Ethereum is grappling with uncertainties as its reliance on Layer-2 blockchains grows, leading to lower fee collection, while rivals like Solana gain ground

- The blockchain has seen fees slide after technical upgrades — Criticisms have weighed on Ether, which has underperformed

Bloomberg 2024-12-01 Sidhartha Shukla

Context & Ripple Effects

Ethereum’s earlier Dencun upgrade cut Layer-2 transaction costs by changing how those networks store data, reinforcing a scaling strategy that moves more user activity off the main chain. That makes today’s fee pressure a consequence of Ethereum’s chosen architecture, not simply a cyclical slowdown.

The tension also extends a longer competitive story: Ethereum had been the preferred venue for DeFi projects while nimbler rivals emerged alongside its complex upgrade path. Solana’s gains sharpen the question of whether lower-cost scaling preserves Ethereum’s ecosystem advantage.

First-order effects

Ethereum collects less in transaction fees as a larger share of activity is handled through Layer-2 networks, while Layer-2 users benefit from cheaper transactions.
Criticism over the weaker fee profile weighs on Ether’s relative performance, and Solana gains a clearer competitive opening.

Second-order effects

Ethereum’s ecosystem must make the case that lower-cost Layer-2 activity creates durable value even when main-chain fee collection declines.
Rival chains can use Ethereum’s fragmented scaling experience to market simpler or more directly monetized transaction environments to users and developers.

Third-order effects

The episode tests whether a base layer can prioritize cheap, high-volume execution through affiliated networks while retaining a clear economic link to its native asset.
If this pattern persists, competition among smart-contract platforms may turn less on raw transaction costs and more on how convincingly each network connects ecosystem activity, fees, and token value.

The trend: Smart-contract platforms are increasingly trading direct base-layer fee capture for lower-cost, modular scaling—and investors are scrutinizing how that trade-off accrues value.

