Layers-2s were hailed as the revolutionary breakthrough to upgrade Ethereum ($ETH) scalability and propel crypto’s dominant smart contract platform into the new era. But are layers 2s killing the $ETH rally? More and more questions about capital fragmentation and liquidity siloing are dampening the $ETH rally.
Maybe it is time to forget governance tokens, and is this new memecoin a better bet? Galaxy Fox ($GFOX) has been smashing ICO funding records, and while still in its presale, this token is the perfect answer to what crypto to buy right now as the market prepares for its next leg up.
Is the Layer-2 Ecosystem Killing the $ETH Rally? Fragmentation & Siloed Liquidity
Ethereum has put sharding on the back burner while pursuing its rollup centric scaling vision. Layer-2s batch transactions off-chain and focus on execution. They reduce the burden on the main chain and return summary data. But are these Layer-2s killing the $ETH rally? Outside of the lack of interoperability between these scaling solutions and the requirement of bridges for moving funds from one Layer-2 to another, are these execution-specialized chains reducing Ethereum’s network effect?
Instead of trading on a global computer, anybody trading on Arbitrum ($ARB) or Optimism ($OP) has their capital siloed on this chain and cannot move it around easily. Still ignoring these operational issues, the abundance of layer 2 governance tokens is diluting the $ETH rally. $OP has a $4 billion market cap, $MNT has a $3.3 billion market cap, and $ARB has a $3 billion market cap. That is plenty of capital that has been diverted away from $ETH.
However, Layer-2s create economic activity, creating greater buy pressure for $ETH. While Layer-2 governance tokens look shaky,
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