Ethereum is scaling fast, and Layer-2s are leading the charge. They help the network handle more users and transactions at lower costs. However, this improvement comes with a risk. ETH, the native token, may lose some of its relevance as the main chain becomes less central to activity. Developers and community leaders must ensure ETH remains vital in this evolving ecosystem.
Layer-2s Boost Performance but Challenge ETH’s Role
Rollups like Arbitrum, Optimism, and Base execute transactions outside the Ethereum mainnet. They then settle proofs on-chain. This approach lowers congestion and makes transactions cheaper. As a result, these rollups have attracted a significant share of users and applications. But the more activity shifts away from the mainnet, the less ETH is involved in the process.
When users pay lower fees on Layer-2s or use alternate tokens, the demand for ETH weakens. The burn rate drops too. Ethereum’s previous upgrades tied network activity to ETH’s value by burning part of the fees. With less ETH involved, this mechanism becomes less effective. That could impact ETH’s deflationary model and long-term price outlook.
ETH Burn Rates Are No Longer Surging
Burning ETH was a powerful change. It reduced supply with every transaction, especially when the network was busy. Traders and investors saw this as a positive shift. However, this model assumed most activity would stay on the base layer. That’s no longer the case. As users move to faster, cheaper rollups, fewer transactions directly burn ETH.
The reduced burn rate means ETH is not gaining as much from Ethereum’s rising adoption. It raises questions about how sustainable the deflationary trend really is. For ETH to remain strong, Ethereum needs to find ways to connect network growth back to the token’s utility.
ETH’s Economic Role Is Getting Weaker
The Ethereum protocol keeps improving. Yet ETH is no longer tied to those gains as tightly as before. Activity may grow, but if it doesn’t involve ETH, the token won’t benefit. That’s a serious challenge. If Layer-2s handle more traffic but don’t require ETH for gas or fees, the token becomes just one of many options rather than a must-have.
This disconnect could lead to lower demand for ETH even as the ecosystem thrives. Ethereum might scale successfully but leave its main asset behind. That’s a problem for long-term alignment between the network’s usage and its token’s value.
Scalability Upgrades Are Coming Fast
Ethereum’s developers are pushing forward. Upgrades like EIP-4844 and others aim to reduce Layer-2 costs further. These updates will make it even cheaper and faster to operate rollups. More projects will move off-chain. But unless these changes increase ETH utility, the token may struggle to keep up with the platform’s progress.
As Ethereum becomes more modular, ETH needs to be at the center of all layers. Otherwise, the value might shift to other assets and networks. The protocol must make ETH an unavoidable part of every transaction, whether it happens on Layer-1 or Layer-2.
Most Rollups Don’t Rely on ETH
Rollups use Ethereum for security, but not always ETH for transactions. Many have their own tokens. Some only need ETH for final settlement, not day-to-day usage. This creates a divide. Ethereum gains adoption, but ETH isn’t necessarily part of that success story.
The more this happens, the more fragmented Ethereum’s economy becomes. ETH starts to lose its network effects. The token becomes optional, which weakens its demand and importance. Without strong utility across layers, it becomes harder to justify ETH’s value as the ecosystem grows.
ETH Needs to Regain Its Position
There’s still time to fix this. Developers can introduce designs that embed ETH into rollup operations. Shared sequencing models could use ETH as the staking asset. Fee systems could redirect value back to the mainnet. These changes would help ETH retain its role as the primary economic driver.
Several strategies are being discussed. These include converting all fees to ETH before settlement, rewarding validators with ETH from Layer-2 activity, and integrating ETH-based governance across rollups. These ideas would help bring economic activity back to the token and ensure ETH gains from every layer of growth.
Decentralization Can Reinforce ETH’s Role
Currently, many Layer-2s are centralized. A few entities control how transactions are processed. Ethereum’s core values call for decentralization. ETH can help achieve that. If rollups adopt decentralized sequencers that use ETH for consensus or staking, the token becomes essential again.
Using ETH in governance and security aligns the layers more tightly. It also ensures that decentralization is achieved without sacrificing economic integration. The Ethereum ecosystem remains unified, and ETH holders benefit from growth at all levels.
Competition Puts Pressure on Ethereum
Other blockchains are moving quickly. Solana, Avalanche, and others offer speed and low fees without Layer-2 complexity. Their models appeal to builders who want simple solutions. If Ethereum doesn’t create a clear advantage—powered by ETH—it risks losing developers and users.
To compete, Ethereum must make sure its ecosystem is not only scalable but also centered around its native asset. If users and apps don’t need ETH, they might choose faster platforms where tokens play a stronger role. Ethereum needs ETH to be the glue that holds everything together.
ETH Must Be Indispensable Across Layers
ETH’s original use case was simple. It paid for gas. But its role has expanded. It now secures the network through staking, supports governance, and acts as a store of value. To remain vital in a modular world, ETH must be necessary across every layer, tool, and protocol.
Every time a user sends a transaction, interacts with a smart contract, or bridges assets, ETH should be involved. That’s how the ecosystem can grow without leaving its native asset behind. Without this, ETH might fade while Ethereum continues building.
Conclusion
Ethereum’s scaling journey is moving quickly. Layer-2s are unlocking new possibilities. But ETH must remain at the heart of it all. Otherwise, the token risks becoming irrelevant even as the ecosystem flourishes. The community has a chance to address this now. By designing systems that link growth directly to ETH, developers can preserve the token’s value while expanding Ethereum’s reach.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Always do your own research.