Ethereum’s push towards layer-2 (L2) blockchain scalability could also be a double-edged sword for Ether, doubtlessly weakening the value accrual of the world’s second-largest cryptocurrency, in line with a brand new report from Binance Analysis.
The report means that Ethereum’s L2 blockchain networks — constructed to enhance mainnet scalability and decrease transaction prices — could also be cannibalistic of the Ethereum base layer, negatively impacting the worth of Ether (ETH).
Ethereum’s dominance by way of decentralized change (DEX) quantity and charges generated is “below risk” by Solana and BNB Sensible Chain, Binance Analysis wrote.
Ethereum, Solana, BNB, DEX quantity. Supply: Binance Analysis
The principle elements embrace sluggish and costly transactions, fragmented “developer mindshare and liquidity, and lowered value accrual to the L1 as a result of rise of L2s,” the report mentioned.
Ethereum’s roadmap already consists of future upgrades aimed toward creating cheaper transactions, further safety, and extra future-proof incentives for the mainnet.
Nonetheless, Ether’s value accrual could proceed to undergo within the close to time period for the reason that subsequent two main upgrades don’t instantly handle these points, however are aimed toward creating extra scalability round knowledge availability and incorporating extra L2 networks.
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Considerations have been reignited across the Ethereum mainnet’s financial incentives since Ether’s price fell to $1,410 on April 7, marking its lowest stage since March 2023.
ETH/USD, 1-year chart. Supply: Cointelegraph
Ether’s worth fell over 61% throughout a four-month downtrend, which began on Dec. 16, 2024, when ETH briefly peaked above $4,100, Cointelegraph Markets Pro knowledge reveals.
Ethereum’s Pectra, Fusaka improve received’t handle Ether’s value accrual
After initial delays, Ethereum’s extremely anticipated Pectra upgrade is set to go reside on the mainnet on Might 7.
The Pectra improve goals to enhance Ether staking and L2 community scalability, enhance blob capability to allow extra knowledge dealing with on the mainnet and enhance general community capability.
The Fusaka improve, anticipated in late 2025, will deal with scaling the Ethereum mainnet as an information availability layer by introducing EIP-7594. Fusaka might also deliver an replace to the Ethereum Digital Machine (EVM), leading to a “extra structured strategy” to smart-contract creation, decreasing runtime overhead and enhancing developer expertise.
Ethereum knowledge capability upgrades. Supply: Binance Analysis
Ethereum’s dedication to L2 scaling could also be a “double-edged sword” resulting from considerations across the mainnet’s “competitiveness as an information availability layer” and “the sustainability of value accrual to Ethereum the asset,” the report mentioned.
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“One promising path for stronger ETH value accrual is the development of primarily based rollups,” which “contribute considerably extra in charges” to Ethereum in contrast with L2s like Base, Arbitrum and Optimism, in line with a Binance Analysis spokesperson.
L2s, rollups by prices paid to Ethereum mainnet. Supply: Binance Analysis
“One other avenue is Ethereum’s evolving position as an information availability layer,” the spokesperson instructed Cointelegraph, including:
“Value accrual by this mannequin depends upon exterior elements: L2s should proceed to decide on Ethereum for knowledge availability, and blockspace demand should develop in a aggressive panorama the place options like Solana and BNB Sensible Chain are gaining traction.”
“Aligning incentive constructions between Ethereum and L2s, whether or not by payment sharing, MEV seize, or protocol-level integrations, shall be important to make sure sustainable value move again to ETH as an asset ought to Ethereum proceed to decide to scaling with L2s,” he added.
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