Best Layer 2 Crypto Coins for 2024

While the best layer 1 blockchains serve as the base and provide security as well as the infrastructural foundation for L2s, the latter are more flexible and can do stuff off-chain or by using sidechain environments bringing the necessary level of versatility and utility to the whole landscape of the industry. Many tokens issued by L2s have a huge potential for future growth.

We are going to discuss why these assets matter in the grand scheme of things, which you should pay extra attention to, and how to pick the most effective investment option to achieve success. Remember that we do not give investment advice. You should do your own research and spend some time learning more about platforms we are going to discuss later on if you find them interesting.

What is a layer 2 blockchain?

One of the biggest issues with Bitcoin that was discovered very early was its throughput which created bottlenecks in financial settlement. Other downsides of cryptocurrencies are high fees and latency. These limitations are caused by the technology itself and require some smart engineering and coding to bypass.

If contemporary digital  are to compete against traditional settlement systems that can process millions of operations simultaneously, the community of developers has to address the issue of low throughput. Even L1 levels that were supposed to solve the problem right from the get-go, namely Ethereum and Cardano, are still far away from beating TradFi banks.

In essense, we are talking about modern ideas onimproving performance metrics that are deployed on top of L1s to increase throughput, reduce associated with asset movement fees and latency, and offer a better user experience to attract more investors and retail traders. By moving some operations to off- and sidechain environments, these upper-level solutions significantly improve fees and settlement times.

Here are some advantages of layer 2 protocols for blockchain users:

• The potential to scale and increase throughput. Imagine a narrow opening in a dam that prevents the water from escaping. Slowly, the water level rises and becomes a problem for everyone on the flooded side of the dam. Here is a simple example of how it works: the upper level builds pumping stations to move the water faster without disrupting its natural flow. Some say that foundational levels are very slow, some say even outdated, architectures that take up to several days to process a single transaction (in some extreme scenarios). The introduction of the Lightning Network made it possible to process thousands of transactions per second.
• The reduction of fees. It can be incredibly expensive to send BTC or ETH to another user. In 2021, gas fees on Ethereum reached $70 per one operation due to extremely high demand. Such prices are rare but spikes happen regularly enough to become an issue that requires immediate attention from developers. These add-ons help reduce prices by rolling up multiple operations into one and “splitting the bill” among several users. The issue of affordability is quite important for an industry built upon the idea of democratizing finance.
• Much faster confirmation. The final settlement happens on the mainnet, but procedure confirmation may happen before just like in the case with banks. L2 protocols provide this functionality to underlying levels by expediting the confirmation process and reducing the time required for it to mere milliseconds. The improved speed makes the whole idea of decentralized finance much more palatable to average users who do not want to wait for hours to receive or send money.
• A way to true interoperability. The introduction of many foundational ledgers caused the fractionalization of the sprawling digital economy where different coins existed in their own bubbles. While Polkadot attempted to solve the issue by becoming the level zero protocol to allow for some interoperability between L1s, it was not enough to create an environment where all infrastructures are at least partially compatible with each other. The additional functionality afforded by these technological improvements made the landscape of the industry easier to navigate.

Difference between layer 1 and layer 2 blockchain

The core difference between the two is the fact the L2 protocols are built on top of L1 networks making them dependent on the reliability, infrastructure, and popularity of underlying technological foundations. The finality of settlement is another factor that should be considered.

On the other hand, many representatives of the upper level have massive advantages over L1 assets in a variety of aspects:

• Scalability. These technological architectures are designed to beat L1s at the game of scalability. In theory, Optimistic Rollups can process millions of TPS which is miles above the capabilities of the underlying L1 architecture. Bitcoin’s Lightning Network can reach 50 thousand TPS.
• Fees. BitMEX once released the results of its research into the capacity of the previously mentioned instrument to improve throughput and reduce prices of sending BTC. Their conclusion was that it could make operational costs 99% cheaper.
• Confirmation. Users of the first level have to wait for the settlement of any operation to occur before adding a new piece of data to the ledger. In essence, L2s improve speeds by processing off-chain procedures quickly and resolving multiple asset movements at once on the mainnet. Instant settlement for the average user is a great achievement of L2.
• Increased interoperability. We already mentioned that L1s exist in isolation from each other without Polkadot which enable communication between different technological infrastructures and create a more interconnected environment to aim at higher capacities and utility somewhere in the future.
• Enhanced privacy. In some cases, flexible coding and good open-source development practices can improve security and privacy. For example, ZK-rollups and Optimistic Rollups move many operations off the chain and make tracing what users are doing much harder. At the same time, experts say that ZK-rollups reach 9 thousand TPS without compromising privacy or security.
• A digital playground. Developers who work on Solana and want to improve upon it have a much larger room for error when experimenting with new features. The foundational ledger structure is rigid and requires lengthy periods of public discussions before a new iteration can be designed, reviewed, and deployed.

