This year, Ethereum Layer 2 has experienced explosive growth. Just like the previous public chain explosion, a large number of project parties have begun to lay out the Layer 2 track. Recently, some people believe that due to the expected token distribution of Layer 2, many studios have become targets of anti-money laundering. Token distribution plus handling fees have made the Layer 2 project party the biggest winner in this hair-baby game.
According to analysis by The Block, based on the current daily profit calculation, Coinbase can obtain an annual profit of US$61 million from the Base network, killing all public chain platforms or DAPP applications in the industry. Today, let’s take a brief look at how Layer 2 projects make money (referring to Rollup solutions).
How Layer 2 makes money
Layer 2 refers to the extended technologies and protocols built on the bottom layer of the blockchain, aiming to improve the scalability, performance and transaction throughput of the blockchain. Traditional blockchains such as Ethereum have limitations such as high transaction fees, low throughput, and long confirmation times. Layer 2 typically introduces new protocols and mechanisms at the upper levels of the blockchain so that large volumes of transactions can be processed in a secondary network before leaving the main blockchain. The results of these transactions are aggregated and submitted to the main blockchain, thereby reducing the burden on the main blockchain, enabling higher throughput, lower costs, and faster confirmation speeds while maintaining consistency with the main blockchain. security and interoperability.
As a popular track at the moment, Layer 2 has high hopes from many people. In the current bear market environment, can you still make money by doing Layer 2? How exactly is it done?
(1) Transaction fees
Layer 2 platforms can make money by charging users transaction fees. When users conduct transactions on Layer 2, they need to pay certain handling fees, which can flow directly or indirectly to the maintainers or node operators of the Layer 2 platform. Platforms can set different rate structures, such as rate models based on transaction volume or value, to generate revenue.
Let’s first take a look at the composition of Layer 2 handling fees:
Computational fees: The fees required to execute smart contracts or computational operations on the Layer 2 chain. This includes operations such as executing contract code, computing state transitions, and more.
Storage charges: Layer 2 involves storing user data, in which case users need to pay storage charges to cover the cost of data storage and management. Storage charges can vary based on the amount of data stored, how long it is stored, and the complexity of the data.
Main chain transaction fee: the fee for submitting the transaction results on the Rollup chain to the main chain. This includes fees for submitting information such as hashes of aggregated transactions or state updates to the main chain for verification and storage. A small amount of transactions are also required on the main chain to support the operation and security of the Rollup chain. These transactions may involve the opening, closing, status updating and other operations of the Rollup chain, so you need to pay the handling fees related to the main chain transactions.
The profit gained by the project party = Layer 2 gas ➖ Data calculation storage fee ➖ Layer 1 verification fee.
This is just a rough calculation, some transaction hardware facilities, node operation and maintenance, labor costs, etc. are not included.
（2）MEV
Layer 2 executes transaction verification and Sequencer (submit transaction sorting) separately. Currently, most Layer 2 Sequencers are centralized and mostly in the hands of project parties. For example, Base and Coinbase are their only Sequencers. In this way, Coinbase can eat all the gas profits from Base. Due to the centralization of Sequencer, part of MEV (maximum extractable value) is also earned by Layer 2 project parties.
(3) Developer tools and services
The Layer 2 platform provides a variety of developer tools and services to provide developers with convenience and support. These tools and services may include software development kits (SDKs), smart contract templates, cross-chain bridges, and more. Platforms can generate revenue by charging developers licensing fees, usage fees, or subscription fees for providing premium features.
For example, OP Stack, Twitter KOL w 3 tester revealed that the fee for each project party to enter OP Stack is 30% of the revenue, and it will be more expensive if one-click chaining is used. This also means that if the operation is not done properly and a sufficient number of transactions cannot be guaranteed, the one-click release of Layer 2 may also lose money.
(4) Ecosystem benefits
The success of a Layer 2 platform is closely tied to the prosperity of its ecosystem. If the platform can attract more users and projects to join and provide it with better scalability and user experience, this will help increase the value of the entire ecosystem. Platforms can benefit from the added value of the ecosystem through token holdings, equity or other means. In addition, the prosperity of the ecosystem will also bring a lot of popularity and activity to Layer 2, and Layer 2 can also earn revenue from gas fees.
(5) Token economic model
The Layer 2 platform issues its own Token, and Token holders can earn benefits by participating in platform governance, staking Token or enjoying other rights and interests. Layer 2 platforms can raise funds through equity or token sales. If the big market rises and related tracks explode, the appreciation of Token will also bring considerable benefits to Layer 2 project parties.
The above are the main profit models of Layer 2 project parties.
Profit Status on the Top Layer 2 Chain
The on-chain profit statement of the head Layer 2
Let’s take a brief look at the profits of each Layer 2 on the chain in August. The profits here mainly refer to the fees extracted. L2 income = L2 fees – L1 data storage fees – L1 verification costs. This can only be approximated. Because Layer 2 off-chain resource consumption and operation and maintenance costs are not calculated:
zkSync
It is around US$3.4 million. It can be seen that since zkSync was launched, profitability has been at the leading address. If other project parties conduct short distribution, zkSync revenue will also increase. As of the launch of the mainnet, in half a year, the total profit has been about 23.5 million US dollars. It is certain that most of the income of zkSync is contributed by the Lumao Party. When I calculated this number, I was really shocked. The market has been so bad this year. It’s still possible to make so much money silently. With the support of top institutions and the leadership of the track, making money shouldn’t be too easy.
BASE
About 2.1 million U.S. dollars, BASE just launched at the end of last month. The huge traffic of the Coinbase platform itself and the short-term explosion of the local dog project BALD brought a lot of traffic to BASE. Although the BALD project was finally RUG, it still left a lot of money for BASE. Users, coupled with the recent strong rise of the social application Friend, and the entry of Twitter KOLs continue to bring popularity to BASE. In less than two weeks, Friend has obtained a total lock-up value (TVL) of US$6 million, achieving It generated revenue of US$3 million and attracted over 100,000 users.
Arbitrum
Around US$930,000, Arbitrum’s popularity has declined recently. In March and April, when Arbitrum Token was first launched, the on-chain ecology was stimulated. The outstanding performance of GMX, RDNT, GNS and other projects led to an increase in popularity at that time, and the chain was active. degree increases.
Optimism
At about 800,000 US dollars, the Optimism ecosystem has been in a state of sluggishness. The rise of the Arbitrum ecosystem in March and April has made Optimism, which is also an OP track, also attracted the attention of some players on the chain. Recently, due to Coinbase, BNB Chain, Worldcoin Other projects have chosen to launch chains based on the OP stack, which has also benefited the Optimism ecosystem, and the activity on the chain has increased slightly.
As mentioned above, the income of Layer 2 mainly comes from gas fees. The more people use it, the more income will be earned. When ecological projects become popular or have potential benefits, the more the project will earn.
summary
No matter what, every track has profits and losses. It is relatively easy to be in the spotlight, but if you want to make more, you can only have a chance by becoming the leader. The vast majority of projects are for accompanying runners, and those who make a profit are always in the minority.
Overall, if Layer 2 wants to develop better, it needs to occupy a larger market share. At the same time, the emergence of popular projects in the ecosystem can bring activity to it.
What do you think about the current profitability of leading Layer 2 projects in the bear market? Welcome to chat in the comment area.
