First Version

Arbitrum Sequencer Sustainability - Full Report- Feb Version

Arbitrum Sequencer Revenue Research - TLDR

Updated version March

Arbitrum Sequencer Sustainability - Full Report

Analysis of revenue generation from fees levied on end users

This analysis should provide projections for future revenue based on the delta between total user fees and the costs associated with DA and settlement. To be clear, the projections should solely focus on fees and exclude timeboost, which we will request in your second deliverable. The report should outline clear expectations for future earnings from this single vertical, accounting for congestion and the possibility of margin compression due to increasing competition in the ecosystem. By helping the DAO cement a vision for sustainable revenue, your work is paramount to the future of Arbitrum DAO’s existence.

Project Phases:

Initial Research & Data Collection:

• Research existing variables impacting revenue and costs for Arbitrum.
• Identify sectors and drives of sequencer revenue
• Extract data to be used for further analysis

Fees Analysis

1. Historical Gas Usage Since Dencun
   • Analyze main protocol gas usage trends on Arbitrum. Who are the highest gas consumers?
     • what is the gas outlook for these projects (market share vs competitors on other chains, growth, roadmap)
     • Are those protocols becoming more gas-efficient? Track average gas fee per transaction type over time.
     • Are they creating their own chain like Unichain? What is the impact on the sequencer?
   • Is there any impact of gas fees linked to ARB incentives : i.e. if we were to reduce these what would be the impact on gas fees?
   • Analyze daily revenue distribution, focusing on congestion periods. How concentrated is it?
   • Identify emerging projects as potential growth drivers.
   • Calculate gas and transaction generation per $1 of TVL across chains. This is to understand whether gas will increase linearly with TVL growth or whther we can expect transactions to be more gas efficient.
2. Technical Improvements
   • Evaluate impact of Arbitrum upgrades on congestion and sequencer revenue.
   • Impact of Ethereum roadmap.
3. Competitor Analysis
   • Compare gas fee trends across competing L2 solutions
   • Identify and explain discrepancies
4. Chain Migration Impact
   • Assess impact of projects moving to Arbitrum Nova
   • Evaluate potential cannibalization risk from Nova and Orbit
   • Analyze overall impact on Arbitrum ecosystem
5. ETH Price Correlation
   • Examine relationship between ETH price and Arbitrum's fee revenue

Cost Analysis (Settlement, Blob)

1. L1 Blob Cost Assessment
   • Quantify L1 blob cost as a percentage of total costs. Look at trends.
   • Analyze blob cost sensitivity to increased L2 traffic.
   • Identify main drivers of blob costs.