Ethereum’s Layer-2 Success Is Becoming an Economic Problem

Ethereum has delivered much of what its scaling strategy promised. Transactions that were once too expensive for routine use can now be processed on networks such as Base, Arbitrum and Optimism for a fraction of the cost, while Ethereum remains the settlement and security layer beneath them. For users, this is progress. For the economics of Ethereum itself, the outcome is more complicated.

Activity across the wider ecosystem can rise without producing a comparable increase in fees on Ethereum’s base layer. Applications may attract users, Layer-2 networks may process record volumes and sequencers may generate revenue, yet only a limited share of that economic activity necessarily reaches Ethereum or strengthens demand for ETH.

This is the Layer-2 paradox: Ethereum has become better at supporting an expanding digital economy, but less certain about how much of that economy it can capture.

Ethereum deliberately moved activity away from Layer 1

The current tension is partly the result of design rather than failure.

Ethereum’s base layer cannot process every trade, payment and smart-contract interaction required by a global financial network. Keeping all activity on Layer 1 would mean recurring congestion, unpredictable transaction costs and a user experience that deteriorates whenever demand increases.

Its answer was a rollup-centric roadmap. Layer-2 networks execute transactions away from the main chain, combine them into batches and submit the relevant data or proofs back to Ethereum. Users receive faster and cheaper transactions, while the rollup continues to benefit from Ethereum’s settlement infrastructure.

That division of labour has worked. A growing share of activity associated with Ethereum now takes place beyond the base layer. The Handelsblatt article that prompted this analysis identifies the resulting disconnect: networks such as Base and Polygon can grow rapidly while returning comparatively little fee revenue to Ethereum itself. It describes an ecosystem in which user activity is real, but the income previously concentrated on Layer 1 is increasingly distributed across several networks.

The problem is not that Ethereum has lost the activity entirely. The problem is that infrastructure use and economic value capture are no longer the same thing.

Cheap Layer-2 transactions mean cheap access to Ethereum

Layer-2 networks still pay Ethereum. They use the base layer to publish data, settle transactions and establish the final state of their systems. Ethereum therefore provides a service for which rollups incur a cost.

Yet Ethereum has also worked deliberately to reduce that cost.

The Dencun upgrade introduced blobs, a form of temporary data storage designed specifically for rollups. Instead of competing with ordinary Layer-1 transactions for expensive block space, Layer-2 networks gained access to a separate and more efficient data market.

The effect was central to Ethereum’s scaling strategy: rollup costs fell sharply, making transactions cheaper for users. Research covering the period from January 2024 to March 2026 found that median Layer-2 fees declined by more than 95 percent.

There is an obvious commercial tension here. Ethereum wants the cost of using its infrastructure to be low enough for Layer-2 networks to expand. At the same time, fees are part of the mechanism through which network activity can create demand for ETH and reduce its circulating supply.

When rollups pay very little for settlement and data availability, Ethereum can support substantially more activity without receiving substantially more revenue. Scalability improves, but the direct economic link between usage and ETH becomes weaker.

The Layer-2 operator may capture more than the settlement layer

A Layer-2 network is not simply a neutral extension of Ethereum. It can operate as a business with its own applications, transaction ordering, user relationships and revenue.

Most rollups currently rely on a sequencer that determines the order in which transactions are processed. The operator collects transaction fees from users, pays the cost of submitting data to Ethereum and retains the difference after operating expenses.

As the cost of Ethereum settlement declines, that margin can become more attractive. The Layer-2 operator benefits from cheaper underlying infrastructure, while Ethereum receives a smaller payment for each unit of activity.

The Layer-2 may also capture additional forms of value. It can become the preferred venue for decentralised exchanges, lending protocols, stablecoin transfers and consumer applications. It can shape incentives through grants, distribute its own token and influence which applications receive visibility. In the case of a network linked to a large exchange or technology company, it may also control an established distribution channel.

This changes the competitive structure of the ecosystem. Ethereum supplies security and settlement, but Layer-2 networks increasingly own the interface through which users experience blockchain activity. The arrangement resembles other infrastructure markets in which the underlying provider performs a critical function while the distributor controls the client relationship and captures a larger share of the commercial upside.

More transactions no longer guarantee stronger ETH economics

The distinction matters because ETH is expected to perform several economic roles at once.

