A research by Austin Adams from Uniswap Labs revealed that transactions and liquidity provisions on layer-2 networks provide decrease value benefits over Ethereum’s mainnet.
The paper highlights Arbitrum’s success in producing greater than triple the liquidity positions in comparison with Ethereum over the previous yr. Particularly for trades beneath $125,000, 97.5% of transactions carried out on layer-2 networks had been cheaper than these on the Ethereum mainnet, seemingly on account of decrease gasoline prices and better liquidity focus useful for retail merchants.
The analysis additionally notes that whereas Ethereum accounts for 25% of complete transactions, it encompasses over 60% of the amount, indicating a choice for layer-2 networks regardless of Ethereum’s larger transaction quantity.
Moreover, layer-2 networks similar to Arbitrum provide considerably shorter block instances, lowering the window for market worth fluctuations and making arbitrage much less worthwhile. This finally advantages liquidity suppliers, who obtain 20% larger returns from arbitrage on layer-2 networks in comparison with the mainnet.
Nonetheless, the paper additionally addresses issues concerning layer-2 networks, together with centralized sequencers that will manipulate transactions for his or her profit and the absence of decentralized fraud proofs in optimistic rollups crucial for correcting errors.
The proliferation of over 40 layer-2 ecosystems additionally results in liquidity fragmentation, requiring reliance on bridging infrastructure, which is dear and time-consuming.
Builders are actively working to mitigate these points, with Optimism unveiling a permissionless fault-proof system and initiatives like Espresso to diversify sequencer networks.
“For decentralized markets to satisfy their full potential, mixture buying and selling prices should proceed to say no, and person expertise should proceed to enhance,” Adams mentioned. “We consider that the studied generalized layer-2s nonetheless have many advantages that customers can make the most of right now, and any future enhancements will solely proceed to profit the buying and selling expertise.”