Ethereum Layer 2 scaling solutions could soon reach their limits in efficiently scaling the mainnet, 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 off-chain transactions and then periodically billing the results back to the main chain. Late last year, more and more users embraced these protocols for faster and cheaper transactions.
This is evident from the spike in the number of blobs, or binary large objects, posted by 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 relevant part. Just two Layer 2s – Coinbase’s BASE and World Chain – are responsible for 55% of daily blogging activity. Sustained demand for Layer 2 systems could therefore quickly exhaust available capacity.
“Ethereum L2s are about to hit a wall. 55% of all blob space is already taken up by just two chains. And at current growth rates, we are just months away from everything breaking,” Santhosh said on X.
Ethereum L2s: Blobs posted since last year’s Dencun upgrade. (Hildobby’s Dune Analytics dashboard)
Blobs are like regular transactions with an extra piece of transaction data added. However, unlike traditional transactions, blob transactions do not permanently take up space on the mainnet and are only available for 18 days. Layer 2 protocols use blobs to aggregate transactions, process them off-chain, and post them to the main chain for verification.
The blob limit per block is six, with a goal of three. When the goal is reached, a base fee is charged to regulate demand from L2s.
Since November, demand for blobs has been so high that the target of three has been consistently met. In other words, scores of L2s compete for the target per block, thus increasing the base fees.
“It’s like having a highway with just three lanes for 50 growing cities,” Santhosh said.
Blob Basic Submission Fees (Hildobby’s Dune Analytics Dashboard)
The chart shows that base submission fees have been significantly higher since November compared to previous months, sometimes exceeding $50.
These typically peak during market hours, airdrops and when a new Layer 2 solution goes live, leading to higher user costs. “This affects everyone. DEXs are seeing higher trading fees, offender protocols are facing spikes in base fees, users are paying more for basic trades,” Santosh explains. “At @polynomialFi, our base rates have increased 300% in the last few months.”
According to pseudonymous Base builder Jesse.base.eth, the blob base fee spike is hindering L2 growth.
“You can see this in the cyclical price spikes caused by daily demand cycles. We need more blobs ASAP to help all L2s continue to scale and ensure @ethereum is the center of the onchain,” Jesse said on X .
Ethereum’s Pectra upgrade, scheduled for March 2025, is expected to increase the blob limit per block to nine, up from a target of six. But according to Santhosh, doubling capacity “will only take months, not years.”