Artemis Data Insights - YTD 2023 Roll-up Review: Launch of Base resulted in ~30% QoQ decline in transactions for Arbitrum, Average Fees / Transaction have compressed by ~17% QoQ in Q3 2023, zkSync boasts highest fees and transactions across layer 2 networks in Q3 2023
This week, Hong Kong crypto investment firm CMCC Global deploys $100mm into blockchain fund, the SEC does not plan to appeal its loss in the Grayscale Bitcoin Trust case, and the SBF / FTX trial is in full swing.
let’s jump right in 👇
🌞 Artemis Data Insights: YTD 2023 Roll-up Review
The entire L1 / L2 ecosystem saw a sell off with average and median WoW declines of 7.2% and 6.9%, respectively. The drawdown was led by non-BTC/ETH tokens including OSMO (down ~15% WoW) and AVAX (down ~14% WoW) while the majors held up slightly better (BTC down ~3.8% WoW, ETH down ~5.6% WoW). Meanwhile, equity markets chopped sideways (S&P 500 and NASDAQ index up ~0.9% and down ~0.1% over past 5 days, respectively).
This week, we took an in-depth look across the roll-up ecosystem to evaluate quantitative trends we’ve seen over 2023. In this analysis, we took a close look at several blockchains that have generated fees and revenues over the past 9 months (and will add coverage to others over time).
*All analysis done on Artemis Sheets and Artemis Terminal, the fundamental analysis tool of choice for top investors in the crypto ecosystem! Check out Artemis Lite, a free version of the Sheets product to get you started on your fundamental analysis journey
Arbitrum saw a steep QoQ decline in transactions, fees and daily active users in Q3 2023 after the launch of the Base network.
Transactions fell ~30% from 85mm in Q2 2023 to 57mm in Q3 2023, while Fees declined ~58% QoQ from ~$23mm to ~$10mm.
Meanwhile, Base saw a whopping ~42mm transactions in its first quarter of operation with average Txn / DAU of ~8.1x (vs. peer group average of ~5.3x). This huge growth in demand for Base blockspace (driven by apps such as friend.tech) delivered ~64% gross profit margins in the quarter, meaningfully outperforming the peer group average of ~34%.
Average Fees / Transaction across the layer 2 landscape declined from ~$0.28 in Q2 2023 to $0.23 in Q3 2023 as usage across blockchains fell across the board. Ethereum layer 1 saw a larger drop in usage and fees, generating only ~$4.75 per transaction in Q3 2023 vs. ~$8.89 in Q2 2023 while transactions remained relatively stable (95.3mm in Q2 2023 vs. 93.9mm in Q3 2023).
Arbitrum, Optimism and zkSYNC all saw QoQ declines in Fees / Txn which coincided with the launches of the Linea and Base blockchains. zkSYNC and OP saw ~50% QoQ declines in Q3 2023 while Arbitrum only saw a ~35% decline. With that said, in Q3 2023 the average Fee / Txn has settled in the ~$0.18-$0.22 range for the four largest layer two networks which could be a sign that an equilibrium price has begun to emerge. Going forward, we will monitor whether these fees / txn continue to converge in the same range or diverge again over time.
zkSync has seen consistent QoQ growth over the course of 2023 and generated the highest number of transactions and fees in Q3 2023 among the peer set we currently cover. YTD, zkSync has generated ~$42mm in fees on 135mm transactions with ~87mm transactions realized in Q3 2023 (QoQ growth of 98%). zkSYNC has also enjoyed a YTD 2023 gross profit margin of ~41%, which outpaced that of both Arbitrum and Optimism (YTD gross profit margin of 26% and 24%, respectively).
With that said, zkSync has also seen its gross profit / txn come down meaningfully from ~$0.23 in Q1 2023 to ~$0.08 in Q3 2023 which puts it closer in line with the peer average of ~$0.06.
Interestingly, zkSync also has the lowest Txn / DAU among its peer group with an average of ~3.5x over the course of 2-23 vs. ~5x amongst its peers (and ~8x for Base). What can partly explain this phenomenon is the widely hyped potential airdrop that could provide early adopters of the zkSync network with a monetary reward, similar to that of Arbitrum that occured earlier this year. This could mean that a portion of the transactions occuring on zkSync are driven by bot activity looking to profit from a future airdrop vs. organic users. If zkSync does eventually conduct an airdrop, comparing transaction activity before and after the airdrop would allow us to determine what proportion of users were utilizing the network for the airdrop vs. actually using the network to transact.
Check out the analysis in Google Sheets here! Powered by Artemis Sheets
Detailed L1 dashboard for people who love more numbers in smaller font:
Note: Revenue represents fees that go to the protocol’s treasury or are returned to tokenholders via a burn mechanism (source: Token Terminal). Weekly commits and weekly dev activity as of 9/29/23.
The content is for informational purposes. None of the content is meant to be investment advice. Use your own discretion and independent decision regarding investments.
Subscribe to our newsletter and understand what’s happening on-chain.