In my opinion, it is unlikely that everyday transactions will predominantly occur on-chain. Most on-chain transactions will likely be conducted by large institutions that will contribute to second layer solutions. In situations where there is a high transaction volume, priority will probably be given to big companies most of the time. Conversely, during periods of low volume, regular individuals can consolidate their inputs and the like.

This is merely speculation. I cannot accurately predict what will happen, I'm just guessing. What I do know for certain is that a future where every single transaction is conducted on-chain is just illusory dream. I agree that 1 MB isn't much, but the same can be said for limits such as 4, 8, 16, or 32 MB in the long run. There are still inherent issues that prevent widespread adoption. Point of sale transactions, for instance, remain vulnerable to double-spending compared to second layer solutions. Transaction fees continue to pose a problem, though somewhat alleviated. Also, security is compromised as miners gain a time advantage during block propagation, and there's also the concern of limited disk space.