L2 chains are drawing liquidity and users away from Ethereum but contribute minimally to ETH burning. Running 'almost for free', they slow down ETH burn rate and affect network revenues.
Growth of L2 Chains and Their Impact on Ethereum
L2 chains have taken some traffic from Ethereum, weakening key economic metrics for L1. Ethereum continues to lose DeFi market share, dropping to 51.3% of total value locked from 60% at the beginning of 2024.
Financial Outflows and Ethereum's Revenue Decline
During peak times in 2024, L2 chains led to the burn of 261 ETH per day. In 2025, 602 ETH was burned daily, but blob fees remain low. Even on busy days, L2 protocols pay minimal fees to L1 Ethereum amidst low gas fees.
Risks and Fragmentation of L2 Networks
The growth of L2 leads to fragmentation. Despite claims of allegiance, L2 often operate independently, limiting payouts to Ethereum. Most networks remain relatively centralized, except for Arbitrum and Optimism, posing potential security threats.
L2 chains continue to evolve, presenting new opportunities and risks for Ethereum and its users. Burning of ETH and decentralization remain key issues as the ecosystem develops.
