14.11.2022

­čĄö┬áMotivation

Introduction to scalability

The blockchain trilemma describes the goals of a blockchain-solution of being scalable, secure and decentralized. The challenge lies in achieving all three, without making any trade-offs.

https://vitalik.ca/images/sharding-files/trilemma.png

On the triangle, Ethereum exhibits strength in being both decentralized as well as secure. However, this comes at the cost of scalability. At full capacity, Ethereum can process around 14 transactions per second. The less stable competitor Solana on the other hand, can process up to 50.000 transactions per second.

Why we need L2s

Transactions on the network are processed by miners, which earn part of the gas fees paid by the transaction-sender. The cost of gas fees depend on supply, demand and network capacity. On Ethereum, the high number of users and transactions result high gas fees, which causes an entry barrier to using Dapps and doing frequent transactions. This restriction in scalability led to the creation of so called Layer2 solutions, which are used to process transactions off of the Ethereum Mainnet. They are extending Ethereum and have an increased throughput for number of transactions and also a fraction of the gas fees.

What will we look at?

In this article, we want to analyse how Ethereum and its main Layer2 solutions (Arbitrum, Optimism and Polygon) compare. Polygon started back in 2017 and is a sidechain, which uses its own POS as its consesus mechanism. Transactions are returned to the L1 post-processing. Both Arbitrum and Optimism are still young and use Ethereums consesus mechanism for security, as well as optimistic rollups. We will look at metrics related to reach, retention and revenue. Does Ethereum compete with its L2s, or do they need each other?

­čôÂ┬áReach

How many new transaction-senders appear every day?

One metric we are interested in is the number of wallet that sign their very first transaction, totalled per day.

Ethereum is the oldest smart-contract compatible blockchain and has data dating back about 8 years. During this time, a lot of transactions were signed by a lot of wallets. The number of new transaction-senders peaked early, and has since gone up and down without a clear trend. Compared to the L2s, Ethereum has on average the highest number of new transaction-senders, currently around 80.000.

Ethereum: total number of new transaction-senders per day

Ethereum: total number of new transaction-senders per day

Arbitrum has, compared to the other L2s and Ethereum, not a lot of new users per day. There is a trend in the past weeks that is showing an increase to up to 10.000 though.

Arbitrum: total number of new transaction-senders per day

Arbitrum: total number of new transaction-senders per day

Optimism has seen a few spikes of new users per day, and a recent increase in the past few weeks.

Optimism: total number of new transaction-senders per day

Optimism: total number of new transaction-senders per day