Modular Capital partner James Ho said on social media that Layer 2 (L2) will soon overtake Ethereum (ETH). His assertion is based on the fact that Arbitrum has over $100 million in annual revenue and a net profit margin of 30-40%.
He predicts that after eip-4844/proto-danksharding, this margin will expand to 90-95%.
From this perspective, the annualized cost of ETH is between $3 billion and $5 billion. The Layer 2 market is moving rapidly toward unbelievable profitability.
Optimism follows a similar pattern, with annualized costs of about $60 million (roughly half ARB’s run rate).
However, both chains are currently single-serializers with no OP/ARB tokens for gas payments and no defined utility.
Arbitrum has achieved half of the ETH mainnet spot dex transaction volume, or $16 billion per month, compared to $32 billion per month.
Daily txns/active wallets are similar, indicating that in terms of economic activities, L2 will soon surpass ETH. Ho believes that the cost of a single L2 will exceed $1 billion, much sooner than many expected.
Ho’s remarks shed light on a promising future for the Layer 2 market, as the cost advantage of using L2 over ETH becomes increasingly apparent.