Ethereum’s Layer-2 networks surged to account for an impressive 61% of all transactions in the third quarter, as revealed in the latest “State of Ethereum” report by Messari. Kunal Goel, a senior research analyst at Messari, attributed this growth to the explosive debut of Base, a platform that momentarily outpaced Ethereum’s mainnet in transaction volume. Additionally, the unexpected popularity of the Friend.tech social token platform played a pivotal role in this surge.
Goel, expressing his astonishment at this combination, stated, “The most impressive thing is Base’s quick growth and how just one app can turn things around for any blockchain.” He elaborated on the challenges faced by new chains and how Friend.tech’s support in onboarding users and funds was beneficial for Base.
While acknowledging the industry’s current bear market, Goel emphasized the importance of user engagement for these Layer-2 solutions. He noted, “Users need developers to make good apps, and developers need users to want to launch apps.” This symbiotic relationship has played a critical role in Base’s success.
Incubated by Coinbase, Base has witnessed significant growth since its August launch, boasting a total value locked (TVL) of $448 million, securing its place among the top four Layer-2 solutions, behind Arbitrum, Optimism, and zkSync Era.
Arbitrum remains the most utilized Layer-2 solution, with an average of 600,000 daily transactions, giving it a substantial lead over competitors Base and Optimism. However, Goel pointed out that Base and Optimism have “cannibalized” Arbitrum’s network activity, resulting in a 36% drop in transactions during the third quarter.
When it comes to TVL, Arbitrum holds a substantial lead with $4.22 billion, nearly three times that of Optimism’s $1.27 billion. Despite this, both have been vying for market capitalization supremacy, with Arbitrum currently leading by a $30 million margin, totaling $1.067 billion.
The trend of Layer-2 solutions taking the lead in transaction throughput aligns with long-term expectations. Goel explained that “the longer-term view has always been that L2 transactions will overtake Ethereum’s,” a perspective that became evident during the bull market of 2020-21 when Ethereum’s mainnet alone couldn’t meet the demand.
Eliezer Ndinga, head of research for 21.co, echoed this sentiment, noting that “blockchains are quite limited in scale” and comparing Layer-2 solutions to the way bandwidth revolutionized the internet.
Ndinga emphasized the potential of Layer-2 solutions, referring to them as “a force to be reckoned with,” particularly as “reputable financial institutions” begin adopting this technology.
Goel’s bullish outlook points to increased market caps and the growing demand for Ethereum’s data availability service as Layer-2 activity surges. He highlighted the significance of reducing transaction costs through the Dencun upgrade, suggesting that as these Layer-2 solutions become more cost-effective, they will witness increased activity.
In conclusion, Goel envisions a future where all decentralized exchange (DEX) trades migrate to Layer-2 solutions due to their lower transaction fees, making them ideal for high-velocity transactions.