The Ethereum network’s primary revenue stream from layer-2 (L2) scaling solutions—commonly referred to as blob fees—has dropped to its lowest weekly levels of 2025, according to blockchain analytics platform Etherscan. During the week ending March 30, Ethereum generated just 3.18 Ether (ETH) in blob fee income, equivalent to approximately $6,000 at current market rates. This represents a 73% decrease from the previous week and a staggering over 95% decline compared to the week ending March 16, when blob fee earnings surpassed 84 ETH.
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This sharp downturn highlights ongoing challenges in Ethereum’s post-Dencun economic landscape, where reduced transaction costs for users have come at the expense of immediate network revenue. While the long-term vision for Ethereum as a scalable, L2-centric ecosystem remains intact, short-term fluctuations in blob fee income are raising questions about sustainability and adoption momentum.
Understanding Blob Fees and the Dencun Upgrade
In March 2024, Ethereum implemented the Dencun upgrade, a major protocol enhancement designed to improve scalability by introducing proto-danksharding. A core component of this upgrade was the introduction of blobs, temporary off-chain data storage units used primarily by L2 rollups to post transaction data more efficiently and at lower cost.
Before Dencun, L2s published their transaction data directly onto Ethereum’s main chain, consuming valuable block space and contributing significantly to gas fees. With blobs, this data is now stored separately but still secured by Ethereum, dramatically reducing costs for end users—often by 90% or more.
However, this efficiency came with a trade-off: a steep initial drop in Ethereum’s fee revenue. According to data from asset manager VanEck, overall fee income fell by as much as 95% immediately following the upgrade.
“ETH fees were weak due to lack of blob revenues as L2s have not filled available capacity,” said Matthew Sigel, VanEck’s head of digital asset research, in a November 2024 post on X.
Despite the cost savings, L2 networks have yet to fully utilize the available blob space, leaving Ethereum under-monetized relative to its new infrastructure capabilities.
Volatile Revenue Trends Post-Upgrade
Since Dencun’s launch, blob fee income has followed a volatile trajectory. Weekly earnings peaked at nearly $1 million in November 2024, signaling strong early adoption and usage spikes across major L2 platforms like Arbitrum, Optimism, and Base.
However, recent weeks have seen a sharp reversal. The drop to just $6,000 in weekly blob fees underscores inconsistent demand and underutilization of the newly expanded data capacity. Analysts attribute this fluctuation to several factors:
- Seasonal lulls in on-chain activity
- Slow migration of high-volume applications to L2s
- Limited economic incentives for L2s to maximize blob usage
Data from Dune Analytics illustrates the uneven nature of blob fee accumulation, with pronounced peaks and troughs that reflect sporadic bursts of network utilization rather than sustained growth.
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The Bigger Picture: Ethereum as a Data Availability Layer
Ethereum’s shift toward becoming a data availability engine for L2 networks marks a fundamental transformation in its economic model. Instead of processing every transaction directly on the mainnet, Ethereum now focuses on securing and validating compressed data batches from L2s via blobs.
This architectural pivot positions Ethereum as the foundational trust layer in a multi-tiered blockchain ecosystem. However, it also raises concerns about long-term revenue sustainability.
As arndxt, author of the Threading on the Edge newsletter, noted:
“Ethereum’s future will revolve around how effectively it serves as a data availability engine for L2s.”
For this model to succeed financially, L2 transaction volume must grow exponentially. Michael Nadeau, founder of The DeFi Report, estimated that L2 activity would need to increase by over 22,000 times current levels for blob fees alone to match Ethereum’s peak historical transaction fee revenues.
While such growth is theoretically possible with broader Web3 adoption, it remains distant in practice.
The Road Ahead: Pectra Upgrade and Economic Evolution
Ethereum’s economic framework continues to evolve. One upcoming milestone is the Pectra Upgrade, expected later in 2025. This enhancement aims to optimize blob space allocation by increasing the number of blobs per block and improving account abstraction features.
These changes could incentivize higher L2 utilization by offering more flexible and cost-effective data posting options. Additionally, improvements in wallet infrastructure and smart contract automation may drive increased on-chain activity across DeFi, NFTs, and social applications.
Still, many in the community acknowledge that scaling takes precedence over immediate monetization. As Sassal, founder of The Daily Gwei, put it:
“The plan is simple: scale Ethereum as much as possible to capture as much market share as we can – worry about fee revenue later.”
This long-game strategy reflects confidence in network effects: once Ethereum solidifies its role as the backbone of scalable blockchain applications, demand—and revenue—will follow.
Frequently Asked Questions (FAQ)
Q: What are blob fees on Ethereum?
A: Blob fees are payments made by layer-2 networks to post transaction data on Ethereum via temporary data containers called "blobs." These fees contribute to Ethereum's overall revenue while enabling cheaper transactions on L2s.
Q: Why did Ethereum’s blob fees drop so sharply?
A: The decline reflects underutilization of blob space by L2 networks, seasonal dips in on-chain activity, and the lingering effects of the Dencun upgrade, which prioritized scalability over immediate fee generation.
Q: Can Ethereum recover its lost fee revenue through blobs?
A: Yes, but only with massive growth in L2 transaction volume. Current estimates suggest usage would need to increase thousands of times over to match past peak fee levels.
Q: How does the Dencun upgrade affect regular Ethereum users?
A: It significantly lowers transaction costs for users interacting with L2 networks like Arbitrum or Base, making DeFi, NFTs, and other dApps more accessible.
Q: What is the Pectra Upgrade?
A: Pectra is a planned Ethereum upgrade focused on enhancing blob efficiency, increasing data throughput, and supporting advanced account abstraction—key steps toward better scalability and usability.
Q: Is low blob fee income a sign that Ethereum is failing?
A: Not necessarily. It reflects a transitional phase where scalability is being prioritized. Long-term success depends on ecosystem growth and increased L2 adoption.
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Conclusion
While Ethereum’s recent plunge in blob fee income may raise eyebrows, it should be viewed within the broader context of strategic scaling. The network is undergoing a deliberate transition—from a transaction-processing powerhouse to a secure data settlement layer for an expanding universe of L2 solutions.
Short-term revenue fluctuations are expected during such transformations. The critical metric moving forward will not be weekly blob earnings, but rather L2 adoption rates, data throughput, and ecosystem innovation.
As upgrades like Pectra pave the way for greater efficiency and scalability, Ethereum remains positioned to lead the next phase of decentralized computing—even if the financial rewards take time to materialize.
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