Original | Odaily Planet Daily ( @OdailyChina )
Author: Azuma ( @azuma_eth )
During this cycle, ETH’s performance lagged far behind the overall market. Some attributed it to the fact that it was too heavy to pull, while others accused the Ethereum Foundation (EF) of being “unworthy of its position.” This past weekend, Layer 2 became the target of criticism from the community again.
On February 9, Andre Cronje (AC), the DeFi god of the previous cycle and current co-founder of Sonic, posted a post on X, angrily criticizing Layer 2 for making huge profits by continuously selling off the proceeds of the sorter and becoming a parasite of Ethereum.
Become Layer 2 ➡️ Run a centralized sorter ➡️ Collect $120 million in fees ➡️ Pay Ethereum another $10 million for DA and security ➡️ Then sell $110 million for profit ➡️ Then call yourself the Ethereum Alliance... I dont understand how the Ethereum community convinced themselves to accept this logic. Layer 2 has become the main reason for Ethereums inflation again.
Layer 2 sorter revenue
The controversy over Layer 2 sorter revenue is a well-known topic.
The sorter is an indispensable role in Layer 2. Its main functions are: 1) Collect user transactions and package them into batches in a specific order; 2) Provide users with instant transaction confirmation before the transaction is finally uploaded to the chain; 3) Compress the transaction data and submit it to Layer 1 to reduce gas costs.
In the decentralized vision of Layer 2, the decentralization of sorter operation is an essential step, but the reality is that almost all Layer 2 sorters are run by the development team, which has long been one of the biggest criticisms surrounding Layer 2.
Why has Layer 2 been unable to decentralize the sorter? There are certainly certain technical and operational reasons, but another major reason that cannot be ignored is that in the real environment, the operation of the sorter is a very profitable business.
The direct revenue sources of the sorter operation mainly include: 1) transaction fee difference; 2) MEV capture; 3) interest on capital deposits.
Odaily Note: The picture shows a further explanation by teacher DeepSeek.
How profitable is this business? We can get a rough idea from the data of February 4th.
On February 4, affected by the collective market fluctuations, Arbitrum collected $1.04 million in fees at the Layer 2 level in a single day, while the final settlement cost paid to Layer 1 was less than $20,000 - this means that in just one day, the chain earned millions of dollars in profits through transaction fee spreads.
Targeting Base
As the most active Layer 2 network in the Ethereum ecosystem, Base has long been at the center of relevant public opinion. As the debate over the benefits of Layer 2 sorters intensifies, the community has also begun to target Base.
Lucidity CIO Santisa Yu X was the first to fire, accusing Base of transferring all the sorter revenue to Coinbase since the launch of the main network. There is reason to suspect that these ETH have been sold.
BASE has been transferring sorter fees to Coinbase since launch. We don’t know if they have sold, but we know they have not deployed those funds on Base or kept them on-chain. In the absence of further transparency, it is reasonable to assume that they have sold. Their position is not aligned with Ethereum.
Odaily Note: The picture shows the Base sorter income address (0xEc8103eb573150cB92f8AF612e0072843db2295F).
Subsequently, Sonic team member The Assistant took the lead and analyzed whether Base had sold these ETH based on Coinbases financial report data.
The Assistant pointed out that the on-chain data is available (refer to the address posted by Santisa in the previous article). Base has earned more than 100 million US dollars through the sorter in the past 12 months, with a profit margin of more than 90%. All of these fees have been transferred to the exchange through the path of Base ➡️ Ethereum ➡️ Coinbase.
According to Coinbases public financial report data, as of June 30, 2023 ( see page 66 of the Q2 2023 financial report ), Coinbase held approximately US$230 million in ETH on its balance sheet. At the time, the price of ETH was US$1,934, which means that Coinbase held 118,924 ETH; as of September 30, 2024 ( see page 22 of the Q3 2024 financial report ), Coinbase held 119,696 ETH on its balance sheet.
The Assistant finally asked, since Base went online, Coinbase has only added 772 ETH to its balance sheet, so where did the Base sorter revenue worth hundreds of millions of dollars go? There seems to be only one answer...
Some people may question that as a (nominally) independent network, Bases revenue should not be included in Coinbases balance sheet. This question is also unreasonable because Coinbase has highlighted the increase in Bases revenue in many of its past financial reports.
AC reposted The Assistants investigation and fired back:
The Ethereum community is proud of their Layer 2, but what Layer 2 does every day is to transfer fee income from Layer 2 to Layer 1, and then transfer it to Coinbase for sale. This is the leader of the Ethereum ecosystem. The Ethereum community should wake up.
What is Vitaliks underlying attitude?
As of the time of writing, Vitalik has not responded to the accusations from AC and other community members, but in his handwritten article on January 24 ( Under the pressure of public opinion, Vitalik wrote a message to L2: Come back to support ETH ), we can roughly see that Vitalik is dissatisfied with the current operating status of Layer 2.
In the article, Vitalik mentioned that it is necessary to clarify the economic model of ETH and ensure that ETH can continue to accumulate value in the Layer 2-intensive world. At the execution level, Vitalik encourages Layer 2 to support ETH by contributing a certain percentage of fees, which can be achieved by destroying part of the fees, permanently staking and donating the proceeds to public products in the Ethereum ecosystem or some other solutions.
Simple translation of this sentence: Layer 2 Don’t be too greedy, it’s time to give up some cake.
