Are the values of Layer 2 tokens being overly inflated?

The Layer-2 token market (L2) is drawing strong attention from the community and investors, especially in the context of Ethereum continuing to face scalability issues. However, the sky-high valuations of current L2 projects also raise many questions about the true value of these tokens. Along with fierce competition between current L2 projects and emerging projects, such as INK, 2025 will be a challenging year with both opportunities and potential risks.

The potential of Layer-2 tokens

Ethereum remains the leading blockchain platform for decentralized applications (dApp) and smart contracts. However, this blockchain network is also facing scalability issues as the number of transactions and users continues to rise. L2 solutions have emerged as an effective option to address this problem by offloading the Ethereum network and improving transaction speeds while reducing gas fees.

Vitalik Buterin, the founder of Ethereum, has introduced a new roadmap for Ethereum focused on enhancing security, finality, and scalability for L2 solutions. This further emphasizes the importance of L2 for the sustainable development of Ethereum in the future.

A recent analysis by Ignas provides a comprehensive overview of the current situation of the L2 token market, highlighting the opportunities and challenges that investors face.

One of the important factors in evaluating L2 tokens is the fees that these projects generate. According to a report by Ignas, current L2 blockchains show a clear differentiation in their fee generation capabilities:

This gap reflects the discrepancy in the level of adoption and the scale of L2 projects, with Arbitrum and Optimism leading the market, while Starknet is still in the early stages of development.

However, when considering the fully diluted value ratio (FDV) compared to fees, these numbers can be shocking. The FDV/Fees ratio for Arbitrum is 137.8x, Optimism is 205.7x, while Starknet reaches up to 4,204x. Compared to the P/E ratio of large companies like Tesla (187x) and S&P 500 (29x), these numbers indicate that the L2 tokens are currently overvalued.

Ignas believes that Arbitrum's annual fee, while leading, only reaches 19.5 million dollars, a figure too modest to justify the current valuation of this token. This raises questions about the sustainability of the L2 business model, especially as operational costs and competition in the industry continue to rise. Ignas emphasizes that unless there is strong growth in fees and levels of adoption, L2 tokens may be overvalued.

Governance and Manipulation Challenges

Another important aspect of L2 tokens is their governance role. These tokens are not only a medium of exchange but also allow holders to participate in the strategic decisions of the project, such as Arbitrum's DRIP proposal. The allocation of 80 million ARB for incentives to draw attention to liquidity and promote growth is one of the typical examples of the governance mechanism of L2 tokens.

However, Ignas also pointed out that the governance mechanism of L2 tokens is being affected by manipulation. Through platforms like Lobby Finance, just 5 ETH (, around 10,000 dollars ), can control up to 19.3 million ARB (, around 6.5 million dollars ), weakening the actual value of governance. This reduces the incentive to hold tokens for governance purposes and raises doubts about the transparency of the system.

The Future and Opportunities of L2 Tokens

The prospects of L2 tokens largely depend on the growth of fees and the level of adoption in the future. Based on the Pareto principle (, only 20% of L2 projects may dominate 80% of the market share and liquidity, indicating that only a few projects like Arbitrum, Optimism, or Base will survive in the long run. However, the emergence of new L2 projects, notably INK, may slow down the process of distinguishing the winners.

In this context, investing in L2 tokens is not without risks. Investors need to be patient and closely monitor the distinction between successful and failed projects. However, if one has a correct perspective on the potential of L2 technology, it remains an exciting field.

"Perhaps we need to wait until the L2 winners become clear before investing in them," Ignas shared.

Layer-2 tokens have great potential in addressing the scalability issues of Ethereum and blockchain in general. However, with the current valuation and fierce competition, the L2 token market still carries many risks. Investors need to conduct thorough analysis and understand the factors affecting the development of each project, while also being ready to face significant volatility. L2 remains a noteworthy field, but only if projects can prove their true value in the long term.

Lilly