Ethereum remains a major player for stablecoins and hasn’t been negatively impacted by apps shifting to faster Layer 2 (L2) networks.

Coinbase’s Base network is driving the growth of L2 chains, maintaining strong momentum throughout the year. This tokenless chain processes over 8 million transactions daily, standing out not only in sheer volume but also in handling complex token transfers.

Base is leading the charge for L2 chains, alongside other big names like Arbitrum and Optimism. Although the hype around L2s cooled in 2024, their infrastructure became one of the most widely used tools in Web3. Base even hit a record-breaking 8.8 million transactions per day, surpassing the combined 5.5 million transactions of other top L2s. The focus for L2 networks has shifted—from early strategies like airdrop farming to real-world app-driven growth, which is expected to define 2025.

In 2024, the balance of power among L2s changed. Polygon, once a dominant player, lost ground as projects and tokens moved to other networks. Polygon’s activity mostly came from Polymarket betting, but it has struggled to keep up in areas like Web3 gaming and NFTs.

L2 chains are also soaking up value from Ethereum and new token launches. According to L2Beat, L2s now lock in over $58 billion, with most of that coming from optimistic rollups. Ethereum itself holds $68.42 billion in value locked, largely thanks to platforms like LidoDAO and Aave.

**Different Strengths for Different Chains**

Each L2 chain has its own niche. Arbitrum and Optimism have become go-to networks for DeFi (decentralized finance) and DEX (decentralized exchange) trading. Base stands out for its high-liquidity trading and the movement of cbBTC, a wrapped Bitcoin token. Base has also become a hub for tokenized AI agents, which are quickly becoming one of its most traded assets.

L2 chains are specialists in their own way. For example:
– ZK Sync Era, Arbitrum, and Optimism shine in DeFi.
– Base excels in centralized finance (CeFi) activities, processing utility transactions for Coinbase.
– Taiko fuels DeFi with its WETH9 smart contract.
– On Base, Uniswap V3 drives the most transactions, recently achieving record-breaking monthly trading volume.

**Helping Ethereum Burn More ETH**

L2 chains aren’t just scaling Ethereum—they’re also helping burn ETH by paying fees. As of late December, fees from L2 “blob space” ranked third in contributing to Ethereum burns, slightly reducing inflation. Ethereum’s annual inflation rate is hovering around 0.5%.

While some questioned whether L2s were undermining Ethereum, the two now seem to have found balance. Both Ethereum users and L2 validators are earning fees. Some apps still use Ethereum’s main chain for their activity, keeping it busy with stablecoin transactions. In fact, Ethereum remains the top choice for stablecoins like USDT, which sees the highest trading volume on its ERC-20 version.

L2s may have taken over some meme token activity and transaction counts, but they still hold only a small portion of stablecoin liquidity compared to Ethereum. Instead, L2s focus on wrapped ETH as collateral and continue growing by hosting innovative decentralized apps.

**A Bright Future for Web3 Development**

The shift toward apps driving activity signals a mature phase for L2 chains and Ethereum. This evolution is paving the way for new opportunities in Web3 and crypto innovation as we look toward 2025.