The Layer 2 Era Has Arrived
This week, for the first time, Arbitrum alone counted more transactions per day than the Ethereum main layer. Meanwhile, Coinbase announced its own L2 chain. Here's what's happening.
The layer 2 era has arrived.
This week, for the first time, Arbitrum alone counted more transactions per day than the Ethereum main layer (L1). 🤯
In January, Optimum briefly overtook Arbitrum in daily active addresses. Together, they are now consistently logging more transactions than the Ethereum main layer (L1).
Aka the "flippenings" no one is talking about. 🔥
But wait: What the heck is “Layer2”?🤔 Can’t we just leave it at Ethereum?
Not quite. Layer 2s (L2s) will be instrumental in scaling Ethereum to a point ready for mass adoption.
Meaning? Almost zero fees and high transaction throughput.
I thought blockchains weren't scalable without compromising security (cf. the blockchain trilemma)?
L2s solutions are scaling solutions built on top of blockchains that process transactions off-chain while still leveraging the security of the underlying blockchain.
For that, Arbitrum and Optimism use "Optimistic Rollups”. This means that they bundle many transactions together, validate them off-chain, and then submit a single proof to the Ethereum L1.
L2s now consistently count more than 400’000 daily active addresses. Currently, Arbitrum and Optimum are the most popular L2s, while Arbitrum leads in numbers:
To date, Arbitrum controls over 50% of all total value locked (TVL) on Ethereum L2s (compared to 30% for Optimism).
There are currently 2m+ ETH locked into Arbitrum, which is more than all other major L2 scaling solutions combined.
Arbitrum daily transactions have grown 1200% YoY. Since the beginning of February, Arbitrum has been doing between 40-50% of the number of transactions as Ethereum L1, with an average cost reduction of around 97% compared to Ethereum L1.
Arbitrum’s weekly active users have grown 700% YoY.
The number of new contracts deployed on Arbitrum has grown by more than 800% since the beginning of January. The builders are currently seeing Arbitrum as an attractive place to build or port their applications.
Since October, Arbitrum has added around 300k new users per month.
Currently, GMX, a decentralized spot and perpetual exchange, is by far the most active project. Moreover, Arbitrum recently launched Arbitrum Nova, purpose-built for applications that require high throughput, like games and social. Total value locked is still low, but increasing rapidly.
But wait, there’s more.
Here comes Optimism.
Yesterday, Coinbase (yes, Coinbase) announced they are launching a new L2 blockchain called 'Base’ built on the Optimism tech stack, secured by Ethereum.
This is big.
Base will commit a portion of transaction fee revenue back to the Optimism Collective, an open-source community of developers who are building L2 scaling solutions for Ethereum using Optimistic Rollups.
This is a big win for Optimism, and an even bigger win for the entire ecosystem.
But wait, it’s not over.
Why settle for one network? Also this week, MetaMask added Arbitrum and Optimism to its bridging tool, making hopping around the crypto ecosystem easier than ever for all MetaMask users.
This seems like the icing on the cake for this L2-week. 🎂
So, why is this all relevant?
L2s will be instrumental onboard the next 1bn+ users to crypto & NFTs.
I expect L2s to gain huge momentum in 2023.
Back to building.
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