How Layer 2 solutions have become a blessing for Ethereum

• L2s processed nearly 45 transactions per second (TPS) on average compared to Ethereum’s 10.5
• The TVL on scaling solutions more than doubled on a YTD basis. 

Slowly but surely, layer 2 (L2) scaling solutions have started to plug the scalability gaps prevalent in the base layer Ethereum [ETH].

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According to a post by a noted on-chain analyst, the scaling factor of L2 rollups exploded to 5.25x from less than a year ago. Put simply, this meant that the the total number of transactions on L2s was more than five times that of Ethereum.

From a scaling factor of under 1 to 5.25X in 1 year, Layer 2 Rollups, now process 5X the transactions of Ethereum mainnet.

In another year, this comparison won't even make sense as Layer 2s will process so many magnitudes more transactions. pic.twitter.com/3xkpJM3Uc0

— Patrick Scott (@patfscott) August 27, 2023

On a big scale

As is well known, scaling solutions arose from the necessity to address capacity constraints on the Ethereum mainnet, which were induced by exponential surge in network traffic. By processing large volumes of low-value transactions and submitting proofs to the L1, L2 solutions have become the backbone of the large Ethereum ecosystem.

As per L2Beat, scaling solutions processed more than 45 transactions per second (TPS) on average at the time of publication. Compared to this, the average TPS on Ethereum was 10.5.

L2s save cost

Apart from better transaction throughput, L2s have also emerged as cheaper alternatives for users to get their transactions processed.

Data from L2Fees showed that almost all scaling networks managed to lower transactions fees by orders of magnitude. Consider this- the largest scaling solution in terms of value locked, Arbitrum [ARB], enabled token swapping at $0.12, about 3.8% of the rates on Ethereum.

Sharp growth in TVL

The perceived strengths of L2 networks also caught the eyes of DeFi investors and developers. Since the beginning of 2023, the total value locked (TVL) on Ethereum scaling solutions more than doubled, settling at $9.58 billion at the time of writing.  For context, this was 22% of the total funds locked on the Ethereum mainnet.

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The L2 scene became increasingly cluttered in 2023 as new networks appeared on the horizon one after the other. Base, the latest entrant to this red-hot world, has been the talk of the town since its debut.

Going forward, the growth of L2s would hinge around the upcoming EIP-4844 upgrade. Aimed at achieving 10-100x cost savings from the base layer, this crucial upgrade could lay the groundwork for Ethereum’s mass adoption.