Activity on Ethereum layer-2 networks explodes: this is the result

Ethereum (ETH) scaling networks, where one can perform faster and cheaper ether transactions, are being deployed en masse this month. Since the Dencun upgrade in March – which made transactions on the layer-2 networks even cheaper – the networks have not been as busy as they are now. And that in turn has a positive effect on Ethereum itself.

Ethereum blob activity at peak

At the beginning of the year, there was a lot of talk in Ethereum news about the Dencun update. This was the most anticipated update to the Ethereum network since the September 2022 Merge, which made the transition from Proof-of-Work (PoW) to Proof-of-Stake (PoS).

Dencun took place in March and included many changes. But the biggest was the lower transaction costs on layer-2 networks. This has been made possible by the activation of a new technology called proto-dankhardening that introduces so-called ‘blobs’. This is a way to process large amounts of data from layer-2 networks more efficiently. They are thrown into a pile that is then temporarily stored outside the blockchain.

Immediately after the long-awaited update, a large spike was visible in the number of transactions on Ethereum scaling networks, such as Optimism (OP), Arbitrum (ARB) and Base. The storm subsequently subsided for a long time, but this month a strong increase is visible again. The number of blobs is averaging above 21,000 this month, as seen on data analyst Hildobby’s Dune Analytics dashboard, matching March levels.

185 ETH ‘geburned’

Since the London hard fork in 2021, part of the transaction costs paid on the Ethereum network has ended up on the digital pyre. But some of the fees on the scaling networks are also destroyed. The more transactions are carried out here, the more ether is taken out of circulation.

According to data from Ultrasound.money, a total of 185 ETH has been burned over the past seven days thanks to activity on the scaling networks. At the current Ethereum price, this corresponds to more than $610,000.

After the Merge, ETH has been deflationary for over a year and a half, meaning its circulating supply decreased over time. This was of course good news for the price, because ETH was becoming increasingly scarce.

But since May of this year, more and more ETH has come into circulation again. And that is partly because a lot of activity has moved from the Ethereum mainnet to the cheaper layer-2 networks.

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