The Kaiko L2 Index (KSL2): A New Way to Invest in Layer-2 Assets

While Layer-2s have lost of their sheen in recent years as BTC dominated the market, there purpose is still worthwhile. Layer-2s are built on top of existing networks

The Kaiko L2 Index (KSL2) is a useful tool for investors interested in crypto sector. The index tracks five Layer-2 assets across Bitcoin and Ethereum. Layer-2s are designed to enhance the speed and usability of underlying networks, while also aiming to solve the blockchain trilemma.

As noted above, these protocols are built on top of existing networks, with speed and scalability in mind. The aim is to solve the the blockchain trilemma, a phrase coined by Ethereum’s Vitalik Buterin.

This concept refers to the trade off between scalability, security and decentralization. No network can be fully optimized for all three and must choose where to prioritize.

For example, BTC is highly secure and decentralized, but this comes at the cost of speed. Layer-2s, on the other hand, can achieve higher speeds without sacrificing security, thanks to the underlying network.

The KSL2 index is designed to capture the performance of this sector, providing investors with a convenient way to benefit from breakthroughs in Layer-2 technology.

While returns have lagged leading digital assets in 2024, several tailwinds are expected to benefit the sector this year, including improving regulatory outlook.

The KSL2 index has traded higher since the U.S. election, why? Clarity, markets love clarity—this has been evident crypto since the US election.

Where once there was chaos, now there is clarity thanks to regulatory overhaul that has occurred since November. The new leadership at the SEC has already begun its work on creating a framework for digital assets.

This should prove pivotal to growth in Layer-2 assets, such as those included in our sector index. Read our full report now to find out more about the risk-return profile of the index and products it powers.