Ethereum Layer 2 scaling solutions may soon reach their limits when it comes to efficient mainnet scaling, warns Gautham Santhosh, co-founder of Polynomial.fi.
Layer 2 solutions are protocols or networks built on top of a Layer 1 network to improve its scalability and reduce transaction costs by processing transactions off-chain and then periodically settling the results on the main chain. More users adopted these protocols for faster and more affordable transactions late last year.
This is evident from the increase in the number of blobs or large binary objects published by hundreds of L2s on Ethereum. Since November, the daily tally has averaged a record 21,000, according to pseudonymous data analyst Hildobby’s Dune Analytics dashboard.
Here’s the worrying part. Just two Layer 2s – BASE and Coinbase’s World Chain – account for 55% of daily blog activity. Thus, sustained demand for Layer 2s could quickly exhaust available capacity.
“Ethereum L2s are about to hit a brick wall. 55% of all blob space is already consumed by just 2 chains. And at current growth rates, we are only months away from breaking it all” , Santhosh said on X.
Blobs are like normal transactions with additional transaction data attached. However, unlike traditional transactions, transactions carrying blobs do not permanently occupy mainnet space and are only available for 18 days. Layer 2 protocols use blobs to aggregate transactions, process them off-chain, and publish them to the main chain for verification.
The blob limit per block is six, with a goal of three. When the goal is reached, a base fee is charged to regulate the demand for L2s.
Since November, demand for blobs has been so high that the goal of three has been consistently met. In other words, very many L2s compete for the target per block, which causes the base fee to rise.
“It’s like having a highway with only 3 lanes for 50 growing cities,” Santhosh said.
The chart shows that base submission fees have been significantly higher since November compared to previous months, sometimes surpassing the $50 mark.
These typically increase during market hours, airdrops, and when a new Layer 2 solution goes live, leading to higher usage costs. “This is hitting everyone. DEXs are seeing higher trading costs, perp protocols are facing base fee hikes, users are paying more for base transactions,” Santosh explained. “At @polynomialFi, our base fees have increased by 300% in recent months.”
According to pseudonymous base builder Jesse.base.eth, the blob’s rising base fees are hindering L2’s growth.
“You can see this in the cyclical price spikes caused by daily demand cycles. We need more blobs ASAP to help all L2s continue to scale and ensure @ethereum is at the center of the chain” , Jesse said on X.
Ethereum’s Pectra upgrade, scheduled for March 2025, is expected to increase the blob limit per block to nine, with a goal of 6. But, according to Santhosh, doubling the capacity “only saves us months, not years.”
