Ethereum

Ethereum layer-1 network revenue collapses - 

What's causing it?

(1/3) Despite a sharp rise in monthly users and daily transaction costs on Layer 2s, Ethereum Layer 1 network revenue has dropped by 99% since March 2024. Network fees peaked at $35.5 million on March 5, but the Dencun upgrade, which significantly lowered Layer 2 transaction fees, caused the decline after it went live on March 13.

(2/3) The Dencun upgrade led to a significant drop in Ethereum Layer 2 fees, triggering a surge in competing L2 scaling solutions. Currently, there are 74 L2 and 21 L3 projects, far more than what the market needs, according to Anoma's CEO Adrian Brink. This intense competition has driven L2s to lower transaction fees, attracting users away from the Ethereum base layer and further decreasing network fees.

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The Dencun upgrade's lowered transaction costs offset the deflationary impact of EIP-1559, which burns a portion of fees. This reduction in fees has decreased demand for Ether (ETH), leading to a steady increase in its supply since the upgrade. The historically low transaction costs and reduced demand have driven ETH's price below $3,000.

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I tried to summarize as much as possible.

I don't know if you're being a brainlet or if you mean this for real. 😂

omg this is so simple and thorough 
where do I sign up?

BurrFrens Intern #3 - Host of News and Current Events curator - /homie - banker by day, enigma by night.  Still playing Minecraft 

Yes, Lower Layer 1 revenue isn't always good, even if fees drop. As Layer 2 solutions built on Layer 1 attract more users with lower costs, fewer transactions happen on Layer 1, reducing demand for ETH and revenue. This can impact the security and sustainability of the Ethereum network, despite the scalability benefits.

I’m slow.  I presume this means that revenue dropping isn’t always going to be a good thing right?  In theory it is, but aren’t L2 essentially built on L1?