Ethereum’s The layer-1 network’s revenues have dropped by 99 % since March 2024.
Data Token Terminal shows that the network’s revenue reached a peak of over 35 million dollars on March 5, 2018. By Sept. 2, however, daily revenue was down to an annual low of about $200,000.
The decline in the market is attributed by many to the growth of layer-2 (L2) networks The March Dencun upgradeThe L2 transaction fee was reduced. reshaped Ethereum’s revenue structure. Token Terminal has been described as:
“Key metrics that show how lower transaction fees on L2s have increased usage, but also driven down the revenue on the L1.”
Post-upgrade Transaction activity on Ethereum’s L2 network has increased. increased daily transactions and active users These platforms are available.
This migration, however, has had a significant impact on Ethereum’s revenue. Coinbase’s Base L2 network generated $2.5M in revenue last August yet only paid $11,000 for settlement on the Mainnet.
Crypto analyst Kun warned L2 networks, in particular for consumer applications, could be dominant and even abandon Ethereum mainnet if the trend continues. He stressed that Ethereum must develop useful use cases for its mainnet, or else it risks a serious valuation issue.
“He added”
“ETH L1 needs valuable use cases on mainnet that cannot be sieged or you have to hope that L2 usage is so big that basically you need 100000 times the usage on L2 to get the same value you did on mainnet with a tiny fraction which then creates a valley of valuation issues.”
‘Death spiral’
Fred Krueger, a Bitcoin investor who has expressed similar concerns about Ethereum, suggested that it could be at risk. “death spiral” If its revenue is low, it will continue to be so.
He noted that Ethereum’s fee income of $200 per day is $73 millions annually. This amount of revenue would not be enough to support its $300 billion market capital.
Krueger claims that the market’s valuation of Ethereum is not in line with its fee model. He said:
“[Ethereum is] not equivalent to a company making $73 million a year in profit, or even a company making $73 million a year in revenue. That $73 million is not even sufficient to buy back all the inflation that naturally comes to ETH validators.”
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Source: cryptoslate.com