Austin Adams of Uniswap Labs conducted a study which revealed that layer-2 networks have lower transaction costs and more liquidity than Ethereum’s mainnet.
It is important to note that the word “you” means “you”. paper Arbitrum has been able to generate more than three times the amount of liquidity in the last year compared with Ethereum. In particular, for transactions below $125,000, the layer-2 network was more cost-effective compared to Ethereum’s mainnet. This is likely because of lower transaction costs. gas Retail traders benefit from lower costs and greater liquidity concentration.
This research notes also that Ethereum Ethereum accounts for only 25% of transactions but it represents over 60%, showing a preference towards layer-2 networks, despite its higher transaction volume.
Layer-2 networks, such as Arbitrum, offer much shorter block time, which reduces the market’s window of price fluctuation and makes arbitrage less lucrative. The liquidity providers benefit from this, as they receive 20% more returns on arbitrage in layer-2 networks than the mainnet.
This paper also discusses concerns with layer-2 network, such as centralized transaction sequencers, which may be used to manipulate transactions in their favor, or the lack of decentralized proofs against fraud, necessary for optimist rollups.
Over 40 layer-2 The fragmentation of liquidity is also a result of ecosystems, and requires reliance on expensive infrastructure to bridge the gap.
These issues are being actively addressed by developers. Optimism Uncovering an unpermitted faultproof Diversifying the sequencer network is possible with initiatives and systems like Espresso.
“For decentralized markets to fulfill their full potential, aggregate trading costs must continue to decline, and user experience must continue to improve,” Adams said. “We believe that the studied generalized layer-2s still have many benefits that users can utilize today, and any future improvements will only continue to benefit the trading experience.”
“This article is not financial advice.”
“Always do your own research before making any type of investment.”
Source: crypto.news