Analysis of ETH and L2 investment options

1. Historical market trends

Although the number of L2 projects has increased, it can be seen from Figure 1 that the total fully diluted valuation (FDV) of L2 as a proportion of ETH has not increased significantly, but has shrunk. In addition, with the emergence of more L2, the TVL (total locked value) of the ETH system has not grown simultaneously, but has caused market fragmentation and insufficient liquidity.

2. Value evaluation and cost-effectiveness

Currently, the total FDV of mainstream L2 tokens is approximately US$40 billion, and its annualized fees are as high as US$40 million, forming a valuation multiple of up to 1,000 times. This is in sharp contrast to the valuation multiples of DeFi protocols, which typically remain between 15-60x. In addition, although the implementation of EIP-4844 reduced Gas fees, it did not significantly increase the overall fee income. Currently, the cost of L2 has dropped to US$3 million to US$4 million per month, an exponential decrease compared with before.

3. Narrative changes in public chain ecology

Although from a long-term perspective, L2 is likely to generate significant fee revenue, estimated at $150 million per year. However, in the current market environment, the block space between L2 and high-throughput chains (such as Sol, Sui, Apt, etc.) is not a scarce resource. The real limiting factor is how to attract application layer projects to use these resources. As a result, market trends in the coming years are likely to favor the application layer over the infrastructure layer.

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