Ethereum revenue plunges 99% as Dencun upgrade shifts dynamics
Ethereum (CRYPTO:ETH) has seen its revenue plummet by 99% since the Dencun upgrade in March, as competition from Layer-2 (L2) scaling solutions has intensified.
The upgrade, which took place on March 13, significantly reduced transaction fees, prompting a surge in daily transactions and monthly active users on L2 networks.
However, this shift has diminished Ethereum's role as the primary transaction platform.
According to data from Token Terminal, Ethereum’s network revenue dropped dramatically from $35.5 million on March 5 to just $566,000 by late August.
Over 70 active L2 solutions and 21 Layer-3 (L3) projects are now competing for users, drawing traffic away from Ethereum’s mainnet.
Rob Viglione, CEO of Horizen Labs, noted that Ethereum is transitioning from a transaction platform to a settlement and security layer for L2 networks, which could ultimately strengthen its position in the long run.
Despite the benefits of lower transaction fees, the Dencun upgrade has had unintended consequences.
With reduced fees, demand for ETH has declined, affecting the deflationary impact originally intended by Ethereum’s EIP-1559.
Instead of reducing the supply, Ethereum has turned inflationary, with more tokens being issued than burned.
Data from Ultrasound.money indicates that more than 16,775 ETH have been added to the network's supply since mid-April.
CryptoQuant analysts suggest that under current network conditions, Ethereum is unlikely to return to a deflationary state without a significant increase in activity.
This challenges the narrative of Ethereum as "ultrasound" money.
However, Ethereum co-founder Vitalik Buterin remains optimistic, arguing that the network has grown stronger despite these economic shifts, positioning itself as critical infrastructure in a diverse blockchain ecosystem.
At the time of reporting, the Ethereum (ETH) price was $2,376.96.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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