On-chain Data Special Topic: Has Layer2 Become Better After the Upgrade of Cancun?

Author: Jason Jiang, OKG Research

After the upgrade in Cancun, Money Launderingdrop on ETH’s L2 has significantly decreased and throughput has increased, but the overall ecosystem has not seen the expected prosperity. The narrative power of L2 is still insufficient after the upgrade. Except for a few projects like Base and Arbitrum, most L2 projects have shown relatively weak performance in terms of data due to the decentralized Liquidity and lack of application innovation in the ETH and encryption ecosystem after the upgrade.

1. Over 60% of L2 transactions occur on-chain in Base and Arbitrum

The most direct impact of the Cancun upgrade is the drop in Money Laundering on the L2 network. It was widely expected that the Cancun upgrade would reduce Money Laundering on L2 by 90%, and this target has been largely achieved. OKLink data shows a significant decrease in daily transaction fees on L2 after the upgrade, with fees on projects such as Arbitrum, Optimism, and StarkNet dropping by over 90%. Arbitrum has seen the largest decrease in daily transaction fees, dropping from around $0.62 before the upgrade to around $0.01 now, a decrease of 97.01%. However, the average transaction cost of the ZK Rollup system is still relatively high compared to the Optimistic Rollup system. Linea, Scroll, Polygon zkEVM, and other projects still maintain transaction costs above $0.5, with decreases of less than 50%.

Data Source: OKLink

Trading fees drop at the same time, the transaction throughput of long L2 projects has also increased, with Arbitrum and Base seeing the most significant rise. The Base network’s TPS has surged from single digits before the upgrade to an average of over 35 transactions per second in recent times, rising by more than 6.3 times, and setting a record single-day peak TPS value on June 28.

Data Source: OKLink

Behind the actual TPS rise, transaction activity on L2 is also more active than before the upgrade. According to OKLink data, the overall number of transactions on L2 has increased significantly after the Cancun upgrade, with a daily transaction volume of over 7 million transactions in recent times, an increase of over 40% compared to before. According to L2Beat data, the number of transactions processed on L2 has now exceeded 20 times that of Ethereum Mainnet.

Data source: L2Beat

Except for Linea and zkSync, the daily transaction volume of other L2 solutions did not exceed 1 million before the upgrade; however, the L2 transaction landscape has changed after the upgrade: Base and Arbitrum have become the main venues for L2 transactions, with over 60% of transactions occurring on these two on-chain solutions. Among them, Base now processes over 3 million transactions per day, and Arbitrum’s average daily transaction volume has also 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 volume of transactions has not shown a significant rise. According to OKLink data, L2 volume did have a rising trend for a period of time after the upgrade was completed, but showed signs of weakness after May 9th and has now basically returned to pre-upgrade levels.

Data Source: OKLink

Analyzing the on-chain volume of individual projects will provide a more intuitive sense. It is not difficult to see from the comparison in the figure below: the most obvious rise after the upgrade is Base. Although the average daily volume has dropped significantly from the peak period of March and April, it has still risen more than three times before the upgrade. However, apart from Base, projects such as Arbitrum, Optimism, and Linea did not show a significant pump in volume after the upgrade, and zkSync and MANTA even experienced a shrinkage in volume.

Data Source: OKLink

From the changes in TVB data, we can also see that the upgrade of Cancun has not significantly increased the overall attractiveness of L2: the daily transfer of ETH from the Ethereum network to various L2 networks has actually decreased compared to before the upgrade. Even Base, which has shown relative strength before, has gradually declined recently, with little difference from the level before the upgrade; on the contrary, Polygon has shown outstanding performance recently.

Data Source: OKLink

Based on the changes in the above data, it is not difficult to find:

1）The upgrade in Cancun is remarkable, not only significantly dropping the L2Transaction Cost, but also to a certain extent improving the transaction throughput. However, it has not changed the situation of L2 stock competition at the moment, but has further intensified the competition and accelerated the change in the L2 trading landscape.

2） From the changes in the number of transactions and volume, it can be seen that L2 has indeed attracted more long-term investors after the drop in Transaction Cost, especially smaller investors who can quickly complete transactions through L2, which will help consolidate the role of L2 as industry infrastructure.

Despite the fact that the L2 ecosystem in Cancun has not experienced an explosive rise, the performance of long projects is relatively weak, and the price trend is also difficult to accept. However, I believe that L2 technology still has value in the long run. There are two reasons why L2 narrative power is currently insufficient: first, as L1 ETH has performed poorly in this cycle, on-chain activity and innovation are not optimistic, and it cannot provide more long liquidity for L2; second, the application ecosystem of L2 has not yet exploded, resulting in weak transaction demand. In addition, the increasing number of L2 projects further disperses liquidity in the stock competition, making the narrative of L2 lack the driving force for sustained rise.

Data Source: OKLink

The easiest way to change the unfavorable status quo of L2 is to wait for the recovery of the ETH Fang ecosystem, but the more direct and active option is to accelerate the construction of more long-term L2 applications. But it’s not easy. With the “infrastructure movement” of the past few years, the infrastructure of the encryption industry is not only relatively complete, but also shows signs of surplus. The reason for this infrastructure surplus is partly because of the long investment in the past, and on the other hand, because the application ecosystem has not been able to keep up. For a long time in the future, the key to changing the status quo of not only L2 but the entire encryption market will lie in the exploration and construction of applications.