In a rather amusing gathering at the Digital Asset Summit, Ethereum‘s co-founder, Joe Lubin, took to the stage, his demeanor a curious mix of optimism and resignation. He spoke of the future of the smart contract network, declaring layer-2 (L2) scaling networks as the lifeblood of the Ethereum ecosystem. One could almost hear the collective sigh of investors in the audience, pondering their own futures.
In a tête-à-tête with CryptoMoon’s Turner Wright, Lubin waxed poetic about the necessity of next-generation databases, powered by high-throughput blockchain technologies. He remarked:
“The Ethereum ecosystem is so vast and mature that it would be wise for new kinds of databases — new layer 2 networks — to set up shop as layer 2s of Ethereum. We have our own, which boasts some rather splendid characteristics, called Linea.”
“And let us not forget another promising layer 2, soon to emerge, dubbed MegaETH,” Lubin added, perhaps with a twinkle in his eye, as if he were announcing the arrival of a new pet rather than a financial instrument.
Ultimately, the Ethereum co-founder concluded that newer layer-1 chains would find themselves in a rather precarious position, struggling to compete with the robust architecture and security guarantees of Ethereum. One could almost hear the echoes of laughter from the ether, as if the blockchain itself were chuckling at the folly of competition.
Investors Have Doubts About Layer-2 Approach
According to L2Beat, there are currently over 140 unique scaling solutions for Ethereum, including 60 rollup networks. It seems the Ethereum ecosystem is akin to a bustling bazaar, where every vendor claims to have the best wares, yet the customers remain skeptical.
Investors have taken to criticizing Ethereum’s layer-2 networks, likening them to parasitic entities that drain the layer-1 network of revenues while contributing little more than a shrug and a wink to the base layer. Ah, the joys of capitalism!
Ethereum’s average gas fee plummeted by 95% following the Dencun upgrade in March 2024, a move that dramatically lowered transaction fees for layer-2 networks. This reduction, however, led to a staggering 99% collapse in revenue on the Ethereum base layer by September 2024. One might say it was a classic case of “be careful what you wish for.”
Since that fateful time, the price of Ether (ETH) has been on a downward spiral, recently hitting a low of approximately $1,759 on March 11. Analysts, with their crystal balls, predict further declines in 2025, leaving investors to ponder their life choices.
Data from Farside Investors reveals that outflows from Ether exchange-traded funds (ETFs) have persisted for 11 consecutive days, a trend that mirrors the broader downturn in the crypto markets. It seems investors are opting for the safety of cash, government securities, and dollar-pegged stablecoins, as they flee from the wild ride of risk-on assets.
The most significant day of outflows occurred on March 13, when investors collectively pulled a staggering $73.6 million from ETH ETFs. It appears they have decided that a little less volatility is worth a lot more peace of mind. Who knew finance could be so dramatic? 🎭
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2025-03-20 22:43