It is used to pay fees on Ethereum, posted as collateral across decentralised finance and staked to secure the network. Under Ethereum’s fee mechanism, part of the base fee paid for Layer-1 transactions is burned, linking network demand with changes in the supply of ETH.

When base-layer activity is strong, more ETH may be burned. When fees remain low, issuance to validators can exceed the amount removed from circulation. The relationship between network growth, scarcity and asset value therefore depends not only on how many people use the Ethereum ecosystem, but also on where they transact and how much value reaches Layer 1.

This is why ecosystem-wide transaction counts can be misleading. A million inexpensive transactions processed on a Layer 2 may demonstrate adoption without creating the same fee demand as a smaller number of costly transactions executed directly on Ethereum.

Investors analysing ETH increasingly need to separate three questions that were once treated as one: Is the Ethereum ecosystem growing? Is Ethereum’s base layer generating more economic demand? Is ETH capturing value from that growth?

The answers can diverge.

Layer-2 fragmentation creates a second cost

The economic debate extends beyond fees.

Ethereum’s Layer-2 networks have created multiple execution environments with separate liquidity pools, bridges and user experiences. Assets held on one network cannot always move seamlessly to another. Users may need to understand different withdrawal procedures, security assumptions and transaction systems, despite believing that they are simply using Ethereum.

Liquidity fragmentation can make markets less efficient. Capital divided among several networks may produce thinner trading conditions than the same capital concentrated in one venue. Applications must decide which Layer 2 to support, while users face additional operational risk when transferring assets between them.

Ethereum developers are working on interoperability and faster cross-Layer-2 communication. The Ethereum Foundation’s 2026 priorities include trust-minimised interactions between Layer-2 networks, shorter settlement times and improvements intended to make the ecosystem feel less fragmented.

Until that infrastructure matures, Layer-2 growth carries a trade-off. It expands capacity while introducing new intermediaries, dependencies and boundaries inside an ecosystem originally valued for its composability.

Ethereum is now trying to scale both layers

Ethereum’s response is not to reverse the Layer-2 strategy. The network is instead attempting to increase capacity on Layer 1 while continuing to expand the data available to rollups.

The next major upgrade, Glamsterdam, is currently planned for the second half of 2026. Its proposed changes focus on parallelisation, greater base-layer capacity and a more efficient division of responsibilities in block construction. The objective is to allow Ethereum to process more activity without making the network prohibitively expensive to operate.

This corrects an important timing detail in the Handelsblatt comparison article, which describes Glamsterdam as a first-half 2026 upgrade. The current official Ethereum roadmap places it in the second half of the year. Its wider significance, however, remains close to the article’s argument: increasing Layer-1 capacity could allow Ethereum to accommodate more activity directly and improve the balance between ecosystem growth and base-layer economics.

Glamsterdam will not force activity to return from Layer 2. Nor would that necessarily be desirable. Rollups remain essential if Ethereum intends to support high-volume financial and consumer applications.

The more plausible outcome is a layered market in which Ethereum handles increasingly valuable settlement and specialised transactions, while Layer-2 networks process high-volume activity. Whether this arrangement strengthens ETH will depend on the price rollups ultimately pay for Ethereum’s services and the demand created by staking, collateral, settlement and data availability.

Success now requires a different measure

Ethereum should no longer be assessed like a conventional platform whose revenue rises automatically with user activity.

Its economic model is becoming closer to that of a settlement network supporting a collection of semi-independent markets. Low fees can make the system more competitive, even when they reduce immediate revenue. Layer-2 profitability can attract developers and capital, even when the resulting value accrues first to the rollup rather than to ETH holders.

This does not mean the Layer-2 roadmap has failed. It means Ethereum has moved from a straightforward capacity problem to a more difficult question of economic design.

The network has shown that it can scale through additional layers. The next test is whether it can preserve a sufficiently strong role for ETH within the system it has enabled. Transaction growth alone will not provide the answer. The more useful indicators will be settlement demand, blob usage, Layer-2 payments to Ethereum, the security budget funded through staking and the degree to which ETH remains indispensable as collateral and reserve capital across the ecosystem.

Ethereum’s Layer-2 networks are no longer merely relieving congestion. They are becoming economic centres in their own right. Ethereum’s future value will depend on whether the base layer remains the essential foundation beneath those centres—or gradually becomes the cheapest component of the stack.