Ethereum Layer-2 Activity Grows Behind Base’s Unprecedented Rise
Base Leads Ethereum Layer-2 Activity | Credit: Hameem Sarwar
Key Takeaways
- Base has firmly established itself as the leader in Ethereum Layer-2 activity.
- It shows a considerable increase in Decentralized Exchange (DEX) volume.
- Can the increase in activity turn the ETH supply deflationary again?
Ethereum has been one of the most disappointing cryptocurrencies of the current market cycle, fueling discussions about its long-term viability and position as the largest altcoin. The chatter has grown larger after Solana’s rise, who has continuously made new all-time highs against Ethereum.
The fact that most of the Ethereum activity is going to its Layer-2 rollups and decreased the ETH burn rate makes it seem that the Dencun upgrade only helped the rollups instead of the main chain. However, Lyaer-2 activity has surged recently, led by Base, causing the ETH supply to briefly become deflationary again.
Let’s look at some on-chain stats and see what this can mean for the future.
Ethereum Layer-2 Activity
Much has been said about the Ethereum Dencun upgrade and the reduction of Layer-2 transaction fees in March. However, Layer-2 transactions have definitively benefited from the upgrade.
Base is a clear example of this, with roughly 400,000 daily transactions in March and over 7 million currently (blue).
Taiko’s increase is also impressive, boasting nearly four million daily transactions. Arbitrum is third and is the only other Layer-2 with over 1 million transactions. At times, Arbitrum has been the leader of the Layer-2 stats.
Linea’s decrease is the most worrisome since it has only 200,000 daily transactions, a precipitous fall from its over 800,000 highs. Base also leads in active addresses , while Arbitrum and Linea are in 2nd and 3rd places.
Arbitrum still maintains its lead in the Stablecoin market cap , trailed by Base and Optimism.
The main concern with the Dencun upgrade was that it sharply cut revenues because of the reduced transaction costs . While this is true, Base and Taiko are both mounting comebacks, also seen in the rent paid to the Layer-1.
Blob Usage
Moreover, there is a steady increase in Blob usage. Blobs were introduced as part of the Dencun upgrade to reduce transaction costs by temporarily storing data.
The Blob fees are burned, reducing the ETH supply similarly to ETH transaction fees. This highlights Ethereum’s rollup-centric roadmap and that Layer-2s are not parasitic to Ethereum. Also, Layer-2 usage has skyrocketed since Dencun while Ethereum’s has stayed constant or declined slightly.
The average Blob count per block has been below the target of 3 since the Dencun upgrade. However, is increasing again and is at the target for all of November. Base is by far the biggest Blob submitter, though Taiko leads the all-time total fees at $3.5 million.
So, Layer-2 activity is increasing, and the continued increase of Blob usage could make the Ethereum supply deflationary again. An Ethereum Blob simulator created by Time Robinson shows that the ETH supply can fall by 6.5% at 100 TPS for 100 rollups. According to Ethereum’s founder Vitalik Buterin, this is a medium-term goal for Ethereum.
Blob fees have burned over 1,200 ETH since the merge, most of which in the past few weeks. At times, Blob fees were even higher than base Ethereum fees.
Base Leads the Way
An analysis of the Layer-2 activity shows that Base is leading the way. Base’s on-chain data shows a pronounced uptrend in the last month for revenue, profit, and rent paid to L1, as was explained by the Blob usage in the previous section.
The surge in Rent Paid to L1 is likely why the Ethereum supply briefly turned deflationary for a week in May.
Roughly 40% of Base’s transactions are in Decentralized Finance (DeFi), meaning they are likely memecoin trading. The DEX volume in Base is only surpassed by Ethereum and Solana, making it unprecedented for a Layer-2.
Base’s Total Value Locked (TVL) is also at an all-time high, led by Aerodrome Finance, further cementing that memecoin trading is a large portion of Base activity.
The Layer-2 DEX activity supports this since Base has by far the largest weekly DEX volume, over twice that of Arbitrum and Polygon.
Finally, Base is constantly creating new highs in addresses, transactions and value bridged, further cementing its place as the leading Ethereum Layer-2.
Higher Revenue and Rent
Layer-2 transaction fees and revenue have fallen swiftly since the Dencun upgrade in March. They have mounted a comeback in November, led by Base and Linea. The increased Blob usage could make the ETH supply deflationary again if it maintains its increase.
Base Leads Layer-2 Activity Behind Aerodrome Finance – Is AERO Set for a Meteoric Rise?
