1/n Many wonder, how do Layer2 solutions profit?
Gas fees user paid to L2 = Revenue 📈
Gas fees L2 paid to Ethereum = Costs 📉
In essence, L2 operates on a "wholesale-to-retail markup" profit model, capitalizing on transaction fees.
Arb & OP earn roughly $1M monthly from this. Bigger players like Base and ZK generate $2-3M monthly.
2/n Why is Ethereum's Cancun upgrade so pivotal for L2s?
The core of the Cancun upgrade is EIP-4844, allowing L2s to bypass Ethereum execution layer itself direct data to Ethereum's designated Blobs. Imagine it as zoning a new district in a cityscape.
This diminishes L2's costs. As any businessperson knows: reduce costs = higher profit. Post-Cancun, if L2s retain their fee structure, their gross profit could potentially double.
3/n Of course, L2s could also reduce their fees.
Currently, L2 is in a state of homogeneous competition. After OP launched its OP-Stack, Arb & ZK scrambled to follow. After all, if competitors offer it and you don't, you're at a disadvantage.
4/n Back to the main point.
What about during a bull run? A bustling market offers more opportunities to seize the moment and profit.
The unit of transaction is ETH. Counting in USD is just for easier understanding. I firmly believe L2s could pull in $10M monthly during a bull market.
5/n This leads to another question: Why don't L2s use their own tokens as gas?
Most L2s haven't. Here's why: Firstly, ETH is more popular and feels more 'authentic' to users.
Secondly, it's profitable — plain and simple. What projects have in abundance is their own tokens. Earning heaps of their own coin as gas fees just doesn't feel as rewarding as earning ETH. 😂
6/6 So, the L2 trend becomes clear:
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Boost Revenue (Engagement): Lure with airdrops or subtly push meme coins, free mint NFTs, etc.
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Boost Revenue (Order Value): Innovate with MEV.
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Cut Costs (Internal): Embrace the Cancun upgrade; Use cheaper DA layers.
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Cut Costs (Partnerships): Collaborate with other L2s. Share gateways, orderers, etc., to save on gas.
Author:
@0xTodd | Nothing Research Partner
@0xNalinz | Nothing Research Analyst
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