Journalist
Posted:
- Layer 2 charges started to rise as utilization declined.
- Optimism remained unaffected by the developments, as costs surged.
Regardless of the market volatility in 2023, the Layer 2 (L2) sector noticed large development. Nevertheless, as development within the sector elevated, so did the competitors throughout the sector.
Low utilization causes bother
Roll-ups on Ethereum have been designed to make transactions cheaper, however an absence of customers is having the alternative impact. These Layer 2s take longer and value extra attributable to underutilized capability.
The L2 Paradox – or why an absence of customers results in rising prices on emergent L2s
Roll-ups on Ethereum are purported to carry prices decrease for particular person transactions. However the lack of customers have had the precise reverse affect. They take longer for finality and value extra.
Let me… pic.twitter.com/YyVtRhDnfT
— Joel John (@joel_john95) November 23, 2023
Inspecting knowledge from sixteenth November, we discover that almost all chains, together with Polygon, have been working beneath their capability.
Ethereum processed extra transactions than a number of rising Layer 2s mixed, making a situation the place L2 capability is underused, inflicting particular person transaction prices to rise.
Supply: L2BEat
Making comparisons
Evaluating Ethereum to its L2 counterparts, Ethereum’s transaction value rises with demand, whereas on roll-ups, the fee per switch drops as transactions enhance.
It’s because a good portion of the price of roll-ups (95%) goes to posting knowledge on the main-net, and if there aren’t sufficient transactions, the few inside a batch bear that value.
This creates a cycle the place L2s wrestle to succeed in economies of scale attributable to an absence of traction, leading to a surge in prices, which additional hampers their economic system of scale. Knowledge exhibits Ethereum’s transaction numbers far exceed these on L2s like Arbitrum and Zk-sync period.
The affect extends to liquidity and person bases, illustrated by Curve’s chart the place 93% of liquidity stays on Ethereum.
Regardless of incentives, customers have been hesitant to maneuver to new chains. L2s have to evolve into standalone ecosystems to outlive. In any other case, consolidation and mergers may be on the horizon for roll-ups.
State of Optimism
Optimism, as a Layer 2 answer, may face challenges because of the broader points within the Layer 2 sector. If the L2 sector struggles to draw extra customers, Optimism may expertise an analogous lack of traction.
Learn Optimism’s [OP] Value Prediction 2023-24
This might result in a scenario the place prices stay excessive for particular person transactions on Optimism, hindering its attractiveness to customers.
At press time, OP was buying and selling at $1.8571 and had grown by 1.75% within the final 24 hours. The amount of OP being traded additionally surged throughout this era.
Supply: Santiment
