Ethereum continues to evolve. Layer-2 networks are taking on a larger role, offering cheaper, faster transactions. These systems are crucial for handling more users. They let the network scale. Yet this success could hurt ETH’s value if not addressed early. As more activity happens off the mainnet, ETH’s economic function weakens.
Rollups Are Leading the Way
Rollups like Optimism and Arbitrum process transactions off-chain. They then settle the data back on Ethereum. This method reduces congestion and lowers costs. Because of this, rollups now power a large portion of Ethereum’s total usage.
But as these rollups grow, something changes. Users don’t always need to interact directly with ETH. Some use rollup-native tokens. Others pay lower fees that don’t touch ETH as often. As a result, ETH’s role in transaction fees decreases. The demand to burn ETH shrinks. That means the asset isn’t benefiting as much from the network’s growth.
The Burn Mechanism Is Slowing Down
Ethereum introduced a burn function through a major upgrade. A portion of ETH used for transaction fees is permanently destroyed. This mechanism was designed to limit ETH supply as activity increased. It worked well when most activity occurred on the base layer.
Now, with the rise of rollups, that burn is declining. More users are transacting off-chain, and fewer ETH tokens are removed from circulation. That weakens the asset’s deflationary appeal. If left unchecked, this could reduce ETH’s long-term value.
Ethereum’s Growth Isn’t Helping ETH Enough
The Ethereum network is growing stronger. Yet ETH, the token that powers it, isn’t gaining proportionally. That disconnect creates problems. Investors expect ETH to benefit as the network gains traction. But if activity shifts to rollups without meaningful ETH involvement, that connection breaks.
This trend creates a risk. Ethereum could scale successfully but fail to reward ETH holders. Over time, the token might lose its place as the economic engine of the network. That would harm Ethereum’s long-term alignment and its appeal to both developers and investors.
Upcoming Upgrades Bring More Scale
Ethereum developers are preparing major updates. Features like proto-danksharding will make rollups more efficient. Other changes will boost bandwidth and reduce data costs. These improvements are necessary for Ethereum to serve billions of users. But they don’t automatically help ETH.
If the upgrades only support rollups without ensuring ETH is central to them, the token may continue losing utility. The protocol must embed ETH deeper into the system’s economics. Without that, the improvements could actually accelerate ETH’s decline.
Rollups Use Ethereum, Not Always ETH
Rollups depend on Ethereum’s security. They anchor their data on the mainnet. But many rollups use their own tokens internally. Some don’t require ETH for basic operations. Others use it only when bridging funds or paying base-level fees. As more rollups launch, this issue grows.
The result is fragmentation. Ethereum remains the backbone, but ETH becomes just one option among many. That weakens its network effect. The token loses the automatic demand it once had, which lowers its economic strength.
Making ETH the Centerpiece Again
Ethereum’s future success depends on ETH being central. That requires design choices that tie ETH to every core function. Here are a few ideas already in discussion:
- Shared Sequencers: L2s could use ETH-based sequencers, creating more demand for the token.
- Fee Redirection: L2s might route part of their revenue to mainnet, burning ETH or paying validators.
- Unified Fee Payments: Users could pay in other assets, but fees get converted into ETH and burned.
- Token Governance Ties: ETH could control more decisions across both L1 and L2 systems.
These approaches would reinforce ETH’s value as activity grows. The more rollups scale, the more ETH benefits. That alignment is vital for sustainable success.
Decentralization Still Matters
Many rollups today use centralized parts. A single entity may control key systems like sequencers or bridges. That creates trust issues. It could also pose regulatory risks. Ethereum’s philosophy depends on open, permissionless infrastructure.
Rollups must move toward decentralization to stay true to those values. ETH can help with that. If sequencers use ETH-based staking models, and governance includes ETH holders, decentralization becomes more viable. That ensures rollups stay aligned with Ethereum’s core principles.
Rising Competition Raises the Stakes
Ethereum isn’t scaling in isolation. Other chains offer high speed and low cost on their base layers. Solana, Avalanche, and others pose real competition. They don’t rely on rollups. Their simpler structures attract developers and users alike.
If Ethereum’s structure becomes too complex, it could lose market share. Rollups add power, but also friction. The only way to stay competitive is to make sure ETH remains a key part of every interaction. Without that, users may flock to ecosystems with more integrated token utility.
ETH’s Value Proposition Must Evolve
ETH is no longer just gas. It’s used for staking, security, and governance. Yet in a multi-layer world, those roles are at risk. Ethereum must make ETH indispensable at every level—L1, L2, and beyond. That requires deliberate strategy and technical solutions that enforce alignment.
ETH should be the bridge across all layers. It must store value, power computation, and govern future upgrades. If ETH is everywhere Ethereum goes, it will remain strong. Otherwise, the chain may thrive, but the token could fade into the background.
Final Thoughts
Ethereum’s scalability journey is moving fast. Layer-2 networks are taking off, enabling wider adoption. But this growth also brings new challenges. ETH’s role is shrinking unless action is taken. The token must regain center stage if Ethereum is to stay economically sound.
Future upgrades must not only optimize performance. They must embed ETH deeper into the ecosystem’s design. Every transaction, every rollup, and every tool should strengthen ETH’s value. That’s how Ethereum becomes scalable without sacrificing its native asset’s importance.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Always do your own research.
