Ethereum’s push towards layer-2 (L2) blockchain scalability could also be a double-edged sword for Ether, probably weakening the worth 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 when it comes to decentralized change (DEX) quantity and costs generated is “below menace” by Solana and BNB Good Chain, Binance Analysis wrote.
Ethereum, Solana, BNB, DEX quantity. Supply: Binance Analysis
The primary components embrace gradual and costly transactions, fragmented “developer mindshare and liquidity, and lowered worth accrual to the L1 because of the rise of L2s,” the report mentioned.
Ethereum’s roadmap already consists of future upgrades geared toward creating cheaper transactions, extra safety, and extra future-proof incentives for the mainnet.
Nonetheless, Ether’s worth accrual could proceed to endure within the close to time period for the reason that subsequent two main upgrades don’t instantly handle these points, however are geared toward creating extra scalability round information availability and incorporating extra L2 networks.
Associated: Google to implement MiCA guidelines for crypto adverts in Europe beginning April 23
Issues have been reignited across the Ethereum mainnet’s financial incentives since Ether’s value fell to $1,410 on April 7, marking its lowest stage since March 2023.
ETH/USD, 1-year chart. Supply: Cointelegraph
Ether’s value fell over 61% throughout a four-month downtrend, which began on Dec. 16, 2024, when ETH briefly peaked above $4,100, Cointelegraph Markets Professional information reveals.
Ethereum’s Pectra, Fusaka improve received’t handle Ether’s worth accrual
After preliminary delays, Ethereum’s extremely anticipated Pectra improve is ready to go dwell on the mainnet on Might 7.
The Pectra improve goals to enhance Ether staking and L2 community scalability, enhance blob capability to allow extra information dealing with on the mainnet and enhance general community capability.
The Fusaka improve, anticipated in late 2025, will give attention to scaling the Ethereum mainnet as a knowledge availability layer by introducing EIP-7594. Fusaka may carry an replace to the Ethereum Digital Machine (EVM), leading to a “extra structured method” to smart-contract creation, lowering runtime overhead and enhancing developer expertise.
Ethereum information capability upgrades. Supply: Binance Analysis
Ethereum’s dedication to L2 scaling could also be a “double-edged sword” as a consequence of considerations across the mainnet’s “competitiveness as a knowledge availability layer” and “the sustainability of worth accrual to Ethereum the asset,” the report mentioned.
Associated: Ethereum shorter good points $1.1M on 50X leverage in 2 days
“One promising path for stronger ETH worth accrual is the event 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 a knowledge availability layer,” the spokesperson instructed Cointelegraph, including:
“Worth accrual by this mannequin is determined by exterior components: L2s should proceed to decide on Ethereum for information availability, and blockspace demand should develop in a aggressive panorama the place options like Solana and BNB Good Chain are gaining traction.”
“Aligning incentive buildings between Ethereum and L2s, whether or not by price sharing, MEV seize, or protocol-level integrations, might be important to make sure sustainable worth stream again to ETH as an asset ought to Ethereum proceed to decide to scaling with L2s,” he added.
Journal: 3 causes Ethereum may flip a nook: Kain Warwick, X Corridor of Flame