Is Ethereum L2 Declining? Co-founder Joe Lubin Optimistic About Future Ecosystem, Yet ETF Sees $73.6 Million in Daily Withdrawals

03/21/2025

Ethereum Co-Founder Joe Lubin Highlights Mainnet Maturity at DAS

On March 20, Ethereum co-founder Joe Lubin emphasized at the Digital Asset Summit (DAS) that the maturity and security of the mainnet have provided developers with more room to operate on Layer 1 (L1), expressing optimism that various Layer 2 (L2) scaling solutions will continue to grow in the future. However, the market seems skeptical of this assertion.

Since the Dencun Cancun upgrade, Ethereum’s revenue has significantly decreased, leading to a decline in ETH prices. Moreover, Ethereum ETFs have seen a net outflow for 11 consecutive days, with a single-day withdrawal reaching as high as $73.6 million, indicating concerns about the future prospects of Ethereum L2.

Lubin States Future Key Lies in L2, with New Solutions Like MegaETH and Linea on the Horizon

Lubin stated at DAS that the security and network foundation provided by the Ethereum mainnet have greatly assisted developers in focusing on application construction. He pointed out that future applications will require operation through a “high-performance blockchain database,” which is where L2 scaling solutions will come into play.

Lubin also specifically mentioned the internal development of Linea within Ethereum, along with another upcoming L2 scaling solution, MegaETH.

Concerns Arise Over L2’s Value Contribution, with Investors Questioning Its Efficacy

According to data from L2Beat, there are currently over 140 different Ethereum scaling solutions, including more than 60 rollup solutions. However, this seemingly vibrant L2 ecosystem has led some investors to question whether it is “sucking blood without contributing.”

They argue that while L2 enhances user experience and transaction efficiency, it also siphons significant transaction volume and revenue from L1 without providing sufficient economic value back to the mainnet, resulting in revenue loss and potential dilution.

Currently, there are over 140 L2 scaling solutions available.

Dencun Upgrade Lowers L2 Costs but Mainnet Revenue Plummets by 99%

Since Ethereum’s Cancun Dencun upgrade in March 2024, transaction fees on L2 have significantly decreased, with average gas fees dropping by 95%. This has been a boon for users and developers; however, it has also caused Ethereum mainnet revenue to plummet by 99% within six months, reaching its lowest point in September 2024.

This dramatic change has raised concerns among investors about whether Ethereum has entered a phase of L2 decline, potentially undermining the mainnet’s original value support.

(Ethereum Dencun Cancun upgrade completed, multiple L2 solutions subsequently updated)

Weakening Coin Prices and ETF Outflows Signal Cooling Market Sentiment

Under the dual pressure of a weakening overall market and declining mainnet revenue, ETH prices have steadily dropped since the second half of 2024, reaching a low of approximately $1,759 on March 11, 2025. Analysts predict further downward adjustments in the short term.

At the same time, data from Farside Investors indicates that Ethereum-related ETFs have experienced net outflows for 11 consecutive days, with the worst day occurring on March 13, 2025, when as much as $73.6 million was withdrawn from Ethereum ETFs.

March 13, 2025, is noted as the day with the highest net outflow from Ethereum ETFs, with $73.6 million withdrawn.

Are L2 Solutions a Remedy or Risk? The Future of Ethereum Remains to Be Seen

Despite Joe Lubin’s confidence in the Ethereum ecosystem and L2 vision, actual market trends indicate that there are still doubts about whether the Ethereum mainnet will have its value diluted by L2.

With signs of declining coin prices, collapsing mainnet revenue, and continuous ETF fund withdrawals, whether the future L2 ecosystem can genuinely serve as a catalyst for Ethereum’s next wave of growth or is merely a short-term fad remains to be seen.

(When Vitalik’s favored World Computer MegaETH meets the new generation DEX that market makers are focusing on, GTE completes community financing)

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