Layer 2 Networks Account For Nearly Two-Thirds of Ethereum Transactions: Report
Ethereum’s layer 2 networks have gained significant traction in the past few years as developers seek faster and cheaper solutions to interact with the blockchain.
According to a new report released by blockchain intelligence firm, Messari, layer 2 solutions recorded 61% of the entire Ethereum (ETH) transactions in Q3 2023.
The State of Ethereum report explored how the blockchain and cryptocurrency fared in the last three months, notably around prices, adoption of layer 2 networks, asset dominance, network upgrades, etc.
Layer 2 solutions are separate networks that help developers build on Ethereum’s mainnet. The need for these solutions grew as a result of the congestion of Ethereum resulting in the need to scale, reduce fees, and expand use cases.
Messari cites Base and Friend.tech
Kunal Goel, a research analyst at Messari opined that the increased adoption of layer 2 transactions in the third quarter of this year is largely a spin-off from the growing adoption of Base.
Since the launch of Base in August, it has lived up to its expectations with growing transactions and use cases and temporarily recording more activity than the mainnet at one point.
The network boasts $442 million in total value locked (TVL) within months which takes it into the top four layer 2 solutions.
According to its developers, Base differs from the rest because it was built solely for developers without a native token as native governance assets in most cases distort the work done on the network.
“We want folks to see Base as kind of an opportunity for growth and expansion. But we also think it’s really important that we incubate, and curate a Base native community where folks who are really building base first, and creating for this new kind of world,” Jesse Pollak, Director of Engineering, Coinbase.
Taking many transactions to layer 2 was Friend.tech, a social token-driven platform that gained significant traction generating millions of dollars within a short period.
Goel noted that Base was in a pole position as it capitalized on Friend.tech launch on its network.
Arbitrum and Optimism post positive results
Arbitrum remained the biggest layer 2 solution in the third quarter, averaging 600,000 daily transactions, a wide 200,000 gap from Optimism.
Although Arbitrum is on top of Ethereum’s layer 2 networks, Base and Optimism have taken off 36% of its market share as they continue to focus on community engagement and lure more projects to their platforms.
💰🚀 Layer 2 Network Optimism Announces $26 Million Airdrop to 31,870 Wallets— Cryptonews.com (@cryptonews) September 26, 2023
Layer 2 network Optimism announced the third airdrop of OP tokens to 31,870 qualified addresses to bolster community participation.#CryptoNews https://t.co/5MlAKMAz9D
While Arbitrum has a TVL of $4.2 billion, Optimism records $1.27 billion. Despite the growth of layer 2, Goel adds that the market still wears a bearish outlook so caution should not be ignored.
In Q3, Ethereum outperformed Bitcoin by 2% in terms of price growth although its market capitalization declined 10%.