Simple transactions on Ethereum now cost less than a dollar, and sophisticated transactions involving many token exchanges cost less than a tenner.
For the first time in over six months, transaction costs have dropped from an average of $70 in May to only $4 presently. Polygon (Matic), which was just released and has received a strong uptake, appears to be a part of the explanation for this reduction in network congestion.
According to Nansen statistics, Aave has over 10,000 daily active ethereum users on Polygon, while Sushiswap has over 16,000 users.
Other well-known dapps, such as Curve and 1inch, as well as the 0x exchange, have embraced this as well.
Onchain ethereum has achieved approximately 1.7 million daily transactions, with Polygon already handling many more, as you'd anticipate because second layer tradeoffs are much more flexible (L2).
When it comes to end users of the network, the underlying principle here is identical to that of all second layers in general.
You must first deposit your eth, with contradicting reports stating that $9 billion has been locked, but we were only able to discover roughly one million eth, or $2 billion, on etherscan.
There may be other addresses, and we attempted to obtain clarification but were unable to do so in time for publication. Even at $2 billion, this is a tremendous leap for a new network, especially when compared to bitcoin's Lightning Network (LN), which has just roughly $45 million bitcoin locked up.
This is most likely due to defi pressures driving second layer adoption in eth owing to the fact that it is a more recurring usage of the network than one-off transactions, as is the case with bitcoin. After the money are deposited, the eth becomes a token on the Polygon chain, and the accounts are no longer held on the Ethereum blockchain.
The token is burnt to recover the eth, the burn is validated by the PoS validators, and you receive the eth. As a result, it doesn't matter which eth you deposited, and the token, which is basically always one eth, because they're all fungible.
That means a code-based fractional reserve layer may be created, maybe based on hot wallet and cold wallet cex divisions, to put the ‘cold wallet' eth to use by lending them or using them as a flashloans pool. Users of this system can then get dividends in exchange for their risk, and they are, of course, free to risk fractional or go full collateral.
Sushi has already paid $1.4 million eth in dividends to sushi token holders based on Polygon activity, making this if not the first, then one of the first such synergic uses. Polygon, on the other hand, is embroiled in a language controversy about its classification, with some referring to it as a sidechain rather than a second layer.
This distinction is dependent on how much of ethereum's on-chain security is used, with zk-rollups being a code-based condensing of ethereum's on-chain transactions, for example. In other words, you receive complete ethereum security.
There is, of course, another PoS network that contributes to security, as well as a Plasma version, with its key benefit currently being that it is operational. Others are on the way, and we should receive more nuanced criticisms on benefits and downsides, but probably more of the former during the bull honeymoon and then a harsh annihilation of any vulnerabilities over the lengthy bear. By the end of the next cycle, we should have bridges for bridges, connectors for all of these second layers, to the point where we can pronounce the dial-up period to be ended.
Until then, things are unsafe since they haven't been combat tested in the wild, and since we don't know what we don't know until we know it in the crypto world. However, defi dapps currently hold around $57 billion in crypto, or around nine million eth. So there's a lot of pressure to get scaling up and running, with or without compromises, and that experiment is already underway.
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