Impact of High L1 Settlement Costs on Boba

1. Cost Efficiency:
   • Layer-2 solutions like Boba Network are designed to mitigate high transaction costs on Layer-1 networks like Ethereum by aggregating transactions and settling them periodically on L1. This operation can result in transaction costs that are 10x to 60x lower than the underlying Layer-1 settlement costs1.
   • Despite higher L1 settlement fees, Boba Network maintains lower transaction costs compared to Ethereum, achieving its goal of providing cost-effective transactions while leveraging Ethereum's security2.
2. Revenue and Performance:
   • High settlement fees can affect the profitability of Layer-2 networks. For example, Boba Ethereum experienced financial losses partly due to these high fees but saw improved margins as L1 fees reduced3.
   • The cost of operations on Layer-1 directly influences the net revenue of Layer-2 solutions as they are typically calculated as total L2 fees minus L1 sequencer fees3.
3. Technical and Operational Considerations:
   • Boba Network operates using an Optimistic Rollup design, aggregating Layer-2 transactions to settle them as Layer-1 Ethereum transactions, thereby reducing computational overhead and costs4.
   • This architectural approach helps manage high L1 costs while ensuring scalability, which is crucial for applications across DeFi, gaming, and other smart contract use cases4.

Current Data Overview

• The average transaction fee on Ethereum, over the past three months, was approximately $1.51, while the Boba Network, running on Ethereum, manages significantly lower average fees5.
• Comparatively, the Boba Network also runs on BNB Chain and Polygon, where it benefits from substantially lower base layer fees, helping mitigate the impact of high L1 Ethereum fees5.

Conclusion