Ethereum Layer-2 Volumes See 70 Percent Surge - Can They Overtake Solana?

Table of Contents

Introduction

The Ethereum network has long been criticized for its high transaction fees, which can exceed $4. However, the exponential growth of layer-2 blockchains has created a sustainable solution for decentralized applications (DApps) that require higher scalability.

Decentralized Exchanges: A Growing Market

Decentralized exchanges have seen significant growth in recent months, with volumes increasing by 70% over the past 30 days. This growth is primarily driven by layer-2 blockchains such as Base and Arbitrum, which offer faster and cheaper transactions compared to the base layer.

Decentralized Exchanges 30-Day Volumes, Market Share

| Blockchain | Volume (USD) | Market Share |
| — | — | — |
| Solana | $24.6 billion | 35.4% |
| Ethereum | $31.2 billion | 45.2% |

Source: DefiLlama

The Advantage of Ethereum’s Layer-2 Solutions

Ethereum’s layer-2 solutions, such as Base and Arbitrum, have already reached a total value locked (TVL) of over $3 billion each. In contrast, Solana’s TVL stands at $9.2 billion.

Blockchains Ranked by Total Value Locked, USD

Source: TradingView

Memecoins and the Rise of Solana

The growth of memecoins has been a significant catalyst for Solana’s adoption and growth. With several tokens surpassing $1 billion in market capitalization, the demand for faster and cheaper transactions on Solana has increased.

Pump.Fun: A Key Driver for Memecoin Adoption

Pump.fun has significantly altered the creation of liquidity pools for new token launches, leading to a substantial increase in trading activity on platforms like Raydium and Orca. This growth is expected to continue, with volumes on these platforms reaching $24.6 billion over the past seven days.

Fees: A Key Driver for Blockchain Growth

Analysts argue that capturing fees is crucial for a network’s survival. The primary value driver for cryptocurrencies on smart contract blockchains is the payment for processing services, which supports their decentralization.

Blockchains and DApps 30-Day Fee, USD

Source: DefiLlama

Solana Surpasses Ethereum in Fees

Solana recently surpassed Ethereum to become the highest-grossing blockchain in terms of fees, prompting investors to question whether (ETH) is overvalued at a $436 billion market capitalization, while (SOL) stands at $116 billion—a 73% discount.

However, this simplistic analysis overlooks Solana’s higher inflation rate, currently at 5.3%.

Looking Ahead: Ethereum’s Fee Structure Adjustments

Ethereum is considering further fee structure adjustments, including dynamic fee changes based on network usage and potential optimizations in how layer-2 solutions like rollups interact with the base layer.

These measures aim to improve the efficiency of decentralized applications (DApps), reduce transaction costs, and ultimately drive higher network fees.

Conclusion

While Solana has emerged as a major player in the blockchain space, Ethereum’s dominance remains unchallenged. The growth of Base and Arbitrum, both Ethereum layer-2 solutions, offers promising prospects for the future. However, it appears that Solana’s growth will not be hindered, paving the way for higher total value locked (TVL) and volumes.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.