TechFlow news, September 4 — According to CryptoSlate, data from Token Terminal shows a sharp decline in Ethereum's Layer 1 (L1) network revenue, dropping as much as 99% since March 2024. Ethereum’s daily revenue peaked on March 5 at over $35 million. However, by September 2, it had fallen to a yearly low of approximately $200,000.
Market analysts attribute this downward trend to the growth of Layer 2 (L2) networks and the Dencun upgrade in March. The upgrade significantly reduced L2 transaction fees, reshaping Ethereum’s revenue structure. Following the upgrade, transaction activity has shifted from Ethereum’s mainnet to L2 networks, driving increases in daily transaction volumes and active user counts on these platforms.
However, this migration has severely impacted Ethereum’s fee income. For example, Coinbase’s L2 network Base generated $2.5 million in revenue in August 2024 but paid only $11,000 in settlement fees to the mainnet, highlighting the shift of value away from Ethereum’s base layer. Cryptocurrency analyst Kun warned that if this trend continues, L2 networks could dominate—and potentially disengage from—Ethereum’s mainnet, especially for consumer-facing applications. He emphasized that Ethereum must develop valuable use cases on its mainnet, or risk facing serious valuation challenges.
Bitcoin investor Fred Krueger echoed similar concerns, suggesting Ethereum could face a "death spiral" if its low-fee environment persists. He noted that Ethereum’s current daily fee revenue of $200,000 annualizes to just $73 million—far short of supporting its $300 billion market capitalization. Krueger believes a more realistic valuation might be closer to $3 billion, underscoring the growing disconnect between Ethereum’s fee revenue model and its market valuation.
