ETH Dencun upgrade attracts more L2 bots and failed txs: Galaxy research

Ethereum’s Dencun upgrade in March has reportedly had the unintentional consequence of increased transaction failures across layer-2 networks. 

In a post on X on Aug. 22, Galaxy researcher Christine Kim delved into the impact of data blobs following the Ethereum Dencun upgrade in mid-March.

She referred to an in-depth analysis by crypto investment firm Galaxy, “150 Days After Dencun,” published on Aug. 21. The analysis reported that failed transactions and bot activity on layer-2s had increased significantly since the upgrade, which reduced fees. 

It noted that following the activation of EIP-4844, Ethereum L2, average daily transaction activity more than doubled by 6.65 million in the 150 days following.

However, the increase in transactions has also resulted in rising transaction failure rates. Kim observed that the failures are likely bot activity driven by the low fees on L2s. 

The majority of the failed transactions stem from high-activity addresses, likely bots. Low fees on L2s could be driving increased bot activity.

According to the research, Base reached a failure rate as high as 21%, Arbitrum saw failure rates up to 15.4%, and OP mainnet experienced failure rates up to 10.4%. 

Layer-2 transaction failure rate since December 2023. Source: Galaxy 

These high-activity or bot addresses attempting 100 or more transactions per day saw failure rates reach 41.6% on Base, 20.87% on Arbitrum, and 12.85% on OP mainnet.

Meanwhile, lower activity addresses making five or fewer transactions daily experienced much lower failure rates, with a maximum of 4% across all observed networks, it noted. 

Ethereum layer-2s are not the only networks experiencing high failure rates. In research on layer-2s released on Aug. 13, Coinbase reported that Solana also has a high rate of transaction failure. 

“Of all [Solana] non-vote transaction fees, between 25% and 45% are spent on failed transactions,” it reported. 

Cointelegraph also reported that Solana’s Ethereum-beating transaction metrics are also likely inorganic and generated by bots. 

However, DeFi Report founder Michael Nadeau disputed the notion that bot activity was spam, stating in a post on X on Aug. 9 that “bots create liquidity and bring efficiency to markets … on public blockchains, they pay fees.”

The March 13 Ethereum upgrade introduced data blobs, also known as proto-danksharding, via EIP-4844, which enabled temporary data storage space for rollup data reducing burdens on the execution layer. 

---