Layer 2 adoption is booming, with Optimism setting new records for activity and the combined transaction volume of optimistic rollups closing in on Ethereum’s mainnet.
On Jan. 7, Optimism’s daily transaction count hit a new all-time high of almost 700,000, according to Etherscan. The milestone marks a 700% increase in activity since September 2022.
“As blockchain technology is gaining more mainstream recognition, L2s will outshine Ethereum Mainnet, especially for consumer and retail-facing applications and use cases,” Kamado, the CEO of Integral, a decentralized exchange, told The Defiant. “Ethereum mainnet will lean more towards settlement and gear towards institutional use cases such as large transfers and large order transactions.”
Optimism is the second largest Layer 2 by total value locked, representing $1.3B or nearly 29% of the sector’s TVL, according to L2Beat. Its TVL grew 11% over the past week while its OP token rallied by 32%, according to The Defiant Terminal.
Optimism’s transaction volume consistently grew throughout the fourth quarter of 2022, surpassing Arbitrum in December. Arbitrum is currently the top L2, hosting $2.3B or 52% of combined Layer 2 TVL.
But Arbitrum’s daily transactions peaked at 576,000 in November and have since slumped by half. Transactions hit a low of 160,000 on Jan. 1.
Catching Up To Ethereum
Despite Arbitrum activity receding, the combined transaction volume of Arbitrum and Optimism is coming close to overtaking Ethereum.
Arbitrum and Optimism processed 941,000 transactions on Jan. 7, lagging behind Ethereum’s 1.1M transactions by about 15%. A record 1.05M transactions were processed by optimistic rollups on Nov. 8.
Rollups improve Ethereum’s scalability by bundling together transactions on Layer 2 and submitting them in batches for final settlement on the Ethereum mainnet, significantly reducing transaction fees for users.
Optimistic rollups have gained a dominant market share thanks to their high interoperability with the Ethereum Virtual Machine, Ethereum’s core smart contract engine, meaning that developers can easily port their code from mainnet to Layer 2 with minimal changes.
Dynamo Patrick of Clip Finance shared a chart showing that total transactions settled on Ethereum grew steadily throughout 2022 in spite of the bear market because of growing L2 adoption.
The combined on-chain activity of Ethereum L2s and mainnet peaked above 2.5M daily transactions in December. That figure currently sits near 2M, representing a 50% increase year-over-year.
“There is a clear long-term uptrend in the total number of transactions settled on Ethereum,” Patrick wrote.