The leading altcoin by market capitalization, Ethereum (ETH), recently announced a new Ethereum Improvement Protocol (EIP) named EIP-4844, which is also known as the Shard Blob Transactions update. This latest EIP is expected to ignite a rally for Layer 2 (L2) projects.
The reason this rally is being predicted is that EIP-4844 is aimed at reducing gas fees on the Ethereum network. According to the official EIP website for Ethereum, the upgrade will see transactions containing “large amounts of data that cannot be accessed by EVM execution.”
Despite the Merge and London hard fork, the gas fees associated with Layer 1 (L1) solutions remain high for many users. Meanwhile, L2 solutions have managed to reduce gas fees by a factor of three to eight compared to L1 chains.
Despite this, L2 networks still pose a considerable expense for numerous retail investors. EIP-4844, which primarily focuses on reducing gas fees for Ethereum's beacon chain, will inevitably bring about amplified benefits for L2 scaling solutions as well.
Consequently, this update will attract a substantial number of investors seeking to engage with L2 chains such as Optimism (OP), Arbitrum (ARB), Polygon (MATIC), and several others. This speculative development not only promises to enhance the fundamentals of L2 chains but also appeals to traders and potential buyers looking to capitalize on the situation. As a result, a substantial rally for these altcoins could be triggered.
L2 Market Overview
At press time, the total market capitalization for L2 projects was up 5.62%, according to the cryptocurrency market tracking website CoinMarketCap. This 24-hour increase resulted in the collective market capitalization standing at approximately $11,457,557,971. Meanwhile, the total trading volume for L2 cryptocurrencies also rose by more than 11% over the past 24 hours.
Almost all the top 10 L2 projects saw their prices rise over the past day of trading as well. The leading L2 altcoin, MATIC, printed a 24-hour gain of 6.07%, which also pushed its weekly performance further into the green to +7.67%. As a result, MATIC was trading at $0.7848 at press time.
During this period, ARB and OP also experienced price increases. ARB was up 3.77% while OP’s price rose 5.60%. This elevated the altcoins’ prices to $1.30 and $1.58 respectively.
Furthermore, the weekly performances for both cryptocurrencies stood in the double-digits at press time. ARB’s weekly gain stood at 15.19%, while OP’s price was up more than 26% over the past 7 days - making it the second-best performing L2 cryptocurrency in terms of weekly performance.
Immutable (IMX) and Loopring (LRC) increased in the past day of trading as well, which brought their prices up to $0.7434 and $0.2305 at press time. This was after the altcoins printed 24-hour gains of 1.63% and 1.07%. Notably, LRC’s positive daily performance was also able to pull its weekly performance out of the red - taking it to +0.43% as a result.
Similarly, SKALE (SKL) saw its price rise by more than 2% to trade at $0.02974 at press time. This 24-hour gain had added to the altcoin’s already-positive weekly performance to take it to +8.28%.
Meanwhile, MetisDAO (METIS) rose 0.92% over the past 24 hours. Its daily gain, however, was not enough to bring its weekly performance out of the red zone. As a result, the cryptocurrency’s price performance throughout the past 7 days stood at -5%. This also meant that METIS was changing hands at $17.08 at press time.
The L2 cryptocurrency that led the way in terms of daily gains was DeGate (DG) after its remarkable 33+% price increase over the past day of trading. This strong daily performance was also enough to push the altcoin’s weekly performance into the green - taking the total weekly gain to 27.56%.
Subsequently, DG was trading very close to its 24-hour high of $0.1889 at $0.1888, while its daily low sat at approximately $0.1401. This latest increase in its price also boosted its market cap to $40,982,421 - ranking it at number 412 in terms of market capitalization at press time.
Not only did the altcoin put on an impressive performance against the Dollar, it was also able to outperform the two market leaders Bitcoin (BTC) and ETH. At press time, the cryptocurrency was up more than 33% against both of the leaders. As a result, 1 DG was worth around 0.000006232 BTC and 0.00009831 ETH.
Last but not least, Coinweb (CWEB) and Boba Network (BOBA) were the only L2 coins in the top 10 list to print 24-hour losses. At press time, CWEB was trading at $0.02119 following its 0.11% drop in price. BOBA, on the other hand, was down 0.34%. This resulted in the cryptocurrency trading at $0.1331.
Polygon Labs Proposes New Token to Replace Matic
In related news, Polygon Labs, a company specializing in Ethereum scaling solutions, has announced a redesign of its native MATIC token, which was valued at over $7 billion in the market. The newly introduced POL token aims to generate staking fees by securing Polygon's proof-of-stake chain, while also reaping rewards from other blockchains.
The company positions POL as an exceptionally productive token, surpassing the capabilities of the leading altcoin, ETH. According to Polygon Labs, POL will surpass ETH in terms of productivity as it enables holders to validate multiple chains. Each chain will also offer POL holders various roles, each associated with accruing fees.
The POL whitepaper provides examples of these roles, which include ensuring the publication and availability of transaction data or validating the authenticity of zero-knowledge proofs.The introduction of POL is part of the broader revamp of the Polygon ecosystem known as "Polygon 2.0," which was unveiled recently.
Furthermore, Polygon 2.0 involves transforming isolated blockchains like Polygon's proof-of-stake chain into a Layer 2 validium and introducing the newly launched zkEVM chain, creating an interconnected ecosystem of blockchains.
In theory, POL will generate fees from all these future chains. As per Polygon's announcement, users will have the ability to swap MATIC for POL at a one-to-one ratio. The announcement also suggested a four-year timeframe during which holders can exchange their tokens.
