Ethereum Layer-2 Platform Earns IDR 574 Trillion, This Is The Motivater Factor

JAKARTA - Ethereum-based decentralized financial platforms (DeFi) are increasingly popular among crypto users. One of the factors that support this popularity is the existence of a layer-2 platform-scale solution, which offers faster, cheaper, and secure transactions. Total Value Locked (TVL), which refers to the amount of assets at stake or paid-up on the layer-2 platform, has exceeded IDR 574 trillion ($36.7 billion).

According to data from L2Beat, the site that tracks the layer-2 platform metric, Arbitrum One, one of Ethereum's earliest layer-2 solutions, has TVL of Rp245 trillion (US$15.7 billion), almost double that of its closest competitor, Optimism, which owns TVL of Rp126 trillion (8.1 billion US dollars). This dominance is most likely due to its first-over and security gains.

Arbitrum One is a platform that uses optimistic rollups, a technique that moves most computations from layer-1 (Ethereum) to layer-2, and only sends evidence to layer-1 for verification. In this way, layer-2 platforms can increase transaction capacity and reduce gas costs, without compromising security.

High Demand For Fast And Cheap Transactions

The spike in TVL on the Ethereum layer-2 platform could show increased demand for faster and cheaper transactions. In particular, the expansion in managed assets comes behind the surge in crypto prices and Ethereum.

Reporting from Crypto News, on March 5, 2024, Ethereum was trading around IDR 57.8 million (USD 3,700). Despite having undergone a correction in the last 24 hours, this coin rose 13% in the previous trading week.

Others, including ARB and OP, native tokens from Arbitrum and Optimism, have recorded gains in recent weeks, respectively. ARB is trading for IDR 31,300 (USD 2), up 6% in the past week. The token now has a market cap of more than IDR 39.1 trillion (USD 2.5 billion), securing a position in the top 50 most valuable coins, according to CoinGecko data. OP is trading for IDR 18,900 (1.21 US dollars), up 12% in the past week. This token now has a market capitalization of more than IDR 23.6 trillion (1.5 billion US dollars), occupying its 64th position among other coins.

Hard Fork Dencun Will Improve Ethereum Scalability

The layer-2 platform-scale solution has gained traction over the past few years, with more platforms rolling out. For example, Blast and Base, two platforms that use optimistic rollups, were recently launched but now have TVLs of more than IDR 42.1 trillion (USD 2.7 billion) and IDR 17.2 trillion (1.1 billion US dollars), respectively.

Crypto users and protocols prefer these platforms because they offer higher scalability and low cost. At the same time, they are safe because they get their security from Ethereum.

The upcoming hard fork Dencun will lower costs and increase efficiency. This update aims to make layer-2 transactions cheaper, forming a basis for even greater scalability progress on Ethereum.

Hard fork Dencun will change the gas cost mechanism in Ethereum, by separating the basic cost from the tip cost. The base cost will be adjusted dynamically based on network demand, and will be burned (defined from circulation). Tip fees will be given to miners or validators as incentives to process transactions.

In this way, the Dencun hard fork will reduce gas cost volatility, eliminate incentives to crowd block, and make transaction costs more transparent and predictable. In addition, the Dencun hard fork will increase network security, reducing the risk of 51% attacks.

Hard fork Dencun is expected to occur in April 2024, after successfully testing on Ropsten, Goerli, and Rinkeby test networks. Hard fork will be an important step towards Ethereum 2.0, which will shift from proof-of-work (PoW) consensus mechanism to proof-of-stake (PoS), which is more energy efficient and environmentally friendly.