Analysis of the Evolution of Ethereum Layer 2 and Public Chain Ecosystem

1. TVL and Trading Volume in the DeFi Sector

Data shows that Arbitrum and Optimism have gradually entered the top ten in the total locked value ranking of DeFi ( TVL ). In terms of TVL, Arbitrum ranks fifth, only behind Ethereum, a certain trading platform, Tron, and Polygon, surpassing public chains such as Avalanche and Solana. Optimism ranks eighth, also surpassing most public chains.

From the perspective of 24-hour DeFi trading volume, Arbitrum ranks third, only behind Ethereum and a certain trading platform. Optimism ranks fifth, only behind Ethereum, a certain trading platform, and Polygon. This somewhat reflects that the activity of these two Layer 2 networks has surpassed that of most public chains.

2. Development Status of Ecological Projects

The DeFi, NFT, and GameFi projects on Arbitrum and Optimism are basically complete, and mainstream DeFi protocols such as Aave, a certain DEX, Synthetix, and Perpetual are all providing services on these two Layer 2 networks.

In addition, some native Layer 2 projects also show potential. For example, the gaming ecosystem project on Arbitrum, magic network ( TreasureDAO ), aims to create a Web3 version of Nintendo, providing underlying services for different games and initially forming an ecological prototype. As of the time of writing, GMX's total trading volume on Arbitrum exceeds $70.9 billion, with cumulative fees exceeding $9.3 million.

Data shows that there are 58 projects on Arbitrum with over 1000 user addresses, and 39 with over 10000; there are 40 with over 1000 monthly active addresses and 24 with over 10000. On Optimism, there are 50 projects with over 1000 user addresses, and 32 with over 10000; there are 33 with over 1000 monthly active addresses and 20 with over 10000.

Currently, the protocols with higher monthly activity on Arbitrum include certain DEXs, GMX, Hop, TreasureDAO, Galxe, StarGate, dopex, and others. On Optimism, the more active ones include certain DEXs, Perpetual, Synthetix, Velodrome, Rubicon, Pooltogether, Thales, and others.

Overall, Layer 2 ecosystem projects have already reached a preliminary scale, and the development speed is expected to accelerate with the decrease in fees and the increase in throughput. In terms of the current development status of ecosystem projects, Layer 2 has surpassed most public chains.

3. Analysis of Active Addresses

From the daily active user data, a certain trading platform, Ethereum, and Solana have a higher number of daily active addresses than Arbitrum and Optimism, while Avalanche is on the same order of magnitude as these two Layer 2 networks.

From a trend perspective, the daily active users of Ethereum have seen a slight increase over the past six months; a certain trading platform remains relatively stable; Solana has recently declined; Avalanche has shown a downward trend over the past six months. In contrast, the daily active users of Optimism and Arbitrum have significantly increased, with Optimism rising from less than 10,000 six months ago to around 30,000-40,000, while Arbitrum has increased from around 15,000 to around 40,000-50,000.

With the evolution of technology, especially with the launch of EIP-4844, the daily active addresses of Layer 2 are expected to increase further. In the next 2-5 years, there may be significant changes in the ranking of daily active addresses for Layer 2.

4. Transaction Quantity Analysis

Currently, the daily transaction count on Ethereum is around 1 million, Arbitrum is about 360,000, and Optimism is approximately 350,000. Over the past year, the transaction volume of Layer 2 has shown an upward trend, while the Ethereum mainnet has remained relatively stable. The number of transactions on Layer 2 is expected to stabilize above Ethereum L1 for the long term in the near future. A certain public chain has a transaction count much higher than other chains because it considers internal consensus messages as transactions.

It is important to note that the number of transactions does not fully reflect the activity level of the chain. Low fees may lead to a large number of low-quality transactions. To assess transaction quality, it is also necessary to pay attention to the active dApps in the ecosystem, the number of real active users, and the interaction quantity.

5. Transaction Fee Analysis

The transaction fees for Layer 2 have been significantly reduced. Currently, the cost of sending ETH and token exchanges ranges from a few cents to a few dimes, which is over 10 times lower compared to L1. Other public chains, except for a certain public chain, do not have a significant advantage in transaction fees compared to Layer 2.

More importantly, the costs of Optimistic Rollup and ZK Rollup still have the potential to decrease by several dozen times, which is closely related to the future implementation of Proto-danksharding(EIP-4844) and danksharding. EIP-4844 will introduce dedicated data space for rollups, expected to bring about a hundredfold reduction in costs.

After the implementation of EIP-4844, Optimistic Rollups may initially have advantages in terms of costs. As ZK Rollup technology matures, this situation may gradually change. In addition, the application of data compression technology is expected to further enhance rollup efficiency.

If these technologies can be implemented, the daily transaction volume of Layer 2 may reach tens of millions, providing ample development space for DeFi and early gaming applications.

6. TPS( transactions per second analysis )

The self-reported TPS data in the market often tends to be exaggerated. TPS is also related to the level of decentralization; the higher the level of decentralization, the more TPS is often sacrificed.

According to tests conducted by a certain capital in the Uniswap V2 token swap scenario, Ethereum's TPS is approximately 9, a certain trading platform around 195, and a certain public chain about 273(. Considering internal consensus messages, the actual usable TPS is approximately 600). Most chains have TPS ranging from dozens to hundreds, which is several to dozens of times higher compared to Ethereum L1.

In theory, rollups can achieve 1000-4000 TPS. If Proto-danksharding and danksharding are implemented, the TPS of Ethereum L2 is expected to exceed 100,000. Although it may not be possible to immediately reach the theoretical value in practical operation, it is possible to be comparable to other high-performance monolithic public chains.

Outlook on the Evolution of Ethereum Layer 2 and Public Chain Landscape

As the Layer 2 ecosystem matures, the TVL, active users, and real transaction volume of Arbitrum and Optimism are expected to gradually surpass that of most public chains. Although new public chains will still emerge in the future, if they cannot achieve improvements of more than ten times in terms of cost, speed, and user experience, surpassing Layer 2 will face challenges.

The future may present a multi-chain pattern, with Ethereum and its Layer 2 networks expected to become the primary ecosystem, along with a few larger chains and ecosystems, as well as some niche chains focusing on specific areas.

If Layer 2 ultimately stands out, it will further enhance the network effects of the Ethereum ecosystem and consolidate its leading position in the field of blockchain smart contracts.

It is important to note that there is still the possibility of breakthrough technological paradigms emerging, which could fundamentally change the scalability of blockchain. Therefore, the current public chain networks may not yet be their final forms, and the true endgame of the blockchain landscape may only become apparent when Web3 is truly adopted on a large scale.

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