Ethereum Congestion & L2's Needed Jolt

SEP 09, 2021 • 4 Min Read

Disclosure: Delphi Ventures and members of our team have invested in tokens mentioned in this report. This statement is intended to disclose any conflict of interest and should not be misconstrued as a recommendation to purchase any token. This content is for informational purposes only and you should not make decisions based solely on it. This is not investment advice.

Key Takeaways

  • It costs $10 to do a simple ETH transfer again, and median gas is now up to 150 gwei with occasional spikes to 1000-5000 gwei (not a typo). For most users, even transferring ETH across the network is no longer viable. The Ethereum network has been in high demand lately and flipped deflationary in recent days (i.e. more gas was burnt than emitted). This translated to spikes in gas fees. However, nascent L2 scaling solutions are promising to alleviate this congestion.

  • Optimism enjoyed a month-long head start over Arbitrum and has consequently seen more traction, but Arbitrum’s open ecosystem and deployments could be the spark that propels long-term growth. Optimism had a 50K daily transaction limit on launch, but that doubled to 100K in late August.

  • Non-Ethereum L1s have grown significantly this year, as evidenced by Solana and Terra’s large additions to TVL in recent months. Likewise, Avalanche and Fantom appear to be attracting more capital on the back of their incentive programs. The growth curve for Solana, in particular, looks the most exciting with the chart almost vertical at this point.

  • Looking at the price performance since the Jul. 2021 bottom; SOL and FTM lead the market with AVAX, LUNA, and NEAR not too far behind. BNB (Binance Smart Chain) and MATIC (Polygon) were both top performers between Jan. and Apr. but TVL (and token price) have fallen out of favor vs. other networks.

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