- Transactions on Ethereum’s layer 2s have doubled post-upgrade, driven by lower costs, attracting bots and increasing transaction failures.
- High transaction failure rates on platforms like Base and Arbitrum suggest bots exploit lower costs, impacting network stability.
The Ethereum network, following its Dencun upgrade in March, is grappling with mixed consequences. This enhancement aimed to boost the scalability and cost-effectiveness of Ethereum’s layer 2 solutions.
However, it inadvertently shifted traffic and economic activity away from the mainnet, impacting the network’s overall financial metrics.
Galaxy Research has provided an analysis highlighting a surge in transactions on Ethereum’s layer 2 platforms, which have more than doubled since the upgrade.
Data from L2Beat reflects this growth, showing that the Total Value Locked (TVL) in these platforms is now at $33 billion, marking over a 200% increase in the past year.
This surge in layer 2 activity, while beneficial for users seeking lower costs, has led to a decrease in revenue generated on the mainnet.
A particular concern arising from this shift is the increased prevalence of bots on the network. These bots, likely driven by the reduced transaction costs, have been attributed to a rise in failed transactions across various platforms.
For instance, the Base platform has reported a transaction failure rate of 21%, with Arbitrum and Optimism recording 15.4% and 10.4% respectively. This high failure rate suggests that bots are exploiting the lower costs to execute high volumes of transactions, many of which do not succeed.
This bot-driven activity has broader implications for the Ethereum ecosystem. The decreased transaction costs on layer 2 solutions, while initially seen as a boon, are now contributing to lower burn rates and reduced revenue on the Ethereum mainnet.
This has a direct impact on the price of Ether (ETH), which has seen a 22% decrease over the last 30 days, underperforming when compared to Bitcoin’s 7.5% decline.
Despite a slight recovery in Ether’s price in the past 24 hours, the long-term financial health of the network may be at risk if these trends continue.
As we reported on ETHNews, the current highlight the delicate balance required in blockchain scalability and cost reduction efforts, where enhancements in one area can lead to unforeseen challenges in others, potentially stifling the economic viability of foundational layers like Ethereum’s mainnet.
The current price of ETH (Ethereum) is $2,732.4 USD, reflecting a 4.17% increase in the last 24 hours.
Here’s a brief technical analysis based on the latest market data
Price Trend: Ethereum has seen a strong upward movement today, gaining over 4%. However, over the past month, ETH has experienced a decline of approximately 21.56%, which could indicate some volatility in the short term.
Key Levels to Watch
Support Level: Around $2,535, which has been identified as a critical horizontal support.
Resistance Level: The next significant resistance is near $2,854.22, aligning with the 61.8% Fibonacci retracement level.
Potential Scenarios:
- If ETH breaks above the $2,854 level, it could signal a continuation of the bullish trend, possibly targeting the $2,900 area.
- Conversely, a drop below the support level of $2,535 could lead to a further decline, with the next support around the $2,490 zone.
