Are Layer-1s Old News? These Are The Biggest L1 Revenue Earners and Losers

Will any Layer 1s  get adopted for real-world use ever? Every blockchain dev and shill on Reddit claims their adoption is right around the corner, but nothing seems to change.

Are these 2020 layer 1s really going to go that high? 2016 layer 1s like NEO and EOS didn’t go that high in 2020.

Are bigger institutions waiting for something that isn’t centralized to hell but isn’t expensive?

The layer 1 crypto narrative might be old news. Today, we want to investigate that and more.

Ethereum’s Layer-1 Revenue: A Steep Decline

Ethereum’s buzzing with the rise of layer-2, where user activity and transactions have exploded since March 2024.

While layer 2s have thrived, layer 1 revenue has taken a hit,  dropping 99% since March. This is a clear sign of how the network is evolving.

ETH is in a death spiral.

ETH is doing $200K a day in "fee revenue".
That's 73 Million a year.

But that's not equivalent to a company making $73 Million a year in Profit, or even a company making $73 million a year in Revenue.

That $73 Million is not even sufficient to buy… https://t.co/rWa24iQq3a

— Fred Krueger (@dotkrueger) September 3, 2024

Adding to the chaos on Ethereum, network fees hit their highest levels for the year on March 5, 2024, at $35.5 million.

Thankfully, the Dencun upgrade came later in March, which cut layer-2 fees, enticing users towards more economical transaction paths. However, none of this has caused user adoption in Ethereum (or several other L1s) to rise, nor has it caused their price to do anything outside of following Bitcoin.

The Proliferation of Layer-2 Solutions

The problem, as institution investors see it, is that the Ethereum network, while the most decentralized, is bursting with layer-2 and layer-3 players, 95 in total.

It’s become too many. Each is eating the other in a bid for dominance. Anoma’s CEO, Adrian Brink, suggests the market is flooded with more solutions than needed.

As for other L1s, Solana, Sui, and Binance are tackling centralization issues, while Polkadot and Cardano’s app deserts aren’t winning any fans.

Investors are done being wowed by ‘partnerships’ that the developers themselves usually paid for and said use cases that aren’t practical.

There are few to no bull catalysts left for previous cycle L1s. New product launches and partnerships no longer affect price action or attract new buyers. On top of this, they will be competing for attention and liquidity with meme coins, NFTs, and first-cycle coins that will have the benefit of pre-launch hype.

So, is the L1 Scene Dead?

Warren Buffett once said, “The stock market is a device for transferring money from the impatient to the patient.”

Bitcoin has the strongest narrative in crypto: digital gold. It’s the market mover in this space.

Conversely, even with the introduction of ETFs on Ethereum , the L1 narrative is still figuring itself out. You don’t hear anyone talking about EOS anymore, and we expect this to happen to many more L1s.

The top ten of the layer 1 market seems safe, yet, as is evidenced in Ethereum’s L2 boom, this space is marred by vaporware.

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Disclaimer: Crypto is a high-risk asset class. This article is provided for informational purposes and does not constitute investment advice. You could lose all of your capital.