One Year After the Ethereum Merge: The Paradox of Layer 2 Boom and Mainnet Revenue Decline

Ethereum One Year After the Merge: Layer 2 Boom Coexists with Mainnet Revenue Decline

On September 15, 2022, Ethereum completed its historic "Merge," transitioning from Proof of Work (PoW) to Proof of Stake (PoS). One year later, this shift has brought significant ecological changes: Layer 2 network transaction volumes have surged, but mainnet fee revenue has sharply declined, creating a stark paradox. This article analyzes this phenomenon from multiple angles to explore the future direction of the Ethereum ecosystem.

Post-Merge PoS Transition: Energy Efficiency and Centralization Controversy

The core goal of the Merge was to reduce energy consumption and enhance network security. According to Ethereum Foundation data, the Merge reduced Ethereum's energy consumption by approximately 99.95%, a feat widely praised by environmental advocates. However, the PoS mechanism has also sparked concerns about centralization. Since validators need to stake at least 32 ETH, large staking pools (such as Lido and Coinbase) have become dominant, leading some community members to worry about excessive concentration of network control. Despite this, Ethereum's developer community continues to advance decentralization solutions, such as distributing staking power through Distributed Validator Technology (DVT).

Explosive Growth of Layer 2: Behind the Surge in Transaction Volume

After the Merge, Ethereum's scaling needs did not diminish but instead intensified due to the proliferation of DeFi, NFT, and gaming applications. Layer 2 solutions, such as Optimistic Rollups (Optimism, Arbitrum) and ZK-Rollups (zkSync, StarkNet), have become key to alleviating mainnet congestion. According to L2BEAT data, as of early 2024, the average daily transaction volume on Layer 2 networks has surpassed that of the mainnet, with some months reaching over three times the mainnet volume. This growth is driven by lower fees and faster confirmation times: on Arbitrum, a transfer typically costs less than $0.01, while on the mainnet during peak periods, it can exceed $5.

The Layer 2 boom has also expanded the Ethereum ecosystem. For example, the total value locked (TVL) in DeFi protocols on Optimism and Arbitrum has exceeded $10 billion, attracting a large number of users and developers. However, this growth comes with costs: the security and interoperability of Layer 2 networks still face challenges, particularly frequent cross-chain bridge attacks leading to user asset losses.

Sharp Decline in Mainnet Revenue: Root Causes of Fee Revenue Drop

In contrast to the Layer 2 boom, Ethereum mainnet fee revenue has plummeted. According to Ultrasound Money data, in the year following the Merge, average daily mainnet fee revenue dropped from approximately $15 million to about $5 million, a decline of over 60%. This trend is primarily driven by two factors: first, Layer 2 has shifted a large volume of transactions from the mainnet to secondary networks, reducing direct transaction demand on the mainnet; second, Ethereum's EIP-1559 mechanism (implemented in 2021) burns a portion of fees, lowering network inflation but also reducing income for miners (now validators).

The decline in fee revenue has impacted validator incentives. Although validators still earn rewards from block rewards and MEV (Maximal Extractable Value), the overall income drop may lead some small validators to exit, further exacerbating centralization risks. Additionally, reduced mainnet revenue affects Ethereum's "ultra-sound money" narrative—because the amount of fees burned has decreased, ETH's inflation rate may shift from negative to positive.

Behind the Paradox: Ecological Restructuring from Mainnet to Layer 2

This paradox is actually an inevitable result of Ethereum's ecological restructuring. After the Merge, Ethereum's strategic focus shifted from "scaling the mainnet" to "Layer 2 as the core." Vitalik Buterin has repeatedly stated that the future Ethereum will follow a "Rollup-centric" roadmap, with the mainnet serving as the settlement and security layer, while Layer 2 handles daily transactions. While this architecture improves overall throughput, it also dilutes the mainnet's direct economic value.

From a user perspective, the widespread adoption of Layer 2 lowers the barrier to entry, attracting more retail investors and small to medium-sized developers. However, for large institutions and DeFi protocols, the stability and security of the mainnet remain irreplaceable. For example, core protocols like Curve and Uniswap still retain most of their liquidity on the mainnet to ensure asset safety. This layered structure may lead to ecological divergence: the mainnet becomes a "premium chain" serving high-value transactions, while Layer 2 becomes a "mass chain" meeting everyday needs.

Future Outlook: Challenges and Opportunities

Looking ahead, Ethereum faces multiple challenges. First, interoperability between Layer 2 solutions still needs improvement to address liquidity fragmentation. Second, declining mainnet revenue may weaken validator incentives, thereby affecting network security. Finally, competitors like Solana and Avalanche continue to vie for market share, attracting users with higher throughput and lower fees.

However, opportunities also exist. Ethereum's developer community is advancing several upgrades, such as EIP-4844 (Proto-Danksharding), which will significantly reduce Layer 2 data availability costs, further enhancing the efficiency of secondary networks. Additionally, as real-world asset (RWA) tokenization and institutional adoption accelerate, the value of Ethereum's mainnet as a settlement layer may re-emerge. According to a Messari report, Ethereum's on-chain settlement value exceeded $1 trillion in 2024, highlighting its potential as a financial infrastructure.

In summary, one year after the Merge, the Ethereum ecosystem presents a complex picture of "Layer 2 boom coexisting with mainnet revenue decline." This paradox is not a zero-sum game but a transitional characteristic of network evolution. Investors and users should pay attention to technological upgrades and ecological changes to seize future opportunities.

Risk Warning

The above content is for reference only and does not constitute investment advice. The cryptocurrency market is highly volatile, and investment requires caution. The data cited in this article comes from public sources and may have time sensitivity. Readers should conduct independent research and consult professional advisors before making decisions.