The Need for Layer 2s
Ethereum transactions fees range from $10 to $400, which price out huge segments of the population. Layer 2 solutions bring these down to earth.
While narratives in crypto are ever-changing, one of mainstays has been the ability to create free and open markets for all participants. Additionally, we want to build a system that avoids the pesky fees that banks charge. $30 to send a wire? Why, with Bitcoin you can move billions of dollars of value for less than a dollar.
Of course, this isn’t always the case on a blockchain. Due to the explosive popularity of DeFi and NFTs on Ethereum, demand for blockspace has outstripped the supply. In the past 5 years, the fees went from something you almost never thought about (i.e. never over a dollar and rarely over 10-20 cents) to an average of $30-$40 per transaction.
And that’s just the average. During peak usage, it’s not atypical to see people posting screenshots of $300-$400 transactions costs, particularly for high intensity operations.
This is where a lot of people throw up their hands and say that all hope is lost. Crypto failed its mission and there is no turning back.
Layer 2’s provide a necessary release valve for this upward price pressure. By moving compute and storage to other layers (while still anchoring the results back into layer 1), we can increase transaction bandwidth by 10-100x or more. This should provide some major relief and bring fees down. Of course, as we add more capacity, many people and bots will find ways to use it. So we will probably never see fees at the penny level ever again.
There are many Layer 2’s that I’ve experimented with to date. In no particular order.
Optimism
Polygon
Arbitrum
zkSync
I’ll go into more detail on these at a later date. However, as someone that is not a power user AND as someone that lost/spent about 2 Eth (currently $6,200) in fees, I am highly motivated to live exlusively in layer 2’s to avoid these fees in the future.