The Ethereum Mainchain can hardly be used by ordinary people due to high transaction costs, that’s no secret. Applications from the DeFi and NFT world are primarily responsible for the high costs.
On average, over 500,000 crypto wallets interact Every day with the Ethereum main chain. This enormous demand inevitably leads to Ethereum transactions becoming very expensive. For a token swap on Uniswap alone, it is therefore quite possible that one between $23.30 and $24.56 pay for a single transaction confirmation.
When market volatility is high, these costs can be even higher. Although the Ethereum core developer community is constantly working on scaling the main chain, the high transaction costs should not change until Ethereum 2.0 and sharding are fully implemented.
Until the scalability of the Ethereum main chain increases, various scaling solutions are trying to relieve the Ethereum main chain.
What is an Ethereum Layer 2 network?
ETH-L2s basically work like cable cars or subways in big cities. They relieve the road network and function in the Ethereum network as layers on which transactions are outsourced in various ways.
Technically, Ethereum Layer 2 networks can be structured differently. Basically, they all have one goal: to outsource transactions from the Ethereum main chain. This makes it possible for ETH-L2s to effectively relieve the main chain and enable users to make cost-effective transactions again.
The Ethereum scaling solutions, where the most capital resides at the moment, are noisy DefiLlama Polygon ($5.17 billion), Arbitrum ($4.02 billion), dYdX ($985 million), and Optimism ($604 million).
ETH-L2s hit new all-time high
The persistently high utilization of the ETH network has resulted in the layer 2 ecosystem growing rapidly in recent months. For example, the value of digital assets on Arbitrum has grown from under $50 million in September 2021 to over $4.02 billion at press time.
Calculated using the data from DefiLama and L2BEAT the total value of capital held in ETH-L2s, it now equates to over $12.43 billion – a new all-time high.
For comparison, according to data from DefiLama, Avalanche’s blockchain is worth $11.39 billion, Solana’s is $7.92 billion, and Fantom’s is $7.61 billion.
Of course, the Ethereum Layer 2 ecosystem cannot be directly compared to other Layer 1 blockchains. Nevertheless, the comparison makes it clear how large ETH-L2s are now.
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