Key Points
- Ethereum’s daily revenue has experienced a significant 99% drop within the past six months.
- This decrease is largely attributed to the implementation of blobs, an efficiency update.
Ethereum’s revenues have seen a considerable decrease in 2024. The daily revenue, which was at its peak at $36 million in March, has recently recorded a low of $199K. Token Terminal reports a 99% decrease in revenues over the last six months.
The Role of Blobs in Ethereum’s Revenue Decline
The drastic drop in revenues is largely associated with the introduction of blobs. These are an efficiency and scaling update which was implemented in March. Blobs allowed Layer 2 solutions (L2s) to process transactions at a lower cost, without reliance on the base layer’s more expensive data availability for storage.
According to Artemis, Ethereum’s monthly revenues reached $542 million in March. In the same month, blob fees generated $1.2 million. However, in the following months, revenues took a hit, falling below $100 million in May and have stayed below that level since.
Impact on Ethereum
Analysts attribute the revenue drop to a significant migration of apps from the base layer to L2s for cost benefits after the introduction of blobs. This transition impacted revenues as base user fees paid using Ethereum gas for transactions declined.
Additionally, Ethereum’s fee structure led to a high burn rate for ETH tokens due to higher gas usage, keeping the altcoin deflationary. However, after the introduction of blobs, the burn rate decreased, turning ETH inflationary, which could potentially impact the altcoin’s price.
Despite the reduced costs for users, some market observers and researchers have suggested adjusting blob fees to burn more ETH and revert it to being deflationary. One of the contributors to Abstract Chain proposed increasing blob fees to rebalance ETH’s relationship with L2s.
However, Ethereum community member Ryan Berckmans disagreed with this proposal, instead advocating for more time given the potential for increased demand from L2. Berckmans argued that the primary goal for Ethereum is not to collect fees but to provide a service.
Despite the significant revenue drop, L2s have seen substantial growth, reaching a record high in transaction count and stablecoins, according to data from Growthepie.
This network growth could be part of the reason why others, like Berckmans, are confident that a potential surge in L2 demand could change the game for blob fees and ETH’s inflation status.
However, whether the Ethereum community members will agree to increase blob fees is yet to be determined.
At the time of writing, the value of ETH had risen above $2.5k after rallying 4% on Monday.
