L2 solutions flourish on Ethereum's loopholes

By: Bharggavi Ssayee

L2 solutions flourish on Ethereum's loopholes

September 12, 2021 6:56 AM

The fees go up on Ethereum to around $ 40. But never before have more Dapps resorted to L2 scaling solutions to keep these costs down.


In the past, congestion on the Ethereum blockchain has very often sparked the ire of investors and DeFi protocols. Despite the London update, the high fees on Ethereum remain a reality. However, alternatives are developing.


In addition to competing blockchains like Solana, applications can use Layer-Two or L2 technologies. These make it possible to process transactions outside of Ethereum, before recording them in a single operation on the blockchain


L2s process more transactions than Bitcoin

They are therefore a relevant technical remedy for recurring Ethereum congestion. And L2 technologies have arguably never been so popular. According to analyst Evan Van Ness, L2 transactions for Ethereum exceed those on the Bitcoin network on a daily basis.


Based on data from CoinMetrics, these transactions reached 250,000 per day compared to 210,000 on the BTC blockchain. There are several L2 alternatives available to Ethereum users. In terms of volume of transactions, StarkWare ranks first with 143,000 transactions / day.


This growth is attracting new players, including Arbitrum. Its Arbitrum One platform has particularly won over big names in DeFi such as Aave, Chainlink, and Uniswap. This L2 offer is not exclusive.


DeFi protocols are indeed experimenting with several L2 options in parallel. Arbitrum nevertheless already displays 56,000 transactions per day according to Evan Van Ness. This is more notably than Optimistic Ethereum.


Less than $ 10 in L2 versus 40 on Ethereum

This technology is the one chosen by Uniswap for its V3, but also by the DeFi Synthetix / Kwenta platform. Polygon is another L2 alternative. According to one of its representatives, users prefer these solutions for transactions of small amounts.


With an average cost per transaction of $ 40 on Ethereum, this finding is not surprising. By comparison, Loopring processes trades at a cost of just $ 0.40. For Arbitrum One and Optimism, it takes $ 2.75 and $ 5.83, respectively, to transfer ETH.


The growth of L2 options on Ethereum is still measured by other figures. According to L2Beat, over $ 1 billion is now in receivership (TVL) in these scaling protocols.


Ethereum's migration to staking, combined with sharding, will reduce network congestion. The blockchain should then be able to process 100,000 transactions per second / However, this will not make third-party scaling and therefore L2 technologies obsolete.