Ethereum’s Layer 2 (L2) ecosystem has grown rapidly, delivering scalability, reduced congestion, and cheaper gas fees. But is this rapid expansion coming at Ethereum’s own expense?
This question took center stage at a recent blockchain conference hosted by Cornell Tech, where industry leaders voiced growing concern: while L2s thrive, the Ethereum mainnet may be getting shortchanged.
Are Layer 2s Taking Too Much Without Giving Back?
Bankless co-founder David Hoffman didn’t mince words during a panel discussion, acknowledging internal frustration: “People at the Ethereum Foundation will admit — we messed up by being too academic, too detached.”
That sentiment echoed among other panelists, who pointed to how centralized, profit-driven L2s like Base, Arbitrum, and Optimism are pocketing millions in sequencing fees — the revenue from prioritizing and ordering transactions — without sharing much with the base layer that secures their operations.
James Beck of ENS Labs captured the broader concern: Ethereum’s role as a neutral validator is vital, yet it’s not being compensated fairly for that work. Instead, L2s enjoy the security of the mainnet while capturing most of the upside.
Dencun: A Game-Changer with Complicated Results
Things escalated after Ethereum’s March 2024 Dencun upgrade, which introduced “blob” transactions — a scaling feature that slashed the cost for L2s to post data to Ethereum. This made L2 operations even more profitable.
Base, the Coinbase-backed L2, illustrates the impact well. Since Dencun, it has earned nearly $98 million in transaction fees while paying Ethereum just $4.9 million — a 20:1 revenue ratio, according to data from CoinMetrics analyst Tanay Ved.
A Base spokesperson pushed back on concerns, stating they’ve paid over $20 million in settlement fees to Ethereum since inception and that their platform helps bring more users, builders, and capital into the Ethereum ecosystem. Yet in recent months, Base has typically remitted only about 8–10% of its total revenue back to Ethereum.
Will Hard Forks Tip the Balance?
Not everyone sees the current imbalance as permanent. Upcoming Ethereum upgrades like Pectra (launched May 7) and Fusaka (expected in late 2025) will increase blob throughput, potentially raising Ethereum’s fee capture from L2s.
Currently, Ethereum is maxing out its 3-blob-per-block target. Pectra raises this to six, with a potential ceiling of nine. This gives Ethereum more space to extract value as L2 usage grows.
Centralization Risks and the Push for “Based Rollups”
Another layer of concern: the centralization of L2 sequencers. As it stands, most transaction ordering on L2s is handled by a single, centralized entity — a vulnerability that leaves rollups prone to outages and attacks. The June 2023 hack of Linea, a $2.6 million exploit, underscored the risks.
In response, some developers are leaning into “based rollups,” where sequencing would happen on Ethereum itself, not on L2s. Taiko Alethia, the first major based rollup, launched in May 2024 and has already secured over $148 million in value.
Though smaller than heavyweights like Base, which sits at over $12 billion in value locked, Taiko’s performance — with 20+ user operations per second — shows promise in balancing decentralization and scalability.
Could a “Tax” on L2s Backfire?
Some in the community have floated the idea of a “fee-sharing” model or even a formal tax on L2s to ensure Ethereum gets its fair share. But critics warn this could harm Ethereum’s competitiveness and push users to rival chains like Solana.
“There are philosophical risks too,” Ved cautioned. “A tax could contradict Ethereum’s ethos of decentralization.”
Instead, proposals like EIP-7762 — which adjusts blob fees based on demand — may offer a subtler, market-driven solution to improve Ethereum’s revenue without hard mandates.
A Culture Shift Underway?
While Ethereum’s decentralized structure makes sweeping changes hard to implement quickly, signs of progress are emerging. Workshops like the one ENS Labs hosted in the UK this January — bringing together developers from Linea, Status, OpenZeppelin, and others — are helping shape a more collaborative future for L2 interoperability and infrastructure.
The Ethereum Foundation itself is evolving too, with new leadership in Tomasz Stańczak and Hsiao-Wei Wang ushering in what some see as a more focused and accountable era.
Despite recent challenges, optimism remains. “Ethereum still leads in DeFi TVL, stablecoins, and institutional interest,” Beck said. “BlackRock is settling funds on Ethereum. That says a lot.”
In the end, Ethereum may be grappling with growing pains — but it’s also laying the groundwork to become the central hub in a sprawling network of interoperable blockchains. Whether through fees, governance, or cultural shifts, the next phase for Ethereum may be less about innovation at the edges — and more about reclaiming value at the core.
