Based Rollups pitched as fix to Ethereum incentives amid L2 fee debate
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 own sequencers , 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 post .
This could easily increase the long-term demand for Ether ( ETH ) by a hundred times, he added.
Validators can opt-in to process Based Rollups, earning additional rewards. The economic impact is an increase in the value of staking ETH, potentially leading to higher yields.
Based Rollup structure. Source: Adam Cochran/X
Cochran added that Based Rollups can be interoperable across other rollups which increases liquidity access, cross-chain settlement transactions, and overall demand for gas.
Based Rollups align incentives between layer-2s and layer-1 validators which, over 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 ETH will be driven by overall Ethereum Virtual Machine (EVM) usage and not by the ETH issuance rate.
“That fundamental separation is the kind of thing that puts $100k ETH on the table within the next decade.”
Based rollups are not a new concept and were mentioned in 2023 by Ethereum developer Justin Drake, who said they were “particularly economically aligned with their base L1.”
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Ethereum issuance flipped to inflationary in April following the Dencun upgrade, which drastically reduced layer-2 fees with the impact of dropping overall gas (ETH) usage.
This reduced the amount of ETH fees burned, which in turn resulted in a slump in network revenue and inflationary issuance.
Ethereum community member Ryan Berckmans refuted the recent concerns about Ethereum, stating in a Sept. 10 X post:
“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.”
He concluded that whether fees are high or low, Ethereum’s continued growth supports a bullish case for ETH which aligns with the aim of fundamentally changing network economics to benefit ETH holders through Based Rollups.
In a post on X on Sept. 10, Ethereum developer Eric Connor said , “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.
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Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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