ETH [Ethereum] declines on this front, and you don’t need to wonder why
Ethereum’s [ETH] decentralized exchange (DEX) had a decline in volume dominance in April for the first time since the end of 2021, according to a tweet from blockchain analytics company Messari. A considerable movement has occurred toward layer-2 solutions (L2) and other layer-1 chains.
USD Coin’s [USDC] depegging caused the broader DeFi market to shake up, resulting in a dip in DEX volume on Ethereum below 70% in April.
The importance of L2s increases
According to DeFiLlama data, Ethereum is still the most popular chain for DEXs, with a total trading volume of more than $1 trillion as of this writing. However, scaling solutions like as Arbitrum [ARB] experienced increased popularity in the first quarter of 2023.
Arbitrum’s weekly volume has been steadily increasing since the beginning of 2023, peaking at $5.33 billion in March, immediately before the AirDrop of ARB tokens. Last week, $4.23 billion in deals were finalized on Arbitrum, compared to $8.4 billion on Ethereum, demonstrating the enormous progress the L2 solution was making.
Some of the other L2s, such as Optimism [OP], also experienced significant development. It was the sixth-largest chain in terms of DEX volume during the previous 24 hours as of this writing. In keeping with previous findings, the volume reached an all-time high of $245.77 million during the USDC depegging.
Will Ethereum’s dominance continue to decline?
With the release of new rollups such as zkSync Era and Polygon [MATIC] zkEVM, there has never been a greater interest in scaling solutions. Messari research researcher Chase Devens believes that the shift of DeFi operations to L2s may herald the beginning of a long-term trend in which clients benefit from lower costs and speedier transactions without sacrificing security.
The theory was supported by data from L2Beat, which revealed that after being neck-and-neck for the majority of 2023, the average amount of transactions on all L2s has surpassed Ethereum mainnet transactions. At the time of publication, L2s were processing 31 transactions per second on average, compared to Ethereum’s 10 per second.
There was also some relief in terms of transaction fees. According to L2 Fees, investors only needed $0.10 to send ETH to Arbitrum One, $0.27 to Optimism, and $0.21 to Polygon zkEVM.
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