Are Ethereum Layer 2s Eating Into Mainnet Revenue?

Currently, there's a lot of debate and discussion over the impact of Layer 2 solutions on the Ethereum ecosystem.

The impact of Layer 2 (L2) solutions on the Ethereum (ETH) ecosystem has become a topic of heated debate, with some arguing that L2 platforms are eating into the mainnet's revenue.

As the narrative unfolds, market analysts have shared their perspectives on the matter. Leon Waidmann, Head of Research at On-chain headquarters, stated that L2s do affect the revenue in the short term.

However, he believes that their long-term potential is still being largely underestimated. According to a chart shared by Leon, the adoption of L2s is rapidly increasing.

This suggests that they are playing a crucial role in making blockchain technology more accessible to the masses, he added.

Despite the short-term revenue decline, the broader ecosystem is growing with ETH at its core, driving economic activity on the platform as a form of global digital money, said Leon.

One of Leon's followers on the X platform also supported his thoughts, stating that if revenues mattered, BTC would be valued at almost zero.

According to the follower, the Lindy effect, legitimacy, decentralization, and censorship resistance are more important factors.

Recently, Ethereum co-founder Vitalik Buterin also mentioned that he is not interested in either investing or holding L2 tokens.

Meanwhile, VanEck Chief Bashes Critics vaneck chief bashes critics, calling out the constant trolling and ongoing criticism of Ethereum (ETH).

VanEck Head of Digital Assets Matthew Sigel has slammed the critics, calling their behavior "exhausting and intellectually dishonest."

In a recent analysis, Sigel highlighted the importance of "moneyness" for Layer 1 (L1) blockchains like ETH and Solana (SOL).

He explained that in traditional finance, a company's stock valuation is largely determined by its price-to-earnings (PE) ratio. In the crypto industry, this concept translates to how well the token serves as a store of value, medium of exchange, and unit of account within its ecosystem.

Sigel stated that ETH functions as the base money for the Ethereum network. The altcoin is used to pay transaction fees and maintain control over the system through validator operations.

This core utility drives its broader usage in decentralized finance (DeFi) and other services.

Comparing ETH to SOL, Sigel noted that while the latter benefits from lower fees, which may enhance its moneyness, the former is expanding its capacity through L2 solutions to reduce user costs and increase economic activity.

Apart from the revenue concerns, there have been worries about a drop in institutional demand for Ethereum (ETH).

On Friday, VanEck decided to close its application for an Ethereum futures ETF due to lower demand.

Institutions have also been pulling out of the ETH futures ETFs, with the VanEck ETF seeing outflows of over $500 million since its launch in late July.

Moreover, the recent sell-off of ETH by the Ethereum Foundation has created negative sentiment around the altcoin.

The above is the detailed content of Are Ethereum Layer 2s Eating Into Mainnet Revenue?. For more information, please follow other related articles on the PHP Chinese website!