As more layer 2 solutions emerge, Ethereum is losing its dominance as the main network for on-chain operations.
Activity within layer 2 networks is booming, as transactions on these products accounted for more than 60% of all Ethereum activity in Q3 2023. According to data from Messari, Coinbase’s Base network quickly did “more transactions than Ethereum Mainnet.”
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According to Messari’s calculations, other layer 2 networks also saw a lot of growth last quarter, with Optimism seeing a 40% increase in transactions. However, this wave of activity also had side effects for the others:
“It appears that Base and Optimism cannibalized some of the activity on Arbitrum, where transactions fell by 36%”
Messari
Nevertheless, Arbitrum still ranks at the top among other layer 2 networks with an average of 600,000 daily transactions, compared to 400,000 for Optimism and Base, the company said.
Graph of all funds locked on Ethereum-based Layer-2 networks | Source: l2beat.com
According to data from L2BEAT, Arbitrum is also the largest layer 2 network in terms of total value, as it has over $5.7 billion worth of crypto locked up within it, representing a 54.4% market share among other rollups. Despite the surge in activity, the total value captured in decentralized finance (defi) protocols has steadily declined since March 2023. According to DefiLlama, defi protocols currently have approximately $37.6 billion in liquidity, a level last seen in February 2021.
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