Ethereum Dominates Real-World Asset Tokenization but Faces Revenue Squeeze from Layer 2 Solutions

Ethereum Dominates Real-World Asset Tokenization but Faces Revenue Squeeze from Layer 2 Solutions

Ethereum, the second largest cryptocurrency by market capitalization, is the leading platform for issuing tokenized real-world assets (RWAs). According to a report by Cryptoglobe, Ethereum accounts for the majority of RWA issuance, with large asset managers like BlackRock and Franklin Templeton tokenizing over $900 million worth of U.S. Treasuries on the platform. However, Ethereum is facing a challenge from Layer 2 solutions, which are designed to improve the scalability and efficiency of the Ethereum network. Layer 2 solutions allow transactions to be processed off-chain, which can significantly reduce costs and improve transaction speeds. One of the key concerns for Ethereum is that Layer 2 solutions are capturing a significant portion of the revenue that would otherwise go to the Ethereum network. This is because Layer 2 solutions charge fees for their services, while the Ethereum network only charges fees for settlement. If Ethereum fails to address this issue, it could hurt the platform's long-term growth prospects. As a result, Ethereum will need to develop a strategy to address the increasing competition from Layer 2 solutions. One possible solution is to improve the scalability and efficiency of the Ethereum network's Layer 1. This would make it more competitive with Layer 2 solutions and help to ensure that Ethereum remains the leading platform for RWA tokenization.