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With the price of ETH back in the $2900 range, there has been much discussion about the amount of protection Layer 2s offer, their long-term ROI, and the longevity of their price rally. After passing the $4000 mark on May 12, the price fell several times before rallying, and the scaling solutions’ price has risen.
Consider the analogy, someone with $100 can save or store it in several ways as they would like. There is the option of storing it in a wallet, keeping it in a bank, or in the security of a vault. However, with Ethereum, a trader with $100 worth of ETH would have to use all ways at once – store in a wallet, bank and vault at once. Does that make it inefficient and unnecessary?
What L2 solutions do is that they offer the option of one way instead of many, making it efficient. These L2 solutions are projects like MATIC, Loopring, OMG. All three projects have offered high short-term ROI since the launch of ETH L2. In the case of MATIC, the number of transactions and the transaction volume have increased significantly since the launch.
The altcoin now ranks 14 in the top 25. The transaction volume for nearly all three projects has increased, on account of significantly high fees of settling transactions on the ETH network. According to data scientist @ASvanevik, MATIC has the largest inflow of stablecoins of any Ethereum address in the last 7 days. This signals increasing demand for MATIC, while the price rally extends beyond the 105% from last week.
In the case of Loopring, the Galaxy Score Trend, a composite measure of fitness, efficiency, and results, is at 63, lower than the high it reached in the second week of May 2021, according to the following data from Lunarcrush.com. The social volume has decreased significantly, as has the market across exchanges. Loopring, like other L2 scaling options, is expected to deliver strong short-term ROI until social volume recovers and trader sentiment is neutral.
L2 solutions are likely to be valid for a long time; as ETH transaction fees remain large, traders and ETH Maxis are bullish on MATIC and Loopring. MATIC also provides side chains and plasma, and it has plans to add positive and Zk rollups in the future, which will certainly improve usability. After demand and ROI, ease of use is the most important aspect in the war of L2 scaling solutions. Long-term ROI for ETH and scaling solutions is expected to be high.