Valid Points: OpenSea, Arbitrum and Layer 1 Wars

This article originally appeared in Valid Points, CoinDesk’s weekly newsletter breaking down Ethereum 2.0 and its sweeping impact on crypto markets. Subscribe to Valid Points here.

Since joining CoinDesk three months ago, I’ve worked alongside Christine Kim and the CoinDesk Research team as an analyst covering Ethereum, decentralized finance and the crypto markets. While I’ve been interested in Ethereum for several years, I’d like to thank Christine and the CoinDesk team for providing me with a strong understanding of the technology and economics within the network.

Starting this week, I’ll be the new author of Valid Points.

I’m excited to continue my journey exploring the ins and outs of the Ethereum ecosystem, and I’ll continue to share my findings and research through this newsletter. The plan is to expand upon Validated Takes, collecting the most important news and data across all things Ethereum and to provide weekly updates on our very own CoinDesk Eth 2.0 Validator, affectionately known as “Zelda.”

Feel free to reach out with your thoughts and ideas for the newsletter by responding to this email or commenting on Twitter.

Welcome to another edition of Valid Points.

– Teddy

Pulse check

The following is an overview of network activity on the Ethereum 2.0 Beacon Chain over the past week. For more information about the metrics featured in this section, check out our 101 explainer on Eth 2.0 metrics.

Disclaimer: All profits made from CoinDesk’s Eth 2.0 staking venture will be donated to a charity of the company’s choosing once transfers are enabled on the network.

Validated takes

• A consensus bug hit Ethereum on Friday, exploiting a vulnerability in outdated Go Ethereum (Geth) software and leading to a chain split. BACKGROUND: Go Ethereum developer Peter Szilágyi publicly announced the bug and issued a hotfix on Aug. 24. At the time of the exploit, only 30% of users had upgraded to the hotfixed software, allowing the attacker to target laggers. Geth software is used by nearly 75% of network users and plays a crucial role in the Ethereum ecosystem.
• OpenSea, the largest NFT market, posted the largest month in history with over $2.8 billion in transaction volume. BACKGROUND: August’s non-fungible token trading volume was over seven times higher than the next largest month and included an explosion in corporate interest from the likes of Visa and Budweiser. Furthermore, OpenSea contracts are responsible for over two times more gas consumption than Uniswap v2 since the beginning of the month.
• EIP 1559-style transactions now account for over 50% of the network, less than a month after the upgrade. BACKGROUND: A majority of wallets have now upgraded from legacy-style transactions, revealing the benefits of the month-old fee market. Positive effects include transaction failures falling from around 15% to 6.7% on top applications like Uniswap v3 and the exclusion of “zero gas” transactions, where miners were able to extract value and provide nothing to the network in return.
• Competition in the layer 1 space has heated up over the past few weeks as investors speculate on native token prices. BACKGROUND: Sol, Avax, Atom and Luna have been top performers over the past month while they compete for network activity and Total Value Locked (TVL). The top 5 alternative layer 1s after Ethereum account for $34.82 billion in TVL, highlighting the demand for cheaper and faster transactions.
• Offchain Labs raised $100 million in a Series B led by Lightspeed Ventures Partners and included Mark Cuban in the funding round. BACKGROUND: “Arbitrum One” has been one of the most widely awaited layer 2 scaling solutions, alongside Optimism. The rollup solution aims to go live for users on Aug, 31, hosting a suite of top decentralized applications at launch, including Aave, Curve, Sushi and Uniswap.

Factoid of the week

Open comms

Valid Points incorporates information and data about CoinDesk’s own Eth 2.0 validator in weekly analysis. All profits made from this staking venture will be donated to a charity of our choosing once transfers are enabled on the network. For a full overview of the project, check out our announcement post.

You can verify the activity of the CoinDesk Eth 2.0 validator in real time through our public validator key, which is:

0xad7fef3b2350d220de3ae360c70d7f488926b6117e5f785a8995487c46d323ddad0f574fdcc50eeefec34ed9d2039ecb.

Search for it on any Eth 2.0 block explorer site.