ETH VS L2, which one is more suitable for investment?
1. Historical performance
Although the number of listed L2s has increased, their total fully diluted valuation (FDV) as a percentage of ETH remains unchanged. As shown in Figure 1, more L2s have not occupied a larger share of the overall ETH market value, but have shrunk; at the same time, the emergence of more L2s has not brought about an increase in the TVL of the ETH system, but has brought about fragmentation and insufficient liquidity;
2. Valuation and cost-effectiveness
Currently, the total FDV of major L2 tokens is about 40 billion US dollars, the annualized fee is 40 million US dollars, and the valuation multiple is about 1,000 times, which is in sharp contrast to the DeFi protocol, whose valuation multiples are usually between 15-60 times;
What is even more outrageous is that the implementation of EIP-4844 and the increase in transaction volume brought about by the reduction of Gas cannot significantly increase the overall fee income. The current L2 fee has dropped to 3 million to 4 million US dollars per month, which is an exponential decline compared to before;
3. The same public chain narrative but different from the logic of the previous cycle
Although in the long run, L2 may generate considerable fee income. L2 generates $150 million in fees per year, but there is no shortage of block space between L2 and high-throughput chains (such as Sol, Sui, Apt, etc.). The limiting factor is the applications that use these block spaces. Liquid markets will reward the application layer rather than the infrastructure layer in the next few years.
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