Try Quests to earn cryptoOptimistic Rollups Transaction Fees
Arbitrum's dominance over Optimism may be down to transaction fees.
Introduction
The current solutions to Ethereum’s scaling problem can be grouped into two main sets, namely, Zero Knowledge (ZK) technology and Optimistic Rollups. The latter is more prominent as it is used by the top 2 Ethereum layer 2 scaling solutions Arbitrum and Optimism. While these two layer 2 chains are both classified as Optimistic Rollups, they do have a few fundamental differences in how they process transactions which is clear when you compare transaction fees. We’ll be looking at how the design of transaction validation on l2s has influenced their adoption.
Optimistic Rollups
This novel technology works by rolling up transactions on a layer 2 chain which is then posted by a node, called a sequencer on the layer 1 chain. This way, transactions are compressed while gas fees are significantly reduced in each rollup batch. Arbitrum and Optimism use different processes to rollup transactions into a batch. Optimism uses single-round fraud proofs executed on layer-1, whereas Artibrum uses muli-round fraud proofs executed off-chain. Arbitrum’s multi-round fraud proofing is the more advanced of the two, with it being cheaper and more efficient than single-round proofing.
The bar chart above shows the daily amount of fees in ETH spent on both Optimism and Arbitrum. By observation, one can see that more transaction fees are paid on Optimism than its counterpart Arbitrum. What makes this interesting is the fact that Optimism fees are 2x that of Arbitrum while producing less than half of Arbitrum’s transactions in the past 90 days.
On average, the Optimism user pays more in transaction fees compared to Arbitrum. The difference between the significant difference in transaction fees is the fact that Arbitrum does transaction validation off-chain which does not incur any amount of gas. Whether off-chain verification is secure or not, we leave that to the security experts but economically, Arbitrum is ahead.
One may argue that although similar, Arbitrum and Optimism ecosystems have different composition of applications, and with different application comes different gas fees. This argument holds so we’ll go a step further by analyzing gas usage in token transfers, and gas usage in sushi - an application that is common to both chains.
The normalized area chart above indicates that Optimism users spend over 4x the amount of regular token transfer transaction fees Arbitrum users spend. Economically, Optimism cannot compete because the average user would always choose the chain with the lower transaction fees especially if it is able to perform the same functions as the other.
If you look at the transaction fees paid for Uniswap v3 usage over the last 90 days, Optimism leads in the ratio 3:2. This means Optimism users pay more for transaction fees to use Uniswap v3 than Arbitrum users. The story is also true for Sushiswap, which is available on both Optimism and Arbitrum.