In the cryptocurrency world, investor interest often focuses on Bitcoin (BTC) and popular altcoins. However, layer-two tokens like STRK and ZRO, despite their technological advancement, do not enjoy the same interest. Why is this the case? What are layer-two tokens and why do investors still prefer other options? Let’s break down these questions.
What are Layer 2 tokens?
Layer 2 tokens, also known as L2 tokens, are designed to improve the scalability and efficiency of Layer 1 (L1) blockchains such as Ethereum and Bitcoin. Instead of making all transactions directly on the main chain, L2s offload some of the workload to additional protocols or chains, which reduces congestion and lowers transaction costs.
Examples of second layer tokens – STRK and ZRO
STRK (Strike): Strike is a financial platform based on the Lightning Network technology that enables fast and cheap Bitcoin transactions. The STRK token is the platform’s native token, used for a variety of functions such as staking, governance, and rewards. Strike focuses on fast payments, micropayments, and international transfers, eliminating the high transaction fees and long waiting times of the Bitcoin main chain.
ZRO (Zero): Zero is an ecosystem based on zk-Rollup technology, which aggregates multiple transactions into one and records only proof of their validity on the Ethereum main chain. The ZRO token is used to secure the network, pay transaction fees, and participate in protocol governance. Zero reduces congestion on Ethereum and significantly lowers transaction costs while maintaining a high level of security through the use of zero-knowledge proof technology.
Why do investors prefer to invest in BTC and Altcoins?
Although layer two tokens are gaining popularity, investors still much prefer to invest in Bitcoin and altcoins like Ethereum or even Shiba Inu than in STRK or ZRO. Why is that? There are at least a few reasons, so it’s worth taking a closer look at each of them.
Recognition and trust
Bitcoin, as the first cryptocurrency, has a well-established position on the market. It is seen as “digital gold” and is a reference point for the entire cryptocurrency market. Altcoins such as Ethereum, Cardano or Polkadot have also gained significant popularity due to their unique features and large communities. Layer two tokens (such as STRK or ZRO), despite their technological advancement, have not yet managed to build similar recognition and trust.
Lack of understanding of technology
Layer 2 technology, while effective, is more complicated and less understandable for the average investor. Concepts such as zk-Rollups or off-chain scaling can be difficult to understand, which discourages investors from investing their funds in L2 tokens. This in turn becomes a kind of self-fulfilling prophecy – few investors decide to invest because they do not see much interest among investors.
Lower liquidity and market capitalization
Layer 2 tokens often have lower market capitalization and liquidity compared to BTC and popular altcoins. Investors prefer more liquid assets that can be more easily bought or sold without significant impact on price. The low liquidity of L2 tokens makes them less attractive to large institutional investors.
Internal competition
There are many different layer 2 protocols and tokens competing for attention and resources. This fragmentation of the market makes it difficult to identify clear leaders worth investing in. Investors often prefer to focus on proven L1 projects rather than risk investing in lesser-known L2 tokens.
Regulatory Perspectives
Cryptocurrency regulations are still developing and may eventually include layer 2 technologies. Investors fear that unclear regulations could negatively impact the value and usability of L2 tokens. In contrast, Bitcoin and some altcoins are already partially regulated and more accepted by financial institutions. The mere fact that Wall Street is now interested in BTC and ETH (via spot ETFs) makes these cryptocurrencies seem like much safer investments.
When (and if) there will be a boom in L2 tokens like STRK or ZRO
Layer 2 tokens like STRK and ZRO offer advanced technological solutions aimed at improving the scalability and efficiency of blockchains. However, they have not yet gained the same popularity among investors as Bitcoin and some altcoins.
It is worth noting, however, that the current situation on the cryptocurrency market means that many investors are looking for new ways to multiply their capital using digital assets. The memecoin market is ongoing, which is extremely unpredictable, so L2 tokens seem to be a very reasonable alternative.
