Ethereum Is Making Extra Cash Than Ever From Layer 2 Networks

Key Takeaways

  • Layer 2 networks are spending extra gasoline than ever settling transactions on Ethereum mainnet.
  • The Wednesday following Optimism’s token launch noticed Layer 2 networks use a record-breaking 3.95% of the each day gasoline consumption on Ethereum.
  • Polygon’s co-founder Sandeep Nailwal instructed on Twitter in the present day that Ethereum would possibly ultimately evolve right into a community the place Layer 2 transactions occupy the vast majority of its blockspace.

With Layer 2 networks gaining important traction in person exercise, the gasoline charges Ethereum is raking in for renting its safety are breaking report highs.

Ethereum Income From Layer 2 Growth

Layer 2 networks are spending report quantities of gasoline on Ethereum mainnet.

In line with on-chain information from Dune, Layer 2 networks at the moment are spending extra gasoline than ever to settle or show transaction batches on Ethereum’s mainnet, with spending persistently surpassing 10 billion gasoline because the starting on Could.

Weekly Ethereum gasoline spent by Layer 2 networks: Supply: @funnyking/Dune

As an illustration, the very best quantity of gasoline ever used on the Ethereum mainnet to settle Layer 2 community transactions occurred this Wednesday—instantly after Optimism launched its OP governance token late Tuesday. Particularly, all Layer 2 networks mixed spent round 3.95 billion of the entire 100 billion each day gasoline restrict on Ethereum, accounting for about 3.95% of the gasoline spent on the community that day. To place the expansion price into perspective, the entire month-to-month gasoline spent by Layer 2 networks on Ethereum in Could 2021 was round 5 billion, whereas in Could this yr, it was roughly 52 billion, marking over a tenfold enhance in absolute gasoline utilization phrases.

When Ethereum site visitors will increase it accrues worth to all ETH holders. It is because the bottom gasoline charges on Ethereum are burned, lowering the general ETH provide and thus rising the worth of all remaining tokens. On this approach Ethereum “income” as Layer 2 networks use its blockspace to settle transactions extra effectively than will be carried out instantly on mainnet.

Layer 2 is an umbrella time period for blockchain scaling options that deal with transactions on separate networks then ship them again to Ethereum mainnet for settlement. For instance, Optimism and Aribrum are Layer 2 networks based mostly on a cryptographic expertise often called Optimistic Rollups that bundle transactions collectively off-chain (on their separate networks) after which settle the bundles in a single transaction on the Ethereum mainnet to scale back its transaction load. 

In contrast to so-called sidechains like Polygon’s Matic blockchain, which have their very own consensus mechanisms, Layer 2 networks take the transactional load off of Ethereum however borrow or inherit its safety by finally settling their batches on mainnet. This results in an attention-grabbing dynamic the place Layer 2 transactions change into more and more cheaper for customers, however mainnet transactions stay sufficiently costly to pay for Ethereum’s appreciable safety expenditure. 

Commenting on the surge in Layer 2 utilization on Twitter in the present day, Polygon co-founder Sandeep Nailwal speculated that over time, Ethereum would possibly evolve from a user-focused to a network-focused chain the place it primarily settles batched Layer 2 community transactions as a substitute of particular person, user-generated mainnet transactions. “As I additionally stated earlier than that #Ethereum is transitioning from a B2C(person to chain) enterprise mannequin to B2B(chain to chain) mannequin,” he stated, including that ultimately, “majority of the Eth’s gasoline could be utilized by L2 chains.”

Disclosure: On the time of writing, the creator of this piece owned ETH and a number of other different cryptocurrencies.

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