The Ethereum network’s primary revenue stream from layer-2 (L2) scaling solutions—blob fees—has plummeted to its lowest weekly level of 2025, signaling ongoing challenges in monetizing its expanded data capacity.
According to Etherscan, Ethereum earned just 3.18 Ether (ETH)—approximately $6,000 as of April 1—from blob fees during the week ending March 30. This represents a 73% drop from the previous week and a staggering over 95% decline compared to the week ending March 16, when blob fee income exceeded 84 ETH.
This sharp downturn highlights the volatile nature of Ethereum’s post-Dencun economic model, which now relies heavily on L2 chains utilizing temporary off-chain data storage known as “blobs” to reduce transaction costs.
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Understanding Blob Fees and the Dencun Upgrade
In March 2024, Ethereum rolled out the Dencun upgrade, a major network enhancement designed to improve scalability by introducing blobs (binary large objects). These blobs store transaction data off the main chain temporarily, significantly lowering costs for L2 rollups like Arbitrum, Optimism, and Base.
While users benefit from cheaper transactions, Ethereum’s fee revenue has taken a hit. Blob fees replaced a portion of traditional gas fees previously paid directly to validators, resulting in an immediate 95% reduction in overall fee income post-upgrade, according to analysis by asset manager VanEck.
“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 commentary.
Despite the efficiency gains, the network continues to struggle with underutilization. Available blob space remains largely unfilled, limiting the potential for consistent revenue generation.
The Unsteady Growth of Blob Fee Income
Since Dencun’s launch, blob fee income has followed a volatile trajectory. Weekly earnings peaked at nearly $1 million in November 2024, driven by increased L2 activity and speculative demand. However, recent weeks have seen a steep reversal.
Data from Dune Analytics reveals that Ethereum’s blob fee revenue has failed to maintain momentum, fluctuating dramatically with no clear upward trend. This inconsistency raises questions about the long-term sustainability of Ethereum’s current scaling economics.
The core issue lies in adoption velocity. While L2 networks are growing, their usage hasn’t scaled proportionally to the massive data capacity now available on Ethereum. Without higher utilization rates, blob fees will remain a minor contributor to the network’s overall income.
Ethereum’s Role as a Data Availability Layer
As L2 ecosystems expand, Ethereum is increasingly positioned not as a primary transaction processor but as a data availability engine—a foundational layer that ensures L2 transaction data is secure and verifiable.
arndxt, author of the Threading on the Edge newsletter, emphasized this shift:
“Ethereum’s future will revolve around how effectively it serves as a data availability engine for L2s.”
This model shifts value creation downstream. While L2s capture user activity and application fees, Ethereum earns modest returns through data publication—essentially renting out storage space rather than processing power.
However, this creates an economic imbalance. Michael Nadeau, founder of The DeFi Report, pointed out that L2 transaction volumes would need to increase more than 22,000-fold for blob fees alone to match Ethereum’s peak transaction fee revenues.
That level of growth is theoretically possible but years away, assuming widespread Web3 adoption, enterprise integration, and mass-market decentralized applications.
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The Road Ahead: Pectra Upgrade and Economic Evolution
Ethereum’s developers are not standing still. The upcoming Pectra Upgrade, expected in 2025, aims to refine how blob space is allocated and priced. Proposed changes include dynamic pricing models and increased blob capacity per block, designed to better align supply with demand.
Sassal, founder of The Daily Gwei, summarized the current strategy:
“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 growth-first approach prioritizes network dominance over immediate profitability. By enabling cheaper and faster L2 transactions, Ethereum hopes to solidify its position as the backbone of the decentralized web—even if short-term revenues suffer.
But long-term viability depends on balancing scalability with sustainable economics. If blob fees remain negligible, validator incentives could weaken, potentially threatening decentralization and security—especially as Ethereum moves further toward proof-of-stake stability.
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Frequently Asked Questions (FAQ)
What are blob fees on Ethereum?
Blob fees are payments made by layer-2 networks to publish compressed transaction data on Ethereum. Introduced during the Dencun upgrade, they allow L2s to reduce user costs while maintaining security through Ethereum’s consensus layer.
Why did Ethereum’s blob fee revenue drop so sharply?
The decline stems from underutilization of available blob space. Despite lower costs for users, L2 transaction volume hasn’t grown enough to fill the increased data capacity, leading to inconsistent fee generation.
How does the Dencun upgrade affect Ethereum users?
Dencun significantly reduces transaction fees on L2 networks like Arbitrum and Optimism by moving data off-chain into blobs. End users enjoy faster, cheaper transactions without compromising security.
Can Ethereum sustain its economy with low blob fees?
Currently, low blob fees are part of a growth strategy. The focus is on scaling first and monetizing later. Future upgrades like Pectra aim to optimize pricing and usage to improve long-term revenue potential.
What is the role of Ethereum in the L2 ecosystem?
Ethereum acts as a data availability and settlement layer for L2 chains. It doesn’t process most transactions directly but ensures that L2 data is secure, transparent, and tamper-proof.
Will blob fees ever replace traditional gas fees?
Unlikely in the near term. Blob fees serve a specific function for L2 data posting and are not intended to replace execution-layer gas fees. Instead, they represent a new revenue stream tied to data availability rather than computation.
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Conclusion
Ethereum’s journey into a scalable, L2-centric future is marked by trade-offs. The Dencun upgrade succeeded in making transactions dramatically cheaper and more efficient—but at the cost of short-term fee revenue. With blob income hitting 2025 lows, the network faces pressure to drive adoption and optimize its economic model.
The upcoming Pectra Upgrade offers hope for rebalancing supply and demand for blob space. Yet success will depend not just on technical improvements but on broader ecosystem growth—more users, more dApps, and more transactions flowing through L2s.
For now, Ethereum continues betting on scale over immediate returns. Whether that gamble pays off will determine not only its financial health but its long-term dominance in the evolving blockchain landscape.