Guess who is smashing ETH?

Author: Azuma, Odaily Planet Daily

During this cycle, ETH's performance lags significantly behind the overall market. Some attribute it to "hard car weight", some accused the Ethereum Foundation (EF) of "unworthy position", and Layer 2 It has become the target of criticism from the community again.

On February 9, Andre Cronje (AC), the god of DeFi and the current Sonic co-founder, posted on X, angrily criticizing that Layer 2 made a lot of profits through continuous selling of the sorter, and has become a parasitic for Ethereum. insect.

Become a Layer 2 ➡️ Run a centralized sorter ➡️ Charge $120 million in fees ➡️ Pay another $10 million to Ethereum for DA and security ➡️ After that, sell $110 million in profit ➡️ Then it also claims to be the "Ethereum Alliance"… … I don’t understand how the Ethereum community convinces itself to accept this logic. Layer 2 has become the main reason for Ethereum's re-inflation.

Layer 2's sorter revenue

Layer 2's sorter income dispute has become a cliché topic.

The sorter is an indispensable role of Layer 2. Its main functions are: 1) Collect user transactions and package them into batches in a specific order; 2) Provide instant transaction confirmation to the user before the transaction is finally put on the chain; 3) Compress the transaction data and submit it to Layer 1 to reduce gas costs.

In the decentralization vision of Layer 2, decentralization of the sorter running is an indispensable step, but the reality is that almost all Layer 2 sorters are run by the development team, which has long been around Layer 2 One of the biggest criticisms.

Why is Layer 2 unable to complete the decentralization of the sorter for a long time? Although there are certain technical and operational reasons, another major reason that cannot be ignored is that in the real environment, the operation of the sorter is a very "profitable" business.

The direct sources of income for the operation of the sorter mainly include:

1. transaction fee difference; 2) MEV capture; 3) interest on fund precipitation.

Odaily Note: The picture shows a further detailed explanation of Teacher DeepSeek.

How profitable is this business? We can take a rough glimpse through the single-day data on February 4th.

On February 4, due to collective market fluctuations, Arbitrum charged $1.04 million in a single day at the Layer 2 level, and the final settlement cost paid to Layer 1 was less than $20,000 - which means that in just 1 day , the chain earned millions of dollars through transaction fee spreads.

Targeting Base

As the Layer 2 network with the most active Ethereum ecosystem, Base has been at the center of relevant public opinion for a long time. As the debate over Layer 2 sorter returns intensifies, the community is also starting to target Base.

Lucidity CIO S antisa took the lead in X, accusing Base of transferring all sorter revenues into Coinbase since its launch, and there is reason to suspect that these ETHs have been sold.

Since its launch, BASE has been transferring sorter fees to Coinbase. We don't know if they've sold it, but we know they haven't deployed the funds on Base or kept them on the chain. Due to the lack of further transparency, we can reasonably assume that they have sold out. They do not agree with Ethereum.

Odaily Note: The picture shows the Base sorter income address (0xEc8103eb573150cB92f8AF612e0072843db2295F).

Subsequently, Sonic team member The Assistant further took the lead and analyzed whether Base had sold these ETHs based on Coinbase's financial report data.

The Assistant pointed out that the on-chain data can be checked (refer to the address posted by Santisa above), Base has earned over $100 million in profits through the sorter in the past 12 months, with a profit margin of more than 90%, and all of these fees have been The path through Base ➡️ Ethereum ➡️ Coinbase is transferred to the exchange.

According to Coinbase's public financial report data, as of June 30, 2023 ( see page 66 of Q2 earnings report for 2023 ), Coinbase held approximately $230 million in ETH on its balance sheet, at which the price of ETH was $1,934, which means Coinbase holds 118924 ETH; as of September 30, 2024 ( see page 22 of Q3 2024 ), Coinbase holds 119696 ETH on its balance sheet.

The Assistant finally questioned that since Base went online, Coinbase has only increased its holdings of 772 ETH on its balance sheet, so where has the revenue of the Base sorter worth hundreds of millions of dollars gone? There seems to be only one answer...

Some people may question that Base, as a (nominally) independent network, its revenue should not be included in Coinbase's balance sheet. This question is also unreasonable, because Coinbase has focused on Base in its past many financial reports. Increase in income.

With the content of The Assistant's investigation, AC reposted and fired further:

The Ethereum community is proud of their Layer 2, but what Layer 2 is doing every day is to transfer fee income from Layer 2 to Layer 1 and then transfer it to Coinbase to sell off. This is the leader in the Ethereum ecosystem. Let’s wake up from the Ethereum community.

What is Vitalik’s underlying attitude?

As of the time of publication, Vitalik has not responded to the accusations of AC and other community members, but in the self-written article on January 24, we can roughly see that Vitalik is already dissatisfied with the current Layer 2 operation status.

In this article, Vitalik mentioned that it is necessary to clarify the economic model of ETH to ensure that ETH can continue to accumulate value in the Layer 2-intensive world. At the execution level, Vitalik encourages Layer 2 to support ETH by contributing a percentage of the costs, which can be achieved by destroying some of the costs, permanently collateral and donating the proceeds to public products of the Ethereum ecosystem or some other solution.

A brief translation of this passage: Layer 2 Don’t look too ugly, it’s time to give up some cake.