Ethereum (ETH) must address its scalability constraints to sustain the growth of layer-2 (L2) networks and avoid future transaction bottlenecks, according to The DeFi Report. 

The firm said in a recent report that as L2 networks scale user adoption and transaction throughput, competition for Ethereum’s limited blob space could increase costs and undermine the network’s broader scaling roadmap.

Ethereum supports L2s through “blobs,” low-cost data storage mechanisms introduced with Ethereum Improvement Proposal 4844 (EIP-4844). However, the current capacity of three target blobs per block risks becoming inadequate. 

Even after the upcoming Pectra upgrade, which will raise the target to six blobs per block, forecasts suggest that rapid L2 expansion could outpace available bandwidth. 

Simulations show that a 10x increase in transactions per second across major L2s, such as Base, Arbitrum, and Optimism, could push transaction fees to unsustainable levels, potentially reaching $0.64 per transaction.

Although planned upgrades, such as PeerDAS and Fusaka, are expected to expand blob capacity further, projections indicate that Ethereum will need to support at least 33 blobs per block to keep L2 transaction costs below $0.02. 

Without these upgrades, Ethereum risks congestion that could threaten the viability of the L2-centric scaling strategy.

Base as a case study

Base, Coinbase’s layer-2 blockchain, provides a tangible example of the opportunities and challenges inherent in Ethereum’s current model. Since its launch, Base has generated over $106 million in user fees, onboarded more than 155 million addresses, and bridged 1.9 million ETH, representing 1.6% of Ethereum’s circulating supply. 

Applications operating on Base have accrued $768 million in cumulative fees, reflecting substantial user demand and network activity.

Since its inception, Base has also contributed approximately $4.5 million in blob and settlement fees to Ethereum’s layer-1 validators, highlighting the intended economic synergy between L2 growth and Ethereum’s revenue model. 

However, despite Base’s success in expanding Ethereum’s reach, it also exemplifies the pressure placed on L1 infrastructure. Over the past six months, Base alone has averaged 93 transactions per second, a figure that, when multiplied across several scaling L2s, raises concerns about the sustainable allocation of blob space.

Although Base drives net-new demand for Etehreum and strengthens the broader network through applications and stablecoin growth, currently securing nearly $10 billion in total value, its scaling trajectory highlights the urgent need for Ethereum to maintain affordability and speed for end users across all L2s.

Outlook for Ethereum’s L2 strategy

The L2 roadmap represents a deliberate strategic pivot for Ethereum, moving toward a business model focused on security provision, settlement, and scalability services for external networks. 

In this model, L2s such as Base could offload transaction activity from the mainnet while generating economic value through blob fees.

However, the report argues that this model’s success hinges on Ethereum’s ability to scale blob capacity without introducing prohibitive costs. 

If scaling upgrades fail to keep pace with L2 adoption, Ethereum could face competitive pressure from alternative data availability solutions or even from competing L1s that can offer lower transaction costs at scale.

Current projections suggest that if transaction volume across major L2s expands dramatically without proportional upgrades to blob throughput, Ethereum will return to current fee levels on its base layer, negating the cost benefits intended by the L2 strategy. 

Ethereum’s annualized revenue under a tenfold L2 scaling scenario would approximate $1.4 billion, roughly equivalent to its fee generation over the past year.

In summary, Ethereum’s capacity to support a flourishing L2 ecosystem depends on continuous technical progress and execution related to the mainnet.

Failing to expand blob space effectively could jeopardize its role as the backbone of decentralized applications and settlement for the next generation of blockchain infrastructure.

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