Author: Jason Jiang, OKG Research
After the Cancun upgrade, the transaction fees of Ethereum L2 were significantly reduced and the throughput was improved, but the overall ecosystem did not usher in the imagined prosperity, and the L2 narrative momentum was still insufficient after the upgrade. Except for a few such as Base and Arbitrum, most L2 projects performed relatively weakly at the data level after the upgrade due to the reality of the decentralized liquidity of Ethereum and the crypto ecosystem itself and the lack of application innovation.
1. More than 60% of L2 transactions occur on Base and Arbitrum chains
The most direct impact of the Cancun upgrade is to reduce the transaction fees of the L2 network. The market had previously generally expected that the Cancun upgrade would reduce the transaction fees of L2 by 90%, and the expected goal has basically been achieved. OKLink data shows that the average daily handling fee of L2 has dropped significantly after the upgrade, and the handling fees of projects such as Arbitrum, Optimism and StarkNet have all dropped by more than 90%. Arbitrum's average daily handling fee has dropped the most, from $0.62 before the upgrade to around $0.01 today, a drop of 97.01%. However, the average cost of the ZK Rollup system is still relatively high compared to the Optimistic Rollup system. The transaction costs of Linea, Scroll, Polygon zkEVM, etc. remain above $0.5, and the decline is less than 50%.
Data source: OKLink
While transaction fees have been reduced, the transaction throughput of multiple L2 projects has also increased, with Arbitrum and Base improving most significantly. Base network TPS has surged from single digits before the upgrade to a recent average of more than 35 transactions/second, an increase of more than 6.3 times, and even hit the highest single-day TPS value in history on June 28.
Data source: OKLink
Behind the actual TPS growth, the transaction activities on L2 are also more active than before the upgrade. OKLink data shows that the overall number of L2 transactions has increased significantly after the Cancun upgrade, and the number of transactions processed per day has recently exceeded 7 million, an increase of more than 40% over the previous period. According to L2Beat data, the number of transactions processed by L2 has now reached more than 20 times that of the Ethereum main network.
Data source: L2Beat
Except for Linea and zkSync, the number of daily transactions of other L2s did not exceed 1 million before the upgrade; however, the L2 transaction pattern has changed after the upgrade: Base and Arbitrum have become the main places for L2 transactions, and more than 60% of transactions occur on these two chains. Among them, Base now processes more than 3 million transactions per day, and Arbitrum's average daily transaction number has exceeded 2 million.
Data source: OKLink
2. Has L2 become better after the Cancun upgrade?
It is worth noting that while L2 transactions have become more active, the transaction volume has not increased significantly. OKLink data shows that L2 transaction volume did have an upward trend for a period of time after the upgrade was completed, but it showed signs of weakness after May 9 and has now basically fallen back to the level before the upgrade.
Data source: OKLink
Analyzing the on-chain transaction volume of a single project will give you a more intuitive feeling. From the comparison in the figure below, it is not difficult to see that the project with the most obvious growth after the upgrade is Base. Although the current average daily transaction volume has dropped significantly from the peak period in March and April, it has still increased by more than 3 times compared to before the upgrade. However, except for Base, the transaction volume of projects such as Arbitrum, Optimism, and Linea has not increased significantly after the upgrade, and zkSync and Manta have even seen a shrinking transaction volume.
Data source: OKLink
From the changes in TVB data, we can also see that the Cancun upgrade has not significantly improved the overall attractiveness of L2: the daily amount of ETH transferred from Ethereum to each L2 has a downward trend compared with before the upgrade. Even Base, which had a relatively strong performance before, TVB has gradually declined recently and is almost the same as before the upgrade; on the contrary, Polygon has repeatedly performed well recently.
Data source: OKLink
Based on the changes in the above data, it is not difficult to find that:
1) The Cancun upgrade has a significant effect. It not only significantly reduces L2 transaction costs, but also increases transaction throughput to a certain extent. However, it has not changed the competition for L2 stock. Instead, it has further intensified competition and accelerated changes in the L2 transaction pattern. ;
2) From the changes in the number of transactions and transaction volume, it can be seen that L2 has indeed attracted more types of investors after the transaction costs have been reduced. In particular, smaller investors can also complete transactions quickly through L2, which will help consolidate the role of L2 as industry infrastructure.
Although the L2 ecosystem did not experience explosive growth after the Cancun upgrade, the data performance of many projects was relatively weak, and the price trend was unacceptable, the author believes that L2 technology still has value in the long run. There are two reasons for the lack of momentum in the L2 narrative at this stage: first, Ethereum, as L1, has performed poorly in this cycle, and the activity and innovation on the chain are not optimistic, which cannot provide more liquidity for L2; second, the application ecosystem of L2 has not yet exploded, resulting in weak transaction demand; coupled with the increasing number of L2 projects, liquidity has been further dispersed in the stock competition, making the L2 narrative lack the momentum for sustained growth.
Data source: OKLink
The easiest way to change the unfavorable status quo of L2 is to wait for the Ethereum ecosystem to recover, but a more direct and proactive choice is to accelerate the construction of more L2 applications. But this is not easy. With the "infrastructure movement" in the past few years, the infrastructure of the crypto industry is not only relatively complete, but also shows signs of oversupply. The reason for this oversupply of infrastructure is on the one hand because of excessive investment in the past, and on the other hand because the application ecosystem has not been able to keep up. In the long term in the future, the key to changing the status quo not only for L2, but also for the entire crypto market will lie in the exploration and construction of applications.
