Ethereum Layer-1 Network Revenue Plummets as Layer-2 Solutions Compete for Lowest Transaction Fees

1. Ethereum layer-1 network revenue has dropped by 99% since March 2024.
2. Monthly users and daily transaction costs on layer 2s have increased despite the revenue decline.
3. Network fees reached their highest levels for the year on March 5, 2024, at $35.5 million.
4. The Dencun upgrade reduced fees for Ethereum layer-2 transactions and went live on March 13, 2024.
5. Following the upgrade, network fees steadily declined, hitting a low of $566,000 on Aug. 31, 2024.
6. The competitive environment among layer-2 scaling solutions has led to a race to the bottom in transaction fees.

Summary :
The Ethereum layer-1 network has experienced a significant decline in revenue, dropping by 99% since March 2024. Despite an increase in monthly users and daily transaction costs on layer 2s, network fees reached their peak on March 5, 2024, at $35.5 million. However, after the implementation of the Dencun upgrade, which reduced fees for Ethereum layer-2 transactions, network fees steadily decreased. Currently, there are numerous layer-2 scaling solutions built on top of the Ethereum network, surpassing market demand. This intense competition has led to a race to offer the lowest transaction fees, drawing users away from the Ethereum base layer. The reduced fees have offset the deflationary pressure introduced by EIP-1559, resulting in a growing supply of ETH. Consequently, the historically low transaction costs have contributed to a decline in the price of ETH, falling below $3,000.

Sources :

- CoinTelegraph