Ethereum’s transition to Proof-of-Stake (PoS) in September 2022 was hailed as a revolutionary milestone—ushering in energy efficiency, improved security, and a path toward monetary deflation. Two years on, however, Ethereum faces growing skepticism. While the network has evolved technically, ETH’s price performance has lagged behind expectations, especially when compared to Bitcoin (BTC) and Solana (SOL). This article dives into the underlying data to uncover the structural challenges behind ETH’s price stagnation.
The core issues aren't merely technical—they reflect deeper tensions in Ethereum’s ecosystem: the evolving relationship between Layer 1 and Layer 2 networks, and the balancing act between staking yield and liquidity. By analyzing transaction fees, blob costs, Layer 2 adoption, staking trends, and DeFi total value locked (TVL), we can better understand why market sentiment has cooled despite strong foundational upgrades.
ETH Underperforms BTC and SOL: A Relative Value Decline
While ETH has appreciated approximately 44.28% against the U.S. dollar over the past two years—peaking near $4,071 and currently trading above $2,300—it has significantly underperformed relative to other major cryptocurrencies.
👉 Discover how network activity impacts asset valuation—explore real-time crypto analytics here.
When measured against BTC, the picture is stark: the ETH