A Uniswap labs study has disclosed that the price of token swap and network fluidity is lesser on Layer-2 compared to Ethereum mainnet.
According to the study, a huge increase in the liquidity of Arbitrum has occurred in comparison to the last year when it functioned as a Layer 2 solution on Ethereum.
In case of smaller trades under $125,000, a vast majority of them (97.5%) on the layer-2 were cheaper compared to that on the layer-1 of Ethereum, thanks to the former having lower gas fees and better liquidity.
On the other hand, although Ethereum seems to be used for more transaction volume (approximately 60%), still, L2 handles more in terms of the number of transactions.
This means that layer-2 will now be used by people for daily transactions as it holds cheaper prices that are needed when transactions are too frequent. Layer-2 systems have faster block times, which has an impact on trade as well. This makes trading on the platforms profitable for the arbitrageurs and lowers their arbitrage expenses by an additional 20%.
The report also discusses a number of potential disadvantages of layer-2 solutions such as centralized service providers and possible security concerns. Nevertheless, developers continue upgrading the technology, for instance, developing permissionless fault-proof systems and diversified sequencer networks.
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