The revenue generated by Ethereum's layer 1 (L1) protocol from layer 2 (L2) solutions has dropped significantly following the Dencun upgrade, according to Galaxy Research. L2 solutions such as zk-rollups, Arbitrum, and Optimisim have become dominant in processing transfers off-chain and settling them on L1. Before the upgrade, L1 still made revenue from transfer fees for these settlements. However, the upgrade has made L2 more efficient in interacting with L1, reducing the need for costly L1 interactions. While this has decreased transfer charges, it has also greatly reduced the direct revenue of Ethereum L1 from L2-based operations, resulting in L2 solutions dominating the transaction volume of Ethereum. This shift raises concerns about the sustainability of Ethereum's layer-1 security model, as it relies on transfer fees for validators and security maintenance.



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