According to Token Terminal, Ethereum's daily transaction fees have fallen to their lowest level since September 2024, influenced by the rise of Layer-2 solutions and increased supply.
Impact of Layer-2 on Ethereum
Ethereum's fee revenue drop coincides with its supply growth since April 2024. The deflationary effect from the 2022 Merge has waned as Layer-2 solutions have reduced fee-burning frequency. While these solutions alleviate congestion, they face interoperability issues, leading to concerns of ecosystem fragmentation.
Competition and Internal Challenges
Ethereum's struggles leave room for competitors. Tron gains ground as a stablecoin transaction platform, and Solana strengthens its decentralized finance presence. Internal upheavals, including leadership changes within the Ethereum Foundation, add to its challenges.
Optimism Among Ethereum Supporters
Despite challenges, Ethereum supporters remain optimistic. On February 7, a significant inflow of 330,705 ETH, valued at $833 million, showcases investor confidence, according to CryptoQuant.
The rise of Layer-2 solutions, increased supply, and internal instability present both challenges and opportunities for Ethereum. Despite fee declines, investor confidence remains robust.
