Ethereum Layer 2 scaling solutions could soon reach their limits in efficient mainnet scaling, warns Gautham Santhosh, co-founder of Polynomial.fi.
Layer 2 solutions are protocols or networks built on top of Layer 1 networks to improve their scalability and reduce transaction costs by processing transactions off-chain and then periodically establishing the results on the main chain. More and more users have adopted these protocols to make transactions faster and more affordable late last year.
This is evident by the increase in the number of blobs or large binary objects published per hundreds of L2s on Ethereum. Since November, the daily count 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 (Coinbase BASE and world chain) account for 55% of daily blogging activity. Therefore, sustained demand for Layer 2 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 just a few months away from everything breaking” , said Santhosh in X.
Blobs are like normal transactions with additional transaction data attached. However, unlike traditional transactions, bearer blob transactions do not permanently occupy mainnet space and are only available for 18 days. Layer 2 protocols use blobs to group transactions, process them off-chain, and publish them to the main chain for verification.
The limit of blobs per block is six, with a goal of three. When the target is reached, a base rate is charged to regulate L2 demand.
Since November, demand for blobs has been so high that the target of three has been consistently met. In other words, dozens of L2s are competing for the target per block, driving up base rates.
“It’s like having a highway with only three lanes for 50 growing cities,” Santhosh said.
The chart shows that the base shipping rate has been noticeably higher since November compared to previous months, occasionally surpassing the $50 mark.
These typically increase during market hours, airdrops, and when a new Layer 2 solution is activated, resulting in higher costs for the user. “This is affecting everyone. DEXs see higher trading costs, rogue protocols face base fee spikes, users pay more for basic transactions,” Santosh explained. “At @polynomialFi, our base rates have increased 300% in the last few months.”
According to pseudonymous base builder Jesse.base.eth, the increase in the blob base rate is hindering L2 growth.
“You can see this in cyclical price spikes driven by daily demand cycles. We need more blobs as soon as possible to help all L2s continue to scale and ensure @ethereum is the center of the chain,” he said Jesse in X.
Ethereum’s Pectra upgrade, scheduled for March 2025, is expected to increase the blob limit per block to nine, with a target of 6. But, according to Santhosh, doubling capacity “only buys us months, not years.”
