The Ethereum Layer 2 ecosystem is recording record network activity despite the bear market, with monthly gas spent settling L2 transactions set to record its second consecutive all-time high. L2 gas spending in November is already at 89 billion units, up from 76.6 billion for all of October and up 170% since the start of the year, according to Dune Analytics.
Monthly gas spent to settle Ethereum L2 transactions. Source: Dune Analytics Anthony Rose, head of engineering at Matter Labs – the company behind the ZkSync Layer 2 network, told The Defiant that the increase in Layer 2 gas spend demonstrates the growing adoption of L2s. “L2s pay for their activities on Ethereum. And as we see increased activity on these systems, we expect to see a corresponding increase in their L1 spending,” said Rose. Layer 2 networks are the main scaling solutions for Ethereum. Transactions executed on L2 chains are pooled for finalization on the Ethereum mainnet. In other words, Tier 2 chains offer a massive reduction in transaction costs. At the same time, they inherit the robust security of the Ethereum network. “I believe the L2s (and eventually the L3s, etc.) will be where most user activity is in no time. This is because the price of using the systems will be drastically lower than in L1”, said Rose. “As time goes on, I think future users might be shocked that we once exchanged monkey jpegs in L1. Ethereum’s roadmap was designed with this rollup-centric future in mind.”
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Arbitrum leads in L2
The Ethereum Layer 2 ecosystem currently has $4.3 billion in total locked value (TVL). Arbitrum is the leading network with 53% of the industry’s combined TVL. Next comes Optimism with 28%. Arbitrum has contributed heavily to the recent increase in L2 activity. After all, the network enjoys a surge in transaction volume following the launch of its Nitro update and the expansion of its NFT ecosystem. Arbitrum’s transaction volume increased in June with the launch of the Odyssey program, which rewarded users for network activity with NFTs. Rumor has it that the event will culminate in an airdrop for attendees. And that inspires many opportunists to join in on the action. However, the increase in activity caused problems for the network. That’s because transaction fees briefly exceeded those on the Ethereum mainnet, prompting OffChain Labs to pause the program. Daily transactions dropped to 80,000 in July after Odyssey was suspended.
Daily volume of arbitrage transactions. Source: Nansen See MoreBut Arbitrum moved to a new technology platform called Nitro on Aug. 31. This led to a 600% improvement in transaction throughput, along with a 75% reduction in transaction fees.
Nitro Update
Transaction volume quadrupled after the update, reaching new all-time highs after leading NFT marketplace OpenSea rolled out support for Arbitrum-based NFTs in September. Importantly, gas tariffs remained stable despite the increase in network activity. According to Nansen, average gas rates dropped from $0.35 to $0.08 after the Nitro migration. While existing Layer 2 networks have already made great strides in reducing fees and improving throughput for users transacting on Ethereum, many developers are suggesting that zero-knowledge rollups will be the next frontier for Ethereum scalability. Leading L2s Arbitrum and Optimism currently use Optimism rollups, which compromise scalability in exchange for compatibility with the Ethereum Virtual Machine (EVM), Ethereum’s smart contract engine. Withdrawals from Optimism rollups to the Ethereum mainnet also take seven days to complete for security reasons.
Zero knowledge rollups
On the other hand, rollups that are powered by zero-knowledge proofs offer improved scalability and transaction privacy, as well as fast withdrawals to the mainnet. While existing ZK-based scaling solutions do not support EVM, the development teams at Matter Labs, Scroll, and Polygon believe they are on the cusp of shipping EVM-compatible ZK-rollups. Mihailo Bjelić, co-founder of Polygon, said that developers can deploy any existing Ethereum contracts to zkEVM rollups without making any code modifications. He further revealed that Polygon’s zkEVM is expected to launch its mainnet in early 2023 and that its testnet currently hosts over 1,500 smart contracts and decentralized applications.
layer 3s
While Matter Labs plans to release its own zkEVM-based rollup, zkSync 2.0, in the coming months, Rose said his team is already planning application-specific Layer 3 blockchains to take the reins of Ethereum scaling. “L2 is really just the first step towards massive scalability,” he said. “We will soon see the release of L3s and several other scaling improvements that various teams are working on. We have our L3 proof of concept in design now.” *Translated with permission from The Defiant.
Warning: The text presented in this column does not necessarily reflect the opinion of CriptoFácil. Read also: Bitcoin hashrate records another drop Read also: New version of Bitcoin Core allows the controversial Full RBF Read also: Magic Eden will support poly network NFTs
