscape. The race isn’t even close when it comes to the number of wallets and the number of transactions. Polygon is clearly ahead. While Optimism lags significantly behind Arbitrum and Polygon, Arbitrum is gaining some ground against Polygon thanks to its new token released this March.
Another metric to consider is the total value locked (TVL). You can think of it as a way to measure the value each solution supports in decentralized applications. The larger the TVL, the more valuable the solution. Surprisingly, Arbitrum has the highest TVL of the three, at around $2.2 billion. Polygon is second with $1.1 billion, and Optimism is third with $920 million.
h in altcoinsWhich one makes sense to invest in?
Given this combination of statistics, it’s clear that Polygon and Arbitrum offer a valuable solution to developers and users. Both have proven use reflected in multiple sets of statistics. It might be reasonable to invest in both, but if there’s a Layer 2 solution that deserves your money, it’s probably Polygon. It has a friendly developer environment and verifiable usage.
Also, Polygon cryptocoin.comAs you follow from . Over the past year, companies like JPMorgan Chase, Starbucks, Disney, Nike, and Meta Platforms have used Polygon in different ways to facilitate new blockchain-based business models.
Meanwhile, Polygon, whose price is down 62% from its all-time high, appears to have significant long-term potential, just the kind investors should be looking for. If Polygon does have one downside, it’s the high levels of centralization. If decentralization is a priority, Arbitrum seems to be the best choice. But with the new token only a few weeks old, I’d personally like to see Arbitrum build more records.
Ethereum whales buy MATIC
MATIC has been struggling in the market lately, even during recovery periods. The coin has failed to break the $1.2 resistance over the past few weeks, which has seen it take a beating below $1.1 on multiple occasions. However, times may be changing for the cryptocurrency as the token begins to gain the favor of the biggest Ethereum whales.
Data from WhaleStats shows that MATIC is on the radar of the top 100 Ethereum whales. These big investors are buying the digital asset in significant quantities and enough to be ranked as the top 3 tokens currently traded by the biggest Ethereum whales. MATIC lagged behind the likes of USDT and USDC for these big whales, which also buy stablecoins in bulk. As for MATIC, they’ve had an average purchase amount of $28,928 over the past 24 hours.
This buying frenzy of ETH whales has also led to an increase in the amount of MATIC they currently hold. The digital asset currently ranks 7th among the 100 largest Ethereum whales, with an average value of $1.5 million. Cryptocurrency currently accounts for 2.98% of total token holdings. This means that whales now collectively own over $150 million in MATIC. In terms of overall trading volume, MATIC currently sees the fifth-highest trading volume among ETH whales, with each trading an average of $51,258 worth of tokens over a one-day period.
The opinions and recommendations in the article belong to the experts and are definitely not investment advice.
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