According to the Defi report, Ethereum (ETH) needs to address scalability constraints to maintain the growth of the Layer 2 (L2) network and avoid future transaction bottlenecks.
The company said in a recent report that as L2 networks increase user recruitment and transaction throughput, competition for Ethereum’s limited blob space could increase costs and undermine the network’s broader scaling roadmap.
Ethereum supports L2 through “Blobs” introduced in Ethereum Improvement Proposal 4844 (EIP-4844), a low-cost data storage mechanism. However, the current capacity of three target blobs per block is insufficient risk.
Even after a Pectra upgrade, which increases targets to 6 blobs per block, predictions suggest that L2 extensions may exceed the available bandwidth.
Simulations show that a 10x increase in transactions per second on major L2s such as Basic, Arbitrum, Optimism, and more can push transaction fees to an unsustainable level, reaching $0.64 per transaction.
Planned upgrades such as Peerdas and Fusaka are expected to further expand blob capacity, but forecasts show that Ethereum needs to support at least 33 BLOBs per block to keep L2 transaction costs below $0.02.
Without these upgrades, Ethereum risks the crowding that could threaten the viability of an L2-centric scaling strategy.
Base as a case study
Base’s Coinbase’s Layer 2 blockchain provides concrete examples of opportunities and challenges unique to the current model of Ethereum. Since the launch of Base, Base has generated over $106 million user fees, onboarded addresses for over 155 million, and bridged ETH 1.9 million, accounting for 1.6% of Ethereum’s distribution supply.
The application running on the base has won $768 million in cumulative costs, reflecting significant user demand and network activity.
Since its inception, Base has donated 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 based on the expansion of Ethereum reach, it also exemplifies the pressure placed on the L1 infrastructure. Over the past six months, there have been an average of 93 seconds of transactions on the base alone. This number, when increased with some scaling L2, raises concerns about sustainable allocation of blob space.
The base will drive net demand for ethereum and strengthen the broader network through the growth of applications and stubcoin, but currently secure a total value of nearly $10 billion, but its scaling trajectory underscores the urgent need to maintain affordability and speed for all L2 end users.
Ethereum’s L2 strategy outlook
The L2 Roadmap represents Ethereum’s intentional strategic pivot towards a business model focused on external network security delivery, payments and scalability services.
In this model, base and other L2Ss can offload transaction activity from the mainnet, while generating economic value through blob fees.
However, the report argues that the success of this model depends on Ethereum’s ability to scale blob capacity without introducing exorbitant costs.
If the scaling of the upgrade is not able to accommodate L2 adoption, Ethereum could face competitiveness from alternative data availability solutions, or competing L1s that can provide larger, lower transaction costs.
Current forecasts suggest that if transaction volumes between major L2Ss expand dramatically without a proportional upgrade to BLOB throughput, Ethereum will return to the current pricing levels in the base layer, negating the cost benefits intended by the L2 strategy.
Annual revenue under the 10x L2 scaling scenario of Ethereum will reach around $1.4 billion, roughly equivalent to fee generation over the past year.
In summary, Ethereum’s ability to support a thriving L2 ecosystem depends on the ongoing technological advancements and implementation associated with the mainnet.
Failure to scale blobspace effectively can put the role of next-generation blockchain infrastructure as a backbone of distributed applications and payments.
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