In this special edition of Coin Metrics’ State of the Network, we explore the evolving relationship between Ethereum and its Layer-2 ecosystem, examining how L2 usage and economics are reshaping Ethereum’s on-chain activity, and the path to restoring ETHs value accrual.
Key Takeaways:
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As Ethereum leans into a Layer-2-centric scaling model, activity has increasingly migrated to L2s. This has helped scale its ecosystem but also reduced mainnet transaction demand, reshaping Ethereum’s economic dynamics.
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The introduction of blobspace in the Dencun upgrade made L2 settlement significantly cheaper, enabling profitable L2s like Base—which has earned ~$94M in profit while paying just ~$4.9M to Ethereum. This has reignited debate over whether L2s are extractive or symbiotic.
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ETH’s returns are increasingly tied to network fundamentals like fees and burn, suggesting it’s being valued as a revenue-generating asset. As those metrics decline, ETH’s underperformance reflects market concerns around weakening value accrual.
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Upcoming upgrades like Pectra aim to double blob capacity and stimulate demand across both L1 and L2, laying the groundwork to restore long-term value to Ethereum’s ecosystem.
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