Ethereum faces ongoing debates about layer-2 fees. Cinneamhain Ventures partner Adam Cochran stated in an X post that Layer-2 solutions help scale Ethereum but often pull liquidity and revenue from the core blockchain. Based Rollups are a new approach that may change this. These rollups could fix the incentive structure and benefit Ethereum’s base layer.
So a based rollup is a type of L2.
— Adam Cochran (adamscochran.eth) (@adamscochran) September 10, 2024
It still saves the data in a compressed format on the L1.
But instead of its own sequencer, it relies on L1 validators to process the transactions.
They still use rollup bundling, systems called “prconfirmation commits” and other features, to…
Based Rollups use Ethereum’s layer-1 validators instead of relying on their own sequencers. This could change how Ethereum’s incentives work. It may increase the long-term demand for Ether (ETH) by up to 100 times. Validators that process Based Rollups can earn extra rewards. This raises the value of staking ETH and increases staking yields.
Increased Rewards for Validators
Based Rollups create new rewards for validators. Validators can earn more by opting to process these rollups. This system makes staking ETH more profitable. It aligns incentives across Ethereum’s layers. As more validators participate, Ethereum becomes more efficient.
The rollups are also interoperable with other rollups. This allows more liquidity and cross-chain transactions. It increases demand for gas fees. More transactions could flow through the network, helping Ethereum’s economic structure. Based Rollups offer a way to address fee reductions after the Dencun upgrade.
Ethereum Network Growth Hits 4-Month High with 126K WalletsImpact on Ethereum’s Staking Model
The introduction of Based Rollups may affect Ethereum’s staking model. It could raise yields for stakers. The rewards will no longer depend on ETH issuance rates. Instead, they will come from Ethereum Virtual Machine (EVM) usage. This is a significant shift in how the network operates.
By aligning incentives between layer-1 validators and layer-2 solutions, Based Rollups offer balance. Validators will continue to earn high yields without needing more ETH inflation. This helps Ethereum keep its economic model stable. As the network grows, Based Rollups may ensure long-term sustainability.
The changes brought by Based Rollups signal a move to improve validator rewards. They may also increase Ether’s overall demand. Ethereum’s structure is evolving, with a focus on creating a stronger and more stable network for validators and stakers alike.