As you see, L2s are quite valuable for the whole industry due to their utility, versatility, and development speeds. The ability to deploy new applications on top of existing digital infrastructures invited an army of passionate developers and created an environment where hundreds of decentralized infrastructures can coexist and thrive. This oversaturation makes it hard to make a good choice and invest in a powerful add-on that has a bright future ahead.

We want to talk about some prominent technological products that are specific to the well-known infrastructures that every single person who heard about this industry knows well. Then, we will give you our list of intriguing investment options in this particular sector.

Bitcoin layer 2 projects list

If you follow recent crypto market trends in 2024, you have heard about many new improvements for the BTC infrastructure. They are mostly designed to solve scalability and operational cost issues that make $BTC cumbersome and rigid.

Here are some of them that deserve your attention:

• The lightning network is the flagship L2 deployed after the introduction of the Taproot upgrade. It moves everything it works on off the chain and makes very fast and cheap asset movements possible. In January 2022, this add-on had over 26 thousand nodes and over 77 thousand active channels. Fee reduction by 99% and throughput in the ballpark of 1 million TPS are two main achievements of this technology.
• The Liquid Network is another successful add-on that focuses on the confidentiality of recordings on the ledger by hiding addresses and amounts. This particular architecture allows for inter-exchange settlement and makes it quick and efficient. Since its launch, the platform processed over 3 million different operations. It is capable of issuing securities and other tokens using the robust digital infrastructure of the underlying architecture.
• Rootstock or RSK allows the deployment of smart contracts in the larger ecosystem. It is also fully compatible with Solidity, the language used in Ethereum’s programming. RSK utilizes a unique merge-mining consensus mechanism and benefits from the massive volume of computational resources used to mine BTC.

Ethereum layer 2 projects

This foundational PoS digital ledger is often cited as the best technological infrastructure for developers who want to develop decentralized applications. It is true that the scalability and flexibility of the this particular infrastructure are higher in comparison with PoW-based ones. This versatility allowed many developers to focus on producing useful level-2 solutions.

Here are some of the ETH frameworks that should be on your watch list:

• Optimistic Rollups make scaling easier and “pack” multiple queries into one before sending them to the lower level for the final settlement. The base throughput is close to 13 TPS which is quite impressive for an L1. Compare this number to Optimistic Rollups that can process up to 3 thousand TPS right now with a potential to reach 50 thousand TPS quite soon. This scale also reduces prices for separate procedures which are 100 times cheaper compared to the foundational architecture.
• ZK-Rollups are zero-knowledge proof rollups that focus on increasing throughput without compromising privacy. Currently, the architecture is capable of processing up to 9 thousand TPS and reduces gas fees even more compared to Optimistic Rollups.
• Polygon (MATIC) is focused on scaling with its sidechain infrastructure, plasma chains, and more. Right now, it is capable of processing over 7 thousand TPS with confirmations happening in under a second. Gas fees are reduced but not as much compared to ZK- or Optimistic Rollups. Polygon is also a development environment with increased deployment speed on the lower level.

Solana layer 2 projects

The unique architecture of the foundational baseline that uses the Proof of History consensus mechanism gives birth to a special breed of L2s with unique features and interesting interoperability solutions. Currently, the main net’s SOL token is fourth in the race of L1s with a respectable $68 billion market cap at the time of writing.

Here are some of the sartups on Solana:

• Serum DEX is a fully decentralized trading platform that operates on Solana and offers a variety of services including high-frequency trading and market-making. Serum can process up to 65 thousand TPS, gives its users access to multiple trading pairs, and an excellent experience.
• Raydium is a market-maker that procures liquidity and allows for quick token swapping at low prices and high throughput. Raydium offers different investment opportunities to its users: yield farming, automatic market making, and more.
• Wormhole is a cross-chain bridge that allows Solana and its applications to connect to various technological architectures for fast asset swapping and quick financial settlement. The value of the technology is derived from its contribution to the interoperability within the larger ecosystem.

Our TOP 10 layer 2 blockchain projects in 2024

Now, you have a surface-level understanding of the current landscape where the best layer 2 crypto coins have to compete against each other for the attention of investors. We strongly believe that a smart retail trader can use the rich arsenal of tools available to them and make successful trades using any of the tokens that are traded on prominent CEX platforms.

For example, you can run a modern AI crypto bot and focus on complex strategies like statistical arbitrage. You may hunt down stable performers and trade them using methods like DCA or GRID. Some of the currently available digital assets in this sector can be staked if you are interested in passive income. Let’s take a closer look at some excellent L2 tokens.

