Ethereum Layer-2 Booming: Will Gas Fees Drop Even In A Bull Market?
07 November 2023 - 1:00AM
NEWSBTC
The adoption of Ethereum layer-2s is on the rise if Token Terminal
data shared on November 6 is anything to go by. According
to statistics from the blockchain analytics platform shared by Erik
Smith, the Chief Investment Officer (CIO) of 401 Financial, the
average active addresses over the past three months has exceeded 10
million, a nearly 2X expansion from early 2023. Related Reading:
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Provides Answers Ethereum Layer-2s Finding More Adoption Looking at
the chart, Polygon, an Ethereum sidechain, remains the most
popular. At the same time, Arbitrum and OP Mainnet, which are
common layer-2s adopting the roll-up technology, are actively being
used. Even so, OP Mainnet’s share is gradually dropping. Base, a
layer-2 backed by Coinbase, and StarkNet are also finding adoption,
expanding their share over the past three months. In crypto, active
addresses refer to the number of unique wallet addresses (sending
and receiving) that have interacted with the blockchain, in this
case, Ethereum, over a given period. An uptick or contraction in
the number of active addresses can be used to measure sentiment and
the level of uptake. In bear markets, active addresses tend to
drop, only rising when bulls flow in, pointing to a possible
scramble for arising opportunities. The recent uptrend coincides
with the rapid expansion of leading crypto prices. Ethereum (ETH)
prices are inching closer to the $1,870 resistance level, with a
breakout above this line a potential trigger for a leg up that
might see the coin retest $2,100 and even register new 2023 highs.
Usually, rising crypto prices tend to revive demand as the number
of active addresses and, in some instances, the total value locked
(TVL) in decentralized finance (DeFi), and more. What Will Happen
To Gas Fees? Ethereum is the world’s most active smart contract
platform, stretching its dominance mainly because of its
first-mover advantage. The blockchain anchors more DeFi,
non-fungible tokens (NFTs), and gaming activity. Deploying
protocols, depending on their objectives, can either directly
launch on the mainnet or layer-2s. The mainnet is directly
secured by validators, while layer-2 solutions depend on the
mainnet for security but often re-route transactions off-chain. In
this arrangement, more transactions can be processed cheaply and
efficiently, relieving the mainnet. Though the Ethereum base layer
is secure, its peak transaction throughput remains relatively lower
at around 15 TPS. This means during peak demand, gas fees tend to
be higher, impacting user demand. Still, Ethereum gas fees remain
at a multi-year low at around 23 Gwei, according to trackers, as
seen on the chart below. This is down from 240 Gwei recorded in
February 2021 when crypto assets rapidly rose. For now, whether gas
fees will increase as the market recovers is yet to be seen. What’s
evident is that as users opt for layer-2s, the mainnet will likely
be relieved, keeping gas fee fluctuation low. Related Reading:
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Of 99%+ Feature image from Canva, chart from TradingView
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