ON–183: Layer 2s (again!) 🌔
Coverage on Optimism, Arbitrum, Zora, and PGN.
Meet the editor: Hello! My name is Spencer Noon and I am an independent crypto investor & onchain analyst. If you’d like to discuss angel/advisor/other opps with me, shoot me a DM on Telegram or reply to this email and say hi 👋
Announcing our newest product 🎉
Today I’m super excited to release a brand new product for the OurNetwork community, NFT Open Editions powered by Zora.
Readers can now show their support of OurNetwork every single week by collecting our newsletter issues (for free!) as NFTs.
Each NFT contains a hand-picked insight, allowing readers to also collect the top moments in onchain history as an added bonus. I’d love for you all to collect as many NFTs as you can, it’s a lot of fun and also easy to do.
Let’s see how this goes. I expect we’ll look back in a few years and some of you will have collected hundreds of OurNetwork NFTs, which is really cool to think about and I think you will be happy you did that.
There is a lot of value we can deliver to our community in the future if we develop more of an onchain footprint, potentially things like !OUR points, perks, and other rewards for our most loyal readers.
More to come on that later, stay tuned…
EXCLUSIVE ONCHAIN COVERAGE:
Layer 2s 🪐
① Optimism 🔴
📈 OP Chains generated 4.4k ETH in Monthly Gas Fees, Used ~3.7x as much Gas as L1 Ethereum
In February 2023, Optimism unveiled the vision for the Superchain, which "seeks to integrate otherwise siloed L2s into a single interoperable and composable system." Today, teams are building on the OP Stack to launch Ethereum L2s, including OP Mainnet, Base, Zora Network, and Public Goods Network. In August, these four chains generated 4.4k ETH in total transaction fees, resulting in 2.2k ETH of Net Onchain Revenue (fees minus L1 data costs).
OP Stack Chain's transaction fees are segmented in to:
L1 Fee: Data costs paid to L1 Ethereum. Margin becomes L2 Revenue.
L2 Base Fees: Gas used on L2, priced by an EIP1559 model, L2 Revenue.
L2 Priority Fees: Tip, L2 Revenue
L1 Fees had been the majority of user fees, but L2 fees recently took share.
The Superchain vision includes "mak[ing] it easy to create horizontally scalable ... web applications." Today's chains give us an early view in to horizontal L2 scaling. Over the last 30 days, the four chains processed 4.6M gas per second, 3.7x Ethereum L1, while only being 46% utilized in aggregate.
💦🔬 Tx-Level Alpha: Using a sample transaction from Aerodrome on Base, we can dive in to where transaction fees accrue in the system. The tx used:
3.1k L1 Gas, which paid the 19 Gwei L1 Gas Price
178.8k L2 Gas, which paid the 0.016 Gwei L2 Base Fee
The user paid an additional 0.00000052 Gwei L2 Priority Fee
We can then compute the transaction fee by: (3.1k*19) + (178.8k*0.016) + (178.8k*0.00000052) = 0.00005 ETH ($0.09). This fee was 94.4% from the L1 Fee, 5.6% from the L2 Base Fee, and near 0% from the L2 Priority Fee.
② Arbitrum 🔵
📈 Arbitrum occupies 54% of the roll-up market
Arbitrum is a Ethereum scaling solution with two chains: Arbitrum One, an optimistic roll-up, and Arbitrum Nova, a general purpose AnyTrust solution. Both solutions run on the Nitro tech stack. Currently, Arbitrum One occupies 54.31% of the roll-up market, leading in both DEX trading volume and bridged ETH count. Nova growth has accelerated with 3 new CEXs adding support (Kraken, Bybit, Crypto.com) and transaction count sitting at about 6.6M tx/month (compared to ~800k at the start of the year). Furthermore, Arbitrum released Orbit in March which allows developers to easily and permissionlessly deploy customizable Layer 3 chains that settle to Arbitrum One or Nova. Xai Games recently deployed its Orbit-based testnet.
Since Arbitrum One has launched in August 2021, derivatives trading volume has been healthy, even in a bear market. Arbitrum One had $334M in 24 hour trading volume and 16% growth over the past 30 days.
Proof of Play migrated their fully onchain RPG, Pirate Nation, to Arbitrum Nova and observed a 20x reduction in gas costs. As part of Pirate Nation’s UX, gas fees are covered for the users; Nova’s efficiency helped the team turn a profit on royalties from secondary sales after accounting for gas costs.
③ Zora 🌜🌞🌛
📈 Zora Network exceeds 40k Creators in August, sees 97% MoM creator growth
Zora is a platform for creators and collectors to mint NFTs. Zora has tens of thousands of creators and almost 1M collectors. Zora recently launched a Layer 2 on the OP Stack. More than 40k creators have used Zora’s Network, which experienced 97.51% month-over-month (MoM) growth in creators in August. Since June, Zora has seen transaction growth triple MoM, surpassing 7M total transactions.
To date, Zora had just over 300k unique addresses bridging to Zora Network. Over the last 2 months (July-September), Zora experienced almost 7x growth in bridging wallets.
Lastly, when examining OP market share growth, it is clear that ZORA's share of total fees continues to steadily increase. Even with the introduction of Base and PGN, ZORA's percentage has now reached 10% of the OP stack chains, demonstrating that the move to its own L2 is resonating with NFT collectors and creators.
💦🔬 Tx-Level Alpha: For the Culture 🤌. The transaction is for the deployment of the Opepen Threadition OE, a collaborative piece between Threadguy and Jack Butcher on Zora (July 16th, 2023). Threadguy, a well known NFT influencer, had expressed interest in changing his PFP and updated it to an Opepen version of his mutant ape. Jack Butcher then decided to do an OE of the custom Opepen and give all the proceeds to Threadguy. Over 70k NFTs were minted and generated 128 ETH in sales, while only costing users 3 ETH in total transaction fees. This was the largest L2 OE at the time and paved the way for other creators to start releasing their work beyond L1s.
④ Public Goods Network 🟢
👥 Nicole d'Avis | Website | Dashboard
📈 280+ cumulative ETH bridged to the Public Goods Network, 13.8K+ accounts
Public Goods Network (PGN) is a low-cost Layer 2 OP Chain, a highly composable EVM compatible rollup, nearly identical to OP Mainnet, built on top of the OP Stack. PGN Mainnet launched on July 25. PGN is supported by an alliance of public goods advocates including Public Nouns, Clr.fund, Giveth, Hypercerts, Octant, Endaoment, Eco, Protocol Labs, and Gitcoin, aligning onchain with the vast majority of net sequencer fees going to fund public goods. Since launch, 12,474 unique wallets have been created.
Ethereum Infrastructure, a round run on PGN, was the second biggest round of GG18. The round totaled 11,955 unique donors, $123.9k donated, and 67.7k donations. Gitcoin grants had a strong impact on transaction volume, and demonstrated potential for sustainable future revenue.
Over 281 in total cumulative ETH has been bridged onto PGN with 930+ contracts. Zora, jokerace, Safe, and Gitcoin Grants Stack have been deployed on PGN. Future Gitcoin rounds will also include bridged GTC (Gitcoin’s token), as well as bridged stables.
💦🔬 Tx-Level Alpha: Beyond Grants: This transaction is the first mint of the PGN Mints NFT on Zora, which was one of the first use cases of PGN beyond grants. Ultimately PGN will raise resources for public goods simply by having users transact onchain. This shows the promise of deploying on PGN to deploy “fees for good”, creating durable, consistent public goods funding.
Quick Links: Disclosures
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