Post-Dencun Growing Pains
Ethereum’s Main Source of Income from Layer-2 Scaling Chains Hits Lowest Levels
Ethereum’s main source of income from layer-2 (L2) scaling chains, known as "blob fees," has reached its lowest weekly levels so far this year, according to data from Etherscan. In the week ending March 30, Ethereum earned only 3.18 Ether (ETH) from blob fees, approximately $6,000 US dollars as of April 1.
73% Drop in Weekly Income
This figure marks a 73% drop from the prior week and a more than 95% decline from the week ending March 16, when Ethereum’s income from blob fees exceeded 84 ETH, according to Etherscan.
Post-Dencun Upgrade
In March 2024, Ethereum’s Dencun upgrade migrated L2 transaction data to temporary offchain stores called "blobs." The upgrade cut costs for users but also reduced overall fee revenue for Ethereum — initially by as much as 95%, according to data from asset manager VanEck.
Ethereum’s Weekly Blob Fee Income
Since then, growth in blob fees has been unsteady. Ethereum’s weekly blob fee income peaked at nearly $1 million in November before declining sharply in recent weeks, according to data from Dune Analytics.
Ethereum’s Ongoing Struggle
Ethereum’s ongoing struggle to earn meaningful income from blob fees underscores concerns about the network’s scaling model, which relies heavily on L2s for transaction throughput.
Ethereum’s Future
"Ethereum’s future will revolve around how effectively it serves as a data availability engine for L2s," arndxt, author of the Threading on the Edge newsletter, said in a March 31 X post.
Scaling the Network
According to an X post by Michael Nadeau, founder of The DeFi Report, L2 transaction volumes would need to increase more than 22,000-fold for blob fees to fully offset Ethereum’s peak transaction fee revenues.
Pectra Upgrade
However, Ethereum’s economics are still evolving. For instance, the network’s Pectra Upgrade — which aims to significantly change how Ethereum allocates blob space — is scheduled for this year.
Scaling and Fee Revenue
"The plan is simple: scale Ethereum as much as possible to capture as much marketshare as we can – worry about fee revenue later," Sassal, founder of The Daily Gwei, said in a March 17 X post.
Conclusion
In conclusion, Ethereum’s main source of income from layer-2 scaling chains, known as "blob fees," has reached its lowest weekly levels so far this year. This decline underscores concerns about the network’s scaling model, which relies heavily on L2s for transaction throughput. Ethereum’s future will revolve around how effectively it serves as a data availability engine for L2s.
FAQs
Q: What is the current state of Ethereum’s main source of income from L2 scaling chains?
A: Ethereum’s main source of income from L2 scaling chains, known as "blob fees," has reached its lowest weekly levels so far this year.
Q: What is the reason for the decline in blob fees?
A: The decline in blob fees can be attributed to the unsteady growth in L2 transaction volumes, which are necessary for Ethereum to earn meaningful income from blob fees.
Q: What is the Pectra Upgrade, and how will it affect Ethereum’s economics?
A: The Pectra Upgrade aims to significantly change how Ethereum allocates blob space, which will likely have a significant impact on the network’s economics.
Q: How will Ethereum’s future be affected by its scaling model?
A: Ethereum’s future will revolve around how effectively it serves as a data availability engine for L2s, which will require significant scaling to capture market share.
