Investment in Layer 2 solutions is bolstered by their technological advancements, such as zero-knowledge rollups (e.g., StarkNet) and optimistic rollups (e.g., Arbitrum), which promise scalability and privacy enhancements. These innovations give Layer 2 an edge over Ethereum’s Layer 1, which remains slow and expensive without upgrades like sharding. However, Layer 1 blockchains like Algorand or Tezos offer built-in scalability and efficiency, reducing the need for secondary layers. For investors, Layer 2 represents a high-growth opportunity if Ethereum retains its lead, but its value could diminish if Layer 1 rivals perfect their offerings and siphon away users.