Original | Odaily ([@OdailyChina](https://x.com/OdailyChina))
Author | Azuma ([@azuma_eth](https://x.com/azuma_eth))
In the current cycle, ETH's performance has lagged significantly behind the overall market, with some attributing it to "the car being too heavy to pull", and others accusing the Ethereum Foundation (EF) of "not being worthy of its position". Recently, Layer 2 has become the target of community criticism.
On February 9th, Andre Cronje (AC), the "DeFi God" of the previous cycle and the current co-founder of Sonic, posted on X, angrily criticizing Layer 2 for profiting greatly from the continuous selling of ordering revenue, which has become a parasite on Ethereum.
Becoming a Layer 2 ➡️ Running a centralized ordering system ➡️ Charging $120 million in fees ➡️ Then paying $10 million to Ethereum for DA and security ➡️ Subsequently selling $110 million in profit ➡️ Then still claiming to be the "Ethereum Alliance" ...... I don't understand how the Ethereum community can convince themselves to accept this logic. Layer 2 has become the main cause of Ethereum's re-inflation.
The Ordering Revenue of Layer 2
The controversy over Layer 2 ordering revenue has long been a recurring topic.
The ordering system is an indispensable role in Layer 2, with the main functions of: 1) Collecting user transactions, packaging them into batches in a specific order; 2) Providing users with instant transaction confirmation before the transactions are finally committed to Layer 1; 3) Compressing transaction data and submitting it to Layer 1 to reduce gas costs.
In the decentralized vision of Layer 2, the decentralization of the ordering system is an essential step, but the reality is that almost all Layer 2 ordering systems are operated by the development teams, which has been one of the biggest criticisms of Layer 2 for a long time.
Why has Layer 2 been unable to complete the decentralization of the ordering system? While there are certainly technical and operational reasons, another major reason cannot be ignored - in a real-world environment, the operation of the ordering system is a highly "profitable" business.
The direct revenue sources for operating the ordering system mainly include: 1) Transaction fee spreads; 2) MEV capture; 3) Interest on fund deposits.
Odaily Note: The image is a further explanation by Professor DeepSeek.
How profitable is this business? We can get a rough idea from the data on February 4th.
On February 4th, affected by the collective market volatility, Arbitrum collected $1.04 million in fees at the Layer 2 level, while the final settlement cost on Layer 1 was less than $20,000 - this means that in just one day, the chain earned over a million dollars in revenue from the transaction fee spread.
Targeting Base
As the most active Layer 2 network in the Ethereum ecosystem, Base has long been at the center of related discussions. As the debate over Layer 2 ordering revenue intensifies, the community has also begun to target Base.
Lucidity CIO Santisa was the first to open fire on X, accusing Base of transferring all of its ordering revenue to Coinbase since the launch of its mainnet, and suspecting that these ETH have been sold.
Since its launch, BASE has been transferring the ordering fees to Coinbase. We don't know if they have sold them, but we know they haven't deployed these funds on Base or kept them on-chain. Due to the lack of further transparency, we can reasonably assume they have sold them. Their stance is not aligned with Ethereum.
Odaily Note: The image shows the Base ordering revenue address (0xEc8103eb573150cB92f8AF612e0072843db2295F).
Subsequently, Sonic team member The Assistant further followed up, analyzing based on Coinbase's financial reports whether Base has sold these ETH.
The Assistant pointed out that on-chain data can be verified (referring to the address posted by Santisa earlier), Base has earned over $100 million in revenue from ordering over the past 12 months, with a profit margin of over 90%, and all of these fees have been transferred to the exchange through the path Base ➡️ Ethereum ➡️ Coinbase.
According to Coinbase's public financial reports, as of June 30, 2023 (see 2023 Q2 report page 66), Coinbase's balance sheet held about $230 million in ETH, with an ETH price of $1,934 at the time, meaning Coinbase held 118,924 ETH; as of September 30, 2024 (see 2024 Q3 report page 22), Coinbase's balance sheet held 119,696 ETH.
The Assistant finally questioned, since the launch of Base, Coinbase has only increased its balance sheet by 772 ETH, so where did the over $100 million in Base ordering revenue go? The answer seems to be only one...
Some may argue that as a (nominally) independent network, Base's revenue should not be included in Coinbase's balance sheet, but this objection is also unreasonable, as Coinbase has consistently highlighted the increase in Base revenue in its past financial reports.
Riding on The Assistant's investigation, AC re-posted and further fired:
The Ethereum community is proud of their Layer 2, but what Layer 2 does every day is to transfer the fee revenue from Layer 2 to Layer 1, and then to Coinbase to sell. This is the leader of the Ethereum ecosystem. Wake up, Ethereum community.
How might Vitalik's potential attitude be?
As of the publication, Vitalik has not yet responded to the accusations made by AC and other community members, but in his handwritten article on January 24th (《Under Public Opinion Pressure, Vitalik Calls on L2: Come Back and Support ETH》), we can get a general sense of Vitalik's dissatisfaction with the current state of Layer 2 operations.
In the article, Vitalik mentioned the need to clarify the economic model of ETH and ensure that ETH can continue to accumulate value in a Layer 2-intensive world. On the execution level, Vitalik then encouraged Layer 2 to contribute a certain proportion of their fees to support ETH, which can be achieved through burning a portion of the fees, permanently staking and donating the proceeds to Ethereum ecosystem public goods, or other solutions.
In simple terms: Layer 2 needs to be less greedy and it's time to share the cake.
