Ethereum Layer 1 Revenue Plummets Amid L2 Surge
Ethereum's layer 1 revenue has fallen dramatically, while layer 2 solutions thrive, enhancing the ecosystem and attracting more users with lower fees
Highlights:
•
Layer 1 fees drop from $35.5M to $600K monthly.
•
74 layer 2 solutions activated, boosting ecosystem growth.

In a dramatic shift, Ethereum's layer 1 network revenue has plummeted by a staggering 99% since March 2024, despite a significant increase in monthly users and daily transaction volumes on layer 2 scaling solutions.

The Dencun upgrade, which went live on March 13, 2024, aimed to reduce fees for Ethereum layer 2 transactions. Following the upgrade, network fees steadily declined, hitting a low of $566,000 on Aug. 31, 2024.
This sharp reduction in Ethereum layer 2 fees sparked an explosion of competing scaling solutions. L2Beat, a layer 2 data resource, currently lists 74 Ethereum layer 2 scaling projects and 21 layer 3 projects. The highly competitive environment has encouraged a race to the bottom, with rival layer 2s offering the lowest transaction fees to attract users.

The lowered transaction costs introduced by Dencun offset the deflationary pressure introduced by EIP-1559, an Ethereum Improvement Proposal that burns a portion of fees on the network. As a result, the supply of ETH has been growing steadily since the Dencun upgrade went live.
Despite the drop in layer 1 revenue, the surge in layer 2 adoption is a positive sign for the Ethereum ecosystem. Currently, the Total Value Locked (TVL) in layer 2s stands at an impressive $16 billion, a figure expected to climb as more chains join and liquidity increases.
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