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Is layer 2 summer really coming?

Is Layer 2 Summer Really Coming to the Crypto City?

We have to admit that for a bull market to happen, Layer 2 adoption on Ethereum is a requirement.

Without Layer 2’s to offload traffic, gas fees for the swap on the Ethereum base chain will exceed $100.

The bull market will throttle itself as the Ethereum base chain will be overpopulated.

But there is good news.

Layer 2 solutions are popping up here and there and people are finally using them.

In fact, daily activities have been outpacing Ethereum mainnet throughout 2023.

Layer2 Summer - transactions surging
Source: L2 Data – Orbiter Finance

Looking at the chart above, red is the transactions on Layer 2s, blue line is Ethereum.

So the question is, when is Layer 2 summer?

Related Reading: What Does The Dollar Milkshake Theory Mean For Crypto?

When is Layer 2 Summer?

Based on the chart, we could assume that Layer 2 summer is already here.

Still, markets don’t really bubble yet.

A lot of building still needs to be done for crypto as the industry reaches some degree of mainstream adoption.

In a recent post, as Ethereum transitions from a young experimental technology into a mature tech stack, there are three major transitions that need to undergo. And the Layer 2 scaling transition is one of them.

Three major technical transitions of Ethereum

The other ones are people moving to smart contract wallets, in which they don’t have to store private keys; and the third is privacy-preserving transitions.

If builders keep building the network and can manage all of the transitions above, a potential Layer 2 summer is predicted to advocate in 2024.

With the support of the Ethereum Improvement Proposal 4844 (EIP-4844) that will go live in Q3 2023, Layer 2 Summer will help to reduce transaction fees on Ethereum by roughly 10x.

Of course, this is good for Ethereum users and benefits Layer 2 users who transact on Ethereum’s base chain.

In this case, a breakthrough application is in need. Everyone is building a base layer technology on which the application can ride.

The question is, what applications will bring the masses in?

It could be a metaverse, a game, a social media platform, etc.

Obviously, in order to attract more users in those Layer 2s, any applications that bring possibilities and potential use cases will count.

Let’s look at some Layer 2s.

List of Layer 2s

Top L2 coins

Here is the list of top Layer 2s, with the top 4 being Arbitrum, Polygon, Optimism, and ImmutableX.

Among those L2s, Arbitrum and Polygon collect the most meaningful fees.

transaction fees on L2s

However, it is noteworthy that not every Layer 2 has a token yet.

Another notable Layer 2 is ZkSync Era – the first Layer 2 on Ethereum with Zero-knowledge technology.

It is among the top list partly because of the expected airdrop and still doing great. Accordingly, ZkSync Era has bet on zero-knowledge technology as the key requirement for onboarding millions of users to Web3.

Related Reading: Game on with zkSync Airdrop

Then, the question is, what is the most profitable L2?

According to a tweet from Delphi Digital, to know which is the most profitable L2, they took the spread between the fee revenue generated by the L2 and the price the L2 pays to the L1, plus the verification costs for zk-rollups.

As a result, Arbitrum turns out to be the most profitable L2.

Let’s dive into the winner of the show!

Impressive Numbers of Arbitrum

Remember the pre-airdrop phase that has been hotter than summer in the second half of March 2023.

Arbitrum is a Layer 2 scaling solution for Ethereum, designed to improve the scalability and performance of the Ethereum network. It is developed by Offchain Labs, a blockchain technology company.

Arbitrum provides developers and users with faster transaction processing, lower fees, and a more seamless user experience while maintaining compatibility with the Ethereum Virtual Machine (EVM).

This means that smart contracts and decentralized applications (dApps) developed for Ethereum can be deployed and run on Arbitrum without requiring any significant modifications.

Arbitrum uses ETH for gas fees on the network.

It is hard to ignore the fact that this is where most people are going. We’ve seen that Trader Joe found its big success when being the first mover to Arbitrum. 

In conclusion, in terms of transaction fees, Arbitrum is the king of Layer 2.

In terms of daily transactions, Arbitrum is almost at par with the Ethereum main chain.

daily transactions on Arbitrum
Source: Artemis

On some days, Arbitrum daily transactions exceed the number of transactions on the main chain.

These statistics have shown that a large number of users have flooded into the Arbitrum ecosystem.

But, the price is not skyrocketing. Why?

There are some reasons, but the current market cycle that doesn’t favor altcoins in general is one.

Related Reading: Top Altcoins 2023 with Potential for Massive Gains

In conclusion

The increased use of L2 solutions shows that a Layer 2 summer is really coming.

Leading Layer 2 solutions include Arbitrum, ZkSync Era, and Optimism, with Arbitrum being impressive in particular.

We should keep an eye on ZkSync Era since it might have an airdrop.

However, for a true summer to really happen in the crypto city, we are still waiting for a breakthrough application on L2s that will catch fire for mainstream adoption.