Evolution of Ethereum L2 and Public Chain Landscape

The current data trends and the development direction of Ethereum technology show some interesting changes.

DeFi TVL and Trading Volume

The TVL rankings of Arbitrum and Optimism have gradually entered the top ten from outside the top ten. In terms of DeFi TVL, Arbitrum ranks fifth, only behind Ethereum, BSC, Tron, and Polygon, surpassing Avalanche, Solana, and others. Optimism ranks eighth, also surpassing most public chains.

From the perspective of 24-hour DeFi trading volume, Arbitrum ranks third, while Optimism ranks fifth. Arbitrum is only behind Ethereum and BSC, having surpassed most public chains. Optimism, on the other hand, is only behind Ethereum, BSC, and Polygon, also exceeding the vast majority of public chains. DeFi trading volume reflects the activity level of the chain to some extent.

Ecological Project Development

L2(Arbitrum and Optimism) have a complete range of DeFi, NFT, and GameFi projects, and some major DeFi protocols on L1 such as Aave, Uniswap, Synthetix, and Perpetual are also providing services on L2.

Some native L2 projects are also beginning to show potential. For example, on the Arbitrum network, the gaming ecosystem project magic network ( TreasureDAO ) is attempting to build a Nintendo on web3, providing underlying services for different games and initially showcasing the ecological prototype. In terms of DeFi projects, GMX's total trading volume on Arbitrum has exceeded $70.9 billion, with cumulative protocol fees surpassing $93 million.

According to the data, there are 58 projects on Arbitrum with more than 1,000 user addresses, 39 projects with more than 10,000, 40 projects with more than 1,000 monthly active addresses, and 24 projects with more than 10,000 monthly active addresses. On Optimism, there are 50 projects with more than 1,000 user addresses, 32 projects with more than 10,000; 33 projects with more than 1,000 monthly active addresses, and 20 projects with more than 10,000 monthly active addresses.

The protocols with high activity on Arbitrum last month include Uniswap, Sushiswap, GMX, Hop, TreasureDAO, Galxe, StarGate, dopex, and others. The highly active ones on Optimism last month include Uniswap, Perpetual, synthetix, Velodrome, Rubicon, Pooltogether, Thales, and others.

Currently, projects on the L2 ecosystem have taken shape. Due to better portability, with costs decreasing and throughput increasing, the development speed of the ecosystem is expected to accelerate. From the current situation, the L2 ecosystem has surpassed most public chains.

Active Address Count

From the perspective of daily active users, the daily active addresses of BSC, Ethereum, and Solana are higher than those of Arbitrum and Optimism, while Avalanche is currently at the same level as Arbitrum and Optimism.

From the trend perspective, the daily active users of Ethereum are relatively stable, with a slight increase in the past six months; BSC is relatively stable; Solana has recently decreased; Avalanche has seen a decline in the past six months; in contrast, the daily active users of Optimism and Arbitrum show a significant upward trend, with Optimism rising from less than 10,000 six months ago to around 30,000-40,000, and Arbitrum increasing from around 15,000 to about 40,000-50,000.

With the evolution of technology, especially after the launch of EIP-4844, there is still room for improvement in the daily active addresses of L2. In the next 2-5 years, there may be significant changes in the ranking of daily active addresses for L2.

Transaction Quantity

Currently, the daily transaction volume of Ethereum is about 1 million, Arbitrum is about 360,000, and Optimism is about 350,000. Over the past year, the transaction volume of L2 has shown an upward trend, while the Ethereum mainnet remains relatively stable. The transaction count of L2 is expected to soon stabilize above Ethereum L1. Solana, due to internal consensus messages also counted in transactions, has a number far higher than other chains.

It is important to note that the transaction volume does not fully reflect the activity level of the chain; low fees may lead to a larger number of low-quality transactions. To assess transaction quality, one should primarily look at the number of active dApps in the ecosystem, as well as the actual number of active users and interaction volume of these dApps.

Fees

L2 fees have been significantly reduced, with the cost of sending ETH and token swaps ranging from a few cents to a few dimes. Currently, the cost of sending ETH is over 10 times lower than L1.

Compared to other public chains, Solana has the most obvious cost advantage, with an overall fee of only 99.17 SOL in 24 hours and an average transaction fee of only 0.0000057 SOL.

Overall, except for Solana, other public chains do not have a significant advantage in transaction fees compared to L2. Arbitrum and Optimism are currently at the same level as Avalanche and lower than most other public chains.

Moreover, the fees for Optimistic Rollup and Zk Rollup still have the potential to decrease by several tens of times. This is mainly related to the subsequent implementation of Proto-danksharding(EIP-4844) and danksharding.

EIP-4844 introduces dedicated space for rollups data, bringing a new type of transaction data and a fee market specifically for rollups data. Blobs can carry a large amount of data, avoiding the current competition for block space, resulting in lower gas costs. EIP-4844 and danksharding will make Ethereum a unified settlement layer and data availability layer.

After the implementation of EIP-4844, rollup transaction fees will be greatly reduced, theoretically offering a reduction space of up to a hundred times. This means that the current fee advantages of most standalone public chains will disappear. At the same time, the advantages of Rollup in consensus, security bridges, and other aspects will have a substantial impact on the competition between L2 and other public chains.

Initial Optimistic Rollup solutions may have advantages in terms of costs. As ZK Rollup technology matures, its costs are expected to be lower than those of Optimistic Rollup. The application of data compression technology will further enhance the rollup space.

If all these technologies are implemented, L2 is expected to accommodate tens of millions of daily transactions, providing ample space for DeFi and early-stage games.

TPS

Currently, the self-promoted TPS data in the market is often exaggerated. TPS is related to the degree of decentralization; the higher the degree of decentralization, the more TPS is often sacrificed.

According to a certain capital's benchmark test for token exchanges on Uniswap V2, Ethereum's TPS is approximately 9.19, Polygon is approximately 47.67, Avalanche is approximately 31.65, BSC is approximately 194.6, and Solana is approximately 273.34.

Vitalik's calculations show that rollups can theoretically achieve 1000-4000 TPS, and if Pro-danksharding and danksharding are implemented, L2 TPS is expected to exceed 100,000.

Although the theoretical values may not be achieved in actual operation, it is expected to be comparable to other high-performance single public chains. With the implementation of Pro-danksharding and danksharding, L2 TPS will be greatly improved. Coupled with the security and network effects of Ethereum, L2 is expected to end the public chain competition at some point in the future.

Outlook on Pattern Evolution

Various projects are entering the Arbitrum and Optimism ecosystems, with some projects showing higher activity on L2 than on L1. As the L2 ecosystem matures, its TVL, active users, and real trading volume are expected to gradually surpass most public chains.

The future will be a multi-chain era, with Ethereum and its L2 likely to become the primary network, along with a few larger chains and ecosystems, as well as some niche chains focusing on specific areas.

L2 will become an important competitor to other public chains. If L2 ultimately prevails, it will further enhance the network effects of the Ethereum ecosystem and solidify its leading position in the field of smart contracts.

It is important to note that there is still the possibility of new technological paradigms suddenly emerging, completely disrupting the current scalability of blockchain. Although the probability is low, it is worth paying attention to. The true outcome of blockchain will only be revealed when Web3 truly bursts into the scene.

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