Ethereum‘s network has struggled with scalability limitations for years, leading to high transaction fees and slow processing speeds which have hindered innovation and widespread adoption. For example, in May 2022, the average transaction fee on the Layer 1 (L1) network was $196, significantly higher than the $2 average two years prior.
The increase in costs has made the user experience on Ethereum prohibitively expensive, causing the network to process transactions slower than competitors like Solana (SOL). To overcome these challenges, Layer 2 (L2) solutions were introduced, processing transactions separately before bundling them and transmitting a compressed version to the Ethereum mainnet. Consequently, 2023 began with a significant rise in demand for L2 scaling solutions.
In February, these protocols spent 106.56 billion GWEI to balance activity on Ethereum’s base layer. By the end of March, this figure more than doubled to 253.91 billion GWEI. The surge in L2 activity in March was linked to expectations for Arbitrum’s ARB token airdrop, which occurred later that month. The ecosystem saw a rapid increase in L2 activity as new participants completed on-chain transactions to qualify for the ARB token airdrop.
On March 23, Arbitrum completed the airdrop, distributing 1.27 billion ARB tokens to over 600,000 eligible wallets. Data from Arbiscan showed that the daily transaction count on L2 reached 2.73 million that day, marking the highest single-day level of the year. Despite a significant drop in many cryptocurrency prices in the first half of the year, gas fees in the L2 sector continued to rise.
According to Dune Analytics, the monthly gas fee spent to complete L2 activity on Ethereum’s mainnet between March and September increased by 108% to 527 billion GWEI. While this amount showed a decline for the remainder of the year, the high monthly gas fees indicated that L2 platforms recorded historic peaks in user activity in 2023.
The launch of Coinbase‘s Ethereum-based scaling solution, Base, in August brought a new user group to the L2 ecosystem. Less than a month after Base’s launch, network activity surpassed existing protocols like Arbitrum and Optimism (OP). Data from IntoTheBlock revealed that during this period, the L2 network registered an average of 888,000 daily active addresses, accounting for 60% of all on-chain addresses connected to optimistic rollup services within the same window.