Polygon (MATIC)

At the time of writing, Polygon is comfortably sitting at the top of the L2 market share with a strong $5.6 billion market cap. MATIC is a household name well-known for several key advantages:

• It offers a great environment for Dapps development by ensuring higher processing speeds and cheaper fees.
• Polygon is focused on ensuring interoperability within the whole digital environment of Web 3 by offering convenient communication channels between many L1s.
• Security is achieved through the use of the Plaza framework and other neat features that make everything happening on the ledger faster, safer, and more private.

Mantle (MNT)

MNT had a year yet managed to stay close to the top with a solid $2.6 market cap and respectable trading volumes.

Here are reasons to keep an eye on Mantle:

• The main goal of Mantle is to facilitate sending money across the wider landscape of L1 via its useful functionality.
• Mantle aggregates liquidity from many decentralized sources to ensure a better trading experience and fast settlement.

Arbitrum (ARB)

With a solid $2.7 billion market cap, Arbitrum is a great choice for an investor who believes in the bright future of the larger framework. This L2 startup uses Optimistic Rollups to achieve high throughput. Here are some of its perks:

• Arbitrum increases the capacity of operations on the lower level and reduces gas fees for all participants of the ecosystem.
• Obviously, it operates within the larger environment that demands ERC-20 compatibility which makes it useful to ETH-based developers.

Immutable (IMX)

As a gaming-oriented digital ledger, Immutable managed to achieve impressive numbers. The market cap is close to $2.7 billion and the price of $IMX is higher than all previously mentioned L2s. Below are reasons why it is so successful:

• By offering players true ownership of in-game items, Immutable makes the experience of gamers meaningful.
• This L2 can send assets to its peers making it a great choice for users who want to keep their in-game assets on other L1s.
• IMX tokens are used for many purposes including paying for asset movement, rewarding participants of the economy, and voting.

Optimism (OP)

This particular company is focused on the sustainability of Ethereum and building a better future for the community of users and developers. By offering full compatibility with existing L2s using the ERC-20 standard for their smart contracts, Optimism contributes to interoperability and invites aspiring developers to join their cause. In general, such ideas rarely gain traction, but Optimism managed to grow into a respectable expansion of its technological foundation. It utilizes Optimistic Rollups to maintain high throughput and low fees for its users.

StarkNet (STRK)

As one of the most interesting concepts for the L1 foundation, StarkNet is enjoying the attention of investors and can show off a respectable $1.4 billion market cap. StarkNet is focused on achieving higher throughputs, deploying modern ways to improve performance metrics, and maintaining privacy for users.

Here are some of its advantages:

• StarkNet ensures privacy of recordings by utilizing zero-knowledge proofs which are excellent for confidentiality and data safety.
• This L2 is fully compatible with ERC-20 smart contracts and other components of the larger infrastructure.

Ronin (RON)

The token is priced at $2.8 at the time of writing. Ronin is most known for its association with the game Axie Infinity which became a global sensation during the peak of the NFT craze. The architecture is designed to streamline game deployment.

• Ronin utilizes the infrastructure of the underlying level and makes use of its fast processing speeds and low gas fees through the use of rollups.
• The convenient transfer of in-game assets between supported games makes interoperability apparent to all users.

Gnosis (GNO)

The recent wave of hype surrounding artificial intelligence afforded new opportunities to developers. Gnosis is a fully decentralized prediction market framework that uses AI agents and the Oracle mechanism to arrive at good forecasts.

• It is one of the best layer 2 blockchain projects with a token that has utility and can be used for governance and staking.
• Gnosis is focused on building an environment that facilitates better predictions by utilizing the power of decentralization.

Golem (GLM)

If you ever wanted to work on a supercomputer that can be programmed for any task and accessed by anyone, Golem gives you this opportunity. The token is used to pay for the time of Golem and issued as an ERC-20 smart contract on the corresponding mainnet.

Users can receive tokens by offering their computational resources to the digital infrastructure and pay for the time with the same currency. The economy looks quite healthy. It is one of the best-performing L2 tokens on our list.

Manta

Manta is a unique two-platform architecture that operates using two completely unique yet interconnected architectures:

1. Manta Pacific is deployed on the mainnet as an L2 infrastructure for EVM ZK applications and is fully compatible with Solidity.
2. Manta Atlantic is a Polkadot’s baseline solution that allows developers to use zkSBTs for programmable identities.

This startup aims to create a unified Web 3.0 environment for developers to bring their vision to the forefront of the industry. Manta is funded by Binance Labs and Polychain capital making it a prospective player in the world of crypto.

The main takeaway

The contemporary landscape of the cryptocurrency industry is quite complicated with hundreds of great interesting ideas and concepts to choose from. Picking the right one is hard even for professionals with years of experience. We strongly believe that practice makes perfect. It is possible to test how these tokens perform by using backtesting features on a trading bot platform with the necessary toolkit.

Always test your investment ideas, research relevant L2s, check out their products, and make sure to invest only after doing your due diligence as meticulously as possible.