Ethereum, the future indicated by the number of transactions ─ decrease in mainnet but increase in layer 2 | CoinDesk JAPAN | CoinDesk Japan

There are many metrics that can be used to measure the long-term evolution of the Ethereum blockchain, from the number of developers and Dapps (decentralized applications), to improvements along the roadmap, to mass awareness.

The most common one is the number of transactions. It’s also worth noting that it measures actual usage of the protocol itself, as well as correlations with things like public adoption and transaction fees.

Unfortunately, Ethereum blockchain transactions are currently down about 26% from their May 2021 peak. Some would argue that this represents a temporary setback at best and a long-term decline at worst. But neither is true.

Future plans for Ethereum

To better understand why the Ethereum blockchain is gaining popularity despite the declining number of transactions, we need to understand its future plans.

Ethereum can directly improve all blockchain activity on mainnet (consensus, execution, data availability, settlement), but is pioneering a more modular approach. In other words, certain functions can be outsourced to a separate protocol optimized for it to improve performance.

The most important of the various functions is transaction execution, which will be outsourced to a Layer 2 rollup outside of Ethereum mainnet for efficient execution.

Layer 2-centric roadmap

At Layer 2, multiple transactions are batched together and executed in batches, after which small pieces of data are sent back to the Ethereum mainnet. This greatly improves throughput (processing capability).

It also inherits many of the security properties of the mainnet itself, as the state of the rollup can be reconstructed and verified using data entered into the mainnet.

This strategy, called the rollup-centric roadmap proposed by Ethereum co-founder Vitalik Buterin in 2020, is a shift in Ethereum’s scaling roadmap.

This prioritized outsourcing execution to Rollup and enhancing the data availability layer to reduce the cost of returning data to mainnet. In short, the focus of the Ethereum mainnet has shifted to consensus, payments, and data availability.

With this background, we can look at the decline in transaction numbers on the Ethereum blockchain from a different perspective. Including the number of transactions processed at Layer 2, the total number of transactions across the Ethereum ecosystem has grown significantly by 146% over the past two years.

This not only shows that the use of the Ethereum blockchain continues to grow rapidly, but also that Ethereum continues to progress along its roadmap as intended.

Will be enhanced in next upgrade

Finally, we believe strong growth and the move to Layer 2 execution will continue for several reasons.

Ethereum continues to move in this direction, and the trend will accelerate, especially with the next upgrade, Denkun, which includes proto-danksharding, which expands Ethereum’s data availability.

In addition to improving the base layer itself, Layer 2 is also improving. As decentralization progresses, new initiatives are planned for interconnectivity and shared security.

Together, base layer and layer 2 improvements will enable new use cases and capabilities, creating a virtuous cycle. The growing number of transactions in the ecosystem indicates the potential of Ethereum to become the world’s payment layer.

｜Translation: coindesk JAPAN
｜Editing: Rinan Hayashi
｜Image: GSR
｜Original: Ethereum Ecosystem Is Getting Busier, Not Quieter, Amid Layer 2 Shift