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A study by Austin Adams of Uniswap Labs revealed that transactions and liquidity provisions on Layer 2 networks offer lower cost advantages over the ethereum mainnet.
He paper highlights Arbitrum's success in generating more than three times as many liquidity positions compared to ethereum over the past year. Especially for trades below $125,000, 97.5% of transactions made on layer 2 networks were more profitable than those on the ethereum mainnet, likely due to lower gas costs and a higher concentration of liquidity beneficial to traders. retail merchants.
The research also notes that while ethereum accounts for 25% of total transactions, it accounts for more than 60% of the volume, indicating a preference for Layer 2 networks despite ethereum's higher transaction volume.
Additionally, Layer 2 networks like Arbitrum offer significantly shorter blocking times, reducing the window for market price fluctuations and making arbitrage less profitable. This ultimately benefits liquidity providers, who receive 20% more returns from arbitrage on Layer 2 networks compared to the mainnet.
However, the document also addresses concerns regarding Layer 2 networks, including centralized sequencers that can manipulate transactions for their benefit and the absence of decentralized fraud proofs in optimistic rollups necessary to correct errors.
The proliferation of 40+ Layer 2 ecosystems also leads to liquidity fragmentation, requiring reliance on bridging infrastructure, which is costly and time-consuming.
Developers are actively working to mitigate these issues, with Optimism introducing a fail-safe permissionless system and initiatives like Espresso to diversify sequencer networks.
“For decentralized marketplaces to reach their full potential, aggregate trading costs must continue to decline and the user experience must continue to improve,” Adams said. “We believe that the generalized Layer 2 studies studied still have many benefits that users can use today, and any future improvements will only continue to benefit the trading experience.”