Discussion

@balajis Balaji on x
ZATOSHI AND ZETHEREUM Here's a bold plan for how one brave engineer could strike a blow for internet freedom while bringing Ethereum all the way back: they just need to go Zatoshi and build Zethereum. What does that mean? It means an pseudonymous developer with impeccable opsec
@viktorbunin Viktor Bunin on x
@balajis Respectfully, you're describing Aztec Network that my wife Lisa works on. They're going to launch fully decentralized (including sequencers and provers) and use zk for privacy, not scalability. It's been 8 years in the making and it's going to change the world.
@naval @naval on x
@balajis Zcash works, it's PoW, and it's focused. A programmable chain means a larger surface area and more vulnerabilities. A private chain faces more regulation and it's less auditable. IMO, store of value, programmability, and privacy (gold, code, & cash) end up in separate ch…
@koeppelmann Martin Köppelmann on x
Thanks for hosting this debate @laurashin! While I think Justin and I share a similar vision of what Ethereum should ideally become in a couple of years, he thinks we are on track for it - I believe decisive action is needed now to achieve that vision.
@iamdcinvestor @iamdcinvestor on x
the courts ruled that onchain privacy code is self-executing and unaccountable and can't be sanctioned and the incoming President of the United States has a DeFi protocol built on Ethereum this is not remotely priced in Thanksgiving buyers have an opportunity for a fantastic
@blockgraze @blockgraze on x
solana allows normal people to commit crimes on the blockchain ethereum allows various foundations to commit crimes on the blockchain they can coexist we need to stop fighting each other, and focus on fighting the people trying to stop us from doing crimes
@laurashin Laura Shin on x
What's the Best Way for Ethereum to Grow? Justin Drake and Martin Köppelmann Debate In this episode of Unchained, @koeppelmann and @drakefjustin dive into: 💡 Native rollups vs. Beam Chain: what's Ethereum's best path forward? 📉 Why Ethereum has lost ground to Solana this [video]
@jessepollak @jessepollak on x
@balajis love this — and to be 100% clear: we welcome privacy on @base and would love to see folks (anonymous or not) push forward this vision. the global onchain economy needs privacy to fulfill it's mission.
@koeppelmann Martin Köppelmann on x
@zmanian @dankrad Hm... i actually think ethereum still has a pretty strong brand and if a dapp dev could choose- Ethereum or Base - they might very well choose Ethereum despite the legit distribution advantages Base brings. But for this the rollup actually needs to be seen as Et…
@justintrimble Justin Trimble on x
Hot take: There's nothing wrong with Ethereum.
@lowbeta_ Zach Pandl on x
TradFi media doing deep dives into #Ethereum scaling strategy and the impact on Layer 1 fee revenue https://www.bloomberg.com/...
@joemccann @joemccann on x
The reason it's called a L2 is now you have 2 problems. .@bloomberg author @sidcoins raises issues with $ETH. https://www.bloomberg.com/... [image]
@jihoz_axie @jihoz_axie on x
It's time rotate into Ethereum, Defi, and gaming. With the return of net new technology and experimentation, the most curious, technical, and principled communities, products, and founders will win. Fundamentals are back. CC: @aixbt_agent
@divine_economy David Phelps on x
ethereum has a marketing problem because it refuses to advocate for the apps in its ecosystem solana has a marketing problem because it's advocating for apps in its ecosystem tokenizing dog-shooting and gleefully tossing around the n-word honestly, i get why xrp is ripping
@jswihart Josh Swihart on x
@balajis Zcash didn't have a word of mouth problem. It had a strategy, narrative and UX problem. That changed this year and rapidly accelerating.
@phtevenstrong Stephen on x
Ethereum is NYC. It has everything. It's expensive. It's hyper competitive and cutthroat, but it's where the money is. Solana is Vegas. Some people live there, but the majority of people there are degenerate transient gamblers. There are some incredibly cool things there
@laurashin Laura Shin on x
🤔 Could this be Ethereum's turning point? A 19% surge in ether against bitcoin signals shifting sentiment after months of underperformance. @juampiaranovich writes. https://unchainedcrypto.com/ ...
@divine_economy David Phelps on x
solana has done the best job optimizing for digital money ethereum has done the best job optimizing for programmable money
@ercwl Eric Wall on x
as much shit as i've given ethereum lately i'd like to say one or two nice things about it the amount of stables i have in aave/compound on ethereum are still like 10:1 or 5:1 the amount i'd degen gamble with on solana i much prefer to use that chain for “serious stuff” still
@jihoz_axie @jihoz_axie on x
DeFi on arbitrum Agents on Base Gaming on Ronin The interesting things are happening in EVM again. Bitcoin has surpassed ath by a lot. Ethereum has not. Very similar situation to December '20 of last cycle at the same point.
@iamdcinvestor @iamdcinvestor on x
THE PAST AND FUTURE PRESIDENT OF THE UNITED STATES OF AMERICA IS BUYING THE ETHEREUM COINS AND IS BUILDING ON ETHEREUM DEFI prolly nothing, but just in case it is: the ticker is ETH 😘
@iamdcinvestor @iamdcinvestor on x
it's Saturday. these are not ETF buyers these are still early crypto capital rotators they will create the initial pump, which will create the ETF fomo and you are still sidelined from it, asking yourself of ETH and Ethereum are dead ☠️
@hosseeb Haseeb on x
In crypto, I've noticed most of the value gets captured by the extremes. The market rarely rewards compromise. For volatility, you either want to be a stablecoin or a memecoin. For L1s, you either want Ethereum-level security or Solana-level speed. The valley of tradeoffs is
@theblockpro__ @theblockpro__ on x
2/ Solana's DeFi protocols earned $420.7M in November, 161% more than Ethereum's $161.2M. Raydium ($175M) & Jito ($164.7M) outperformed Uniswap ($69.1M) & Lido ($62.3M), fueled by Solana's low fees, high throughput, & ecosystem recovery. [image]
@ayyyeandy Andy on x
Hot take: Launching an L1 is way harder than people think it is, and contributing to an existing rollup ecosystem is a far better move. Don't let the short term narrative around L2 fatigue cloud judgment of where the largest eco's are all headed (Ethereum, Solana, Celestia,
@cwgoes Christopher Goes on x
those of us from @cosmos feel a sense of deja vu these days - presentations at devcon proposing to ship @tendermint - “layer” “twos” achieving political self-actualization the self-similarity of socio-capital structures is scale-free @ethereum's future lives in @cosmos's past
@axel_bitblaze69 Axel Bitblaze on x
GM! I'm tired of $SOL vs $ETH debate.. There are legitimate things being built on both the chains. 🤡 [image]
@iamdcinvestor @iamdcinvestor on x
prediction: as the market digests and understands that Ethereum L2s benefit from (multi-trillion?) ETH liquidity and could support less risk for app builders than choosing a monolithic L1 serious app builders will increasingly choose Ethereum L2s over L1s leading to relative
@theblockpro__ @theblockpro__ on x
Highlights from @TheBlock__'s Data Dashboard: 1/ Ethereum reclaims USDT dominance with 66.94B vs. Tron's 61.77B, the first lead since June 2022. USDT on Ethereum is up 62% YTD, fueled by ETF anticipation, Bitcoin's ATH, and its DeFi and institutional appeal. [image]
@jesincomments @jesincomments on x
Ethereum struggles as user experience changes lead to decreased activity and fees. This raises concerns about its future amidst growing competition from rival cryptocurrencies. https://www.bloomberg.com/...
r/ethtrader r on reddit
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