Ethereum

Based

Based Rollups could provide a solution to the issue of Ethereum’s layer-2 networks pulling liquidity and revenue from the blockchain’s base layer.
Based Rollups, a layer-2 scaling solution that uses layer-1 validators for processing instead of their <a data-ct-non-breakable="null" href="https://cointelegraph.com/news/layer-2-rollups-must-decentralize-sequencers" rel="null" target="null" text="null" title="null">own sequencers</a>, could “directly impact the monetization of Ethereum by making a pretty fundamental change to incentive structures,” Cinneamhain Ventures partner Adam Cochran said in a Sept. 10 X <a data-ct-non-breakable="null" href="https://x.com/adamscochran/status/1833576432674750752" rel="null" target="null" text="null" title="null">post</a>.
This could easily increase the long-term demand for Ether (<a data-ct-non-breakable="null" href="https://cointelegraph.com/ethereum-price" rel="null" target="null" text="null" title="null">ETH</a>) by a hundred times, he added.&nbsp;
Validators can opt-in to process Based Rollups, earning additional rewards. The economic impact is an increase in the value of <a data-ct-non-breakable="null" href="https://cointelegraph.com/learn/ethereum-2-0-staking-a-beginners-guide-on-how-to-stake-eth" rel="null" target="null" text="null" title="null">staking</a> ETH, potentially leading to higher yields.
<figure>
 <img alt="Based Rollups pitched as fix to Ethereum incentives amid L2 fee debate" name="" src="https://s3.cointelegraph.com/uploads/2024-09/0191dfb5-a124-7ab7-8ba6-c9f567095914">
 <figcaption style="text-align: center;">
 Based Rollup structure. Source: Adam Cochran/X
 </figcaption>
</figure>
Cochran added that Based Rollups can be interoperable across other rollups, which increases liquidity access, cross-chain settlement transactions and overall demand for gas.&nbsp;
Based Rollups align incentives between <a data-ct-non-breakable="null" href="https://cointelegraph.com/magazine/bitcoin-layer2-sidechains-not-really-bitcoin-l2s/" rel="null" target="null" text="null" title="null">layer-2s</a> and layer-1 validators which, in the long term, could allow for zero issuance inflation while maintaining high staking yields, he said.
Cochran concluded that it will be the first time that the incentive to stake Ether (<a data-ct-non-breakable="null" href="https://cointelegraph.com/ethereum-price" rel="" target="_self" text="null" title="https://cointelegraph.com/ethereum-price">ETH</a>) will be driven by overall Ethereum Virtual Machine (EVM) usage and not by the ETH issuance rate.
<blockquote>
 “That fundamental separation is the kind of thing that puts $100k ETH on the table within the next decade.”
</blockquote>
Based rollups are not a new concept and were <a data-ct-non-breakable="null" href="https://ethresear.ch/t/based-rollups-superpowers-from-l1-sequencing/15016" rel="null" target="null" text="null" title="null">mentioned</a> in 2023 by Ethereum developer Justin Drake, who said they were “particularly economically aligned with their base L1.”
Related: <a data-ct-non-breakable="null" href="https://cointelegraph.com/news/ethereum-lsd-solution-puffer-finance-moves-to-base-rollups" rel="null" target="null" text="null" title="null">Ethereum LSD solution Puffer Finance moves to based rollups after raising $18M</a>
Ethereum issuance flipped to inflationary in April following the <a data-ct-non-breakable="null" href="https://cointelegraph.com/learn/ethereum-dencun-upgrade-proto-danksharding-and-layer-2-scalability" rel="null" target="null" text="null" title="null">Dencun</a> upgrade, which drastically <a data-ct-non-breakable="null" href="https://cointelegraph.com/news/ethereum-dencun-transaction-fees-l2" rel="null" target="null" text="null" title="null">reduced layer 2 fees</a> with the impact of dropping overall gas (ETH) usage.
This reduced the amount of ETH fees burned, which in turn resulted in a <a data-ct-non-breakable="null" href="https://cointelegraph.com/news/ethereum-network-revenue-collapses-third-quarter-2024" rel="null" target="null" text="null" title="null">slump in network revenue</a> and inflationary issuance.&nbsp;
Ethereum community member Ryan Berckmans refuted the recent concerns about Ethereum, <a data-ct-non-breakable="null" href="https://x.com/ryanberckmans/status/1833502744876904831" rel="null" target="null" text="null" title="null">stating</a> in a Sept. 10 X post:
<blockquote>
 “If total fees stay low forever, then the whole world can use Ethereum for dirt cheap and this would further turbocharge adoption of ETH as money.”
</blockquote>
He concluded that whether fees are high or low, Ethereum’s continued growth supports a bullish case for ETH. This aligns with the aim of fundamentally changing network economics to benefit ETH holders through Based Rollups.&nbsp;
In a post on X on Sept. 10, Ethereum developer Eric Connor <a data-ct-non-breakable="null" href="https://x.com/econoar/status/1833521965707284516" rel="null" target="null" text="null" title="null">said</a>: “Ethereum is in the best spot it’s ever been, yet sentiment is the worst it’s ever been.”
“The future of crypto will not be won on Crypto Twitter. It will be won by delivering a decentralized, global financial settlement layer for the world, where ETH gains a natural monetary premium,” he added.
Magazine: <a data-ct-non-breakable="null" href="https://cointelegraph.com/magazine/bitcoin-price-all-time-highs-donald-trump-election-sec-gary-gensler-felix-hartmann-hall-of-flame/" rel="null" target="null" text="null" title="null">Bitcoin will ‘start ripping’ as Trump’s polls improve: Felix Hartmann, X Hall of Flame</a>

Based Rollups pitched as fix to Ethereum incentives amid L2 fee debate

Cointelegraph

Other articles published on Sep 11, 2024

Vitalik Buterin Stuns Community With Controversial Bull Posting Amid Ethereum Sales

Gnosis Pay Launches Referral Campaign with NFT Rewards

The Giant Bitcoin Whale Woke Up from a Long Winter’s Sleep: He Paid a Ridiculous Price Years Ago,...

Movement Labs targets 1-second L2 finality by end of 2024: Co-founder

Will Bitcoin Surge to $150K? Peter Brandt Charts Bullish Path for BTC Price

Aptos Welcomes Brevan Howard, BlackRock, and Hamilton Tokenized Funds by Libre

Join our free newsletter for daily crypto updates!