DeFi Layer 2 and multi-chain platforms are seeing deposits after Ethereum fees increased

High transaction fees have been a persistent headache for investors and blockchain projects since at least 2014, when Ethereum network co-creator Vitalik Buterin stated in relation to Bitcoin: “The ‘Internet of Money’ shouldn’t cost $ 0.05 per transaction. That’s absurd.”

Fast forward to November 2021 and the simple approval of a token so that it can be traded on Uniswap can cost up to 50 US dollars in Ether (ETH) depending on the time of day.

Average gas price on the Ethereum network. Source: Etherscan

Layer 2 solutions, which were advertised as protocols to solve the problem of high fees, could not escape the curse of high fees caused by overloaded networks. because new users are added to the cryptocurrency ecosystem every day.

Users migrate to networks with low commissions

DeFi Layer 2 and multi-chain platforms are seeing deposits after Ethereum fees increased
DeFi Layer 2 and multi-chain platforms are seeing deposits after Ethereum fees increased

As a result of the persistent and high fees on Ethereum, more and more users are bridging assets to networks that are compatible with the Ethereum Virtual Machine (EVM). They offer cheaper commissions. Data from Dune Analytics shows that the overall value of the bypass logs has been pointing up since early October.

Total value locked on Ethereum bridges. Source: Dune Analytics

As shown in the graphic above, Ronin Bridge has become one of the most popular protocols over the last month, largely thanks to the migration of their assets to the lower-cost platform from Axie Infinity users.

The popularity of Axie Infinity can be seen in the Token Terminal table below, which shows the revenue from the protocol.

Main projects according to accumulated income in the last 7 days. Source: Token Terminal

The third recording protocol is Pancake exchange (CAKE), a DeFi protocol with a high TVL on the Binance Smart Chain that offers significantly lower transaction fees than Ethereum.

Most of last week’s top winners in terms of TVL are also protocols that can be found on Ethereum’s competitors or that offer multi-chain functionality in sidechain environments.

Main projects according to TVL trend in the last 7 days. Source: Token Terminal

Avalanche, Abracadabra.money, Yield Yak, Benqi, SpookySwap and Loopring are also Ethereum multi-chain or sidechain solutions that have seen a significant TVL rally in the past 7 days.

Unless you do something in the short term to lower the high transaction costs on the Ethereum network, the trend of liquidity migration to other blockchain networks is likely to continue.

The views and opinions expressed are those of the author only and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you will need to do your own research when making a decision.

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