Goodbye Gas Fees: Hello Layer 2 Living

When I started writing DeFriday, you could do most transactions on Ethereum for less than $10-20. 

That’s not cheap, but it was manageable if you were moving around a modest portfolio. 

Then NFT summer happened. Tons of new people started using Ethereum, and given the fixed bandwidth for transactions, the mania around NFTs drove the average gas price to insane levels. Since the start of summer, it hasn’t been unusual to see basic DeFi interactions cost $50 - $200. 

Obviously, that price is completely alienating for anyone moving around less than six figures at a time. Can you imagine if every time you bought a cup of coffee you had to pay $50 for the credit card processing? Insanity. 

The insane gas fees on Etheruem have driven adoption for a number of alternative blockchains: Solana, BSC, Polygon, Avalanche, Fantom, you have tons of options now if you want an Etheruem-like experience without the gas fees. 

You don’t get the low gas for free, though. Most alternatives end up sacrificing decentralization and/or security in order to speed things up. The Solana network completely crashed for 20 hours a couple months ago (neither Bitcoin or Ethereum have ever gone down). BSC copy & pasted Ethereum and just sped things up, but that’s led to numerous security issues and fracturing of the blockchain. Plus the whole thing is basically controlled by Binance. 

What most people don’t know is: Gas fees on Ethereum are supposed to be high. The goal for Etheruem is not to be the chain most consumers transact on. It’s to be the settlement layer for a number of other chains sitting on top of it, which can run much faster and much cheaper, because they’re backed by Ethereum’s security and infrastructure. In other words: the consensus layer for a variety of networks.

The problem though is that these second layer chains, the “L2s,” have been in development for years without users being able to hop on. It’s been a lofty promise that “someday” you’ll be able to ditch the Ethereum mainnet and do everything on the faster, cheaper, L2s without having to give up security or decentralization.