Linea’s 8X Upside: Why It Could Be 2025’s Hottest L2

Over the past year, the amount of value locked up in L2 platforms has jumped from ~$18B to $57.75B. In fact, a little over a week back, the TVL had actually breached $60B.

So, which L2 platforms are attracting the most liquidity?

The top 3 isn’t a surprise - Arbitrum, Base, and Optimism have been the most popular L2 for a while now. However, we would like to point your attention to number 7 in the list. Linea, a Consensys-backed layer-2 scaling solution, may just become the hottest L2 network in the world this coming year.

Linea recorded over 2.7 million transactions and 100,000 weekly active users in its first month post-launch. The Linea Ecosystem Investment Alliance, comprising over 30 venture capital firms, supports developers building on the platform.

With plans to roll out its native token by the end of Q1 2025, Linea has garnered a tremendous amount of hype. 

So, what’s the story here and what’s going on behind the scenes? Let’s take a look.

What is Linea?

Linea is a zk-rollup (zero-knowledge proof) which uses zero-knowledge proofs to process transactions and smart contracts with high speed and low cost while maintaining compatibility with the EVM. 

There are a few terms here that require a little bit of explanation.

Zero-knowledge proof is a cryptographic technique wherein you prove that you have knowledge of X without explicitly revealing what X actually is.

For example, imagine you have to prove that you are a legal adult. To do so, you take your national ID card, and hide all the details except for your birth year. Just revealing your birth year will prove whether or not you are lying about your age without exposing any of your sensitive information.

So, what’s a zk-rollup? A rollup bundle multiple transactions off-chain and process them. This design ensures scalability, data integrity, and security while reducing costs. A zk rollup generates a zero-knowledge proof to ensure the validity of the transactions.

How Linea Works

Linea’s architecture consists of key components that optimize its performance and decentralization:

• Sequencer: Orders, constructs, and executes transactions into blocks. It ensures efficient block generation and prepares data for zk-proof creation.

• Prover: Generates zk proofs to validate the correctness of state transitions on Layer 2.

• Coordinator: Manages communication between Linea’s internal components and the Ethereum mainnet, ensuring seamless data flow and network synchronization.

• Bridge Relayer: Facilitates secure communication between Linea and Ethereum, enabling smooth interoperability.

Transactions are processed on Linea’s L2 and periodically rolled up to Ethereum with zk proofs, ensuring secure and verifiable state transitions. 

Key Features

• Low Costs and Fast Finality: Ideal for high-frequency DeFi operations and blockchain gaming.

• Account Abstraction: Allows users to pay transaction fees in stablecoins, simplifying the user experience.

• Integration with MetaMask: Linea supports over 100 dApps, enhancing accessibility and adoption.

Linea Ecosystem Overview

Linea has more or less consistent contract activity. As per Dune Analytics, Linea has more or less achieved around 1.5k active contracts on a daily basis.

Let’s check out the DeFi and Memecoin sectors.

DeFi

As per DeFiLlama, the DeFi TVL (total value locked) in Linea is around $468.31M Let’s look at the protocols attracting the most liquidity.

ZeroLend and Renzo account for more than 50% of the overall TVL. Two of the top 5 protocols are lending, while two are liquid restaking.

ZeroLend has recently come under scrutiny for being a “low-effort fork” of Aave, with many calling it “Aave’s codebase with a high inflation token slapped on top.” Users also found that the mobile version of its website was redirected to Aave’s FAQ section

Despite all this, ZeroLend managed to become the biggest DeFi app on Linea. However, the Aave community recently greenlit proposal #5ae27 to deploy Aave V3 protocol on Linea,

Memecoins

These are the memecoins on Linea that are currently being tracked by Coingecko. Foxy has attracted the largest marketcap so far.

FOXY is the first memecoin on the Linea blockchain, designed to focus on community and cultural engagement rather than speculation. Represented by its Fox mascot, Foxy’s mission is to become the mascot of the Linea community.

Built on Linea, FOXY benefits from faster, cheaper transactions and improved scalability.  With solid tokenomics, including community airdrops, liquidity incentives, and ecosystem rewards, FOXY is positioned for sustainable growth.

Why Linea Matters

Like all rollups, Linea addresses Ethereum’s scalability challenges, providing users and developers an efficient, scalable, and user-friendly environment.

Unlike Arbitrum, Base, and Optimism, Linea is a zk rollup, as opposed to an optimistic rollup. If implemented correctly, zk rollups could potentially be more resource and time-efficient than their optimistic counterparts.

However, the technological overhead needed to create a proper zk rollup solution is quite high. Linea has a major advantage here over its competitors since it's backed by Consensys - a proven builder in the web3 space. Consensys is responsible for MetaMask, Infura, and much more.

So, if anyone has a shot at creating an extensive and rich zk-based ecosystem, it’s Linea.

What about its potential upside?

According to L2Beats, the total TVL in Linea is a little over $1B. Optimism has over $8B, Base ~$15B, and Arbitrum around $21B.

So, what this means is that if Linea achieves its development goals, it has, at the very least, an upside of almost 8X!

Now, let’s compare these chains when it comes to market cap and FDV.

Both Arbitrum and Optimism have a staggering FDV of almost $10B! With the token launch right around the corner, this gives you a fair idea of the potential market size and opportunity you are looking at here.

If you want to stay ahead of the curve on Linea, don't miss our upcoming M6 Labs newsletter! Here's what we'll cover:

• Performance of Other L2s: We'll analyze trading data for top Layer 2s like zkSync, StarkNet, Blast, Mode, Scroll, Arbitrum, Optimism, and see how Linea measures up.

• Top Meme Coins on L2s: We'll track the market cap performance of leading meme coins within these ecosystems to give you insights into what Foxy could achieve.

We will also be covering the Linea topic extensively in The Coiners community. If you haven’t joined it yet, The Coiners is a group of crypto enthusiasts and traders. Everyday, our mentors and veteran traders give the community valuable insight and analysis on some of the most promising projects in web3. 

Over the next week, our experts will be giving focused insights and analysis on the Linea ecosystem. Do not miss out!