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Since pivoting to a Layer 2-centric approach, the Ethereum (ETH) ecosystem has relied heavily on L2 solutions for expansion. However, these solutions have struggled to compete effectively, especially under pressure from alternatives like Solana (SOL). During the recent meme coin craze, Solana attracted a lot of activity due to its advantages: low fees, high transaction speeds, and user friendliness.
To understand the challenges, it is essential to consider why L2 solutions have not demonstrated the widely expected scalability and cost benefits.
Why meme projects prefer Solana over Ethereum L2
Meme projects have contributed significantly to the recent surge in market activity. These projects favor Solana for several reasons other than ease of use.
Low fees: Solana has low transaction costs, making it ideal for fee-sensitive applications like meme coins. Fast: Solana’s multi-threaded architecture enables high throughput and ensures a seamless user experience. Improved developer experience: Solana’s tools and ecosystem are optimized for ease of use to attract developers and projects.
Why is scalability important?
Scalability is fundamentally measured by the number of transactions a blockchain can process. A highly scalable blockchain can handle more TX while offering lower fees, which is critical for widespread adoption and maintaining a seamless user experience.
This is especially important for grassroots projects like meme coins, many of which are short-lived and highly sensitive to fees. Without scalability, these projects cannot succeed and users will migrate to platforms that offer greater efficiency and cost-effectiveness.
Why Ethereum L2 cannot meet this challenge
Ethereum architectural limitations. Ethereum has long faced scalability issues, and L2 rollups are a major solution to these issues. L2 operates as an independent blockchain that posts transaction results and proofs to the Ethereum mainnet while processing transactions off-chain. They inherit the security of Ethereum, making them a promising scaling approach.
However, Ethereum’s original design has its own challenges. Ethereum founder Vitalik Buterin has admitted that “Ethereum was never designed with scalability in mind.” One important limitation is the lack of multithreading in the Ethereum virtual machine. EVM, which processes transactions, is strictly single-threaded. This means that only one transaction can be processed at a time. In contrast, Solana’s multithreaded architecture allows it to process multiple transactions simultaneously, significantly increasing throughput.
L2 inherits Ethereum’s limitations. Virtually all L2 solutions inherit Ethereum’s single-threaded EVM design, which makes them less efficient. For example, Arbitrum: With a target gas limit of 7 million per second and each coin transfer costing 21,000 gas, Arbitrum can process approximately 333 simple transactions per second. More complex smart contract calls consume even more gas, significantly reducing capacity. Optimism: With a gas limit of 5 million per block and a block time of 2 seconds, Optimism can only process about 119 simple transfers per second. Gas-intensive operations further reduce this capacity.
Prices are unstable. Another big problem with Ethereum and its L2 solution is the volatility of prices during periods of high network activity. For applications that rely on low and stable rates, this is a significant drawback. Projects like Memecoin are particularly sensitive to fees, making Ethereum-based L2 less attractive.
Lack of interoperability between L2s. The scalability argument with multiple L2s only holds if contracts on different L2s can freely interact. However, rollups are essentially independent blockchains, and accessing data from one rollup to another is just as difficult as cross-chain communication. This lack of interoperability severely limits the potential for L2 scalability.
What can L2 do to scale up further?
Embed functionality that enhances interoperability. Ethereum L1 needs to do more to support interoperability between L2. For example, the recent ERC-7786: Cross-chain Messaging Gateway is a step in the right direction. Although interoperability issues were not completely resolved, communication between L2 and L1 was simplified and the foundation was laid for further improvements.
Architecture updates: Branch from existing L1 design. To compete with multi-threaded blockchains like Solana, L2 will need to move away from Ethereum’s single-threaded EVM design and embrace parallel execution. This may require a complete overhaul of EVM, but the potential for improved scalability makes it a worthwhile endeavor.
future milestones
Ethereum’s L2 solution faces significant challenges in achieving the scalability and cost efficiency required for applications like meme coins. To remain competitive, ecosystems must address fundamental architectural limitations, enhance interoperability, and embrace innovations in blockchain design. Only by doing so can Ethereum L2 achieve the scalability needed to support widespread adoption and fend off competition from emerging blockchains like Solana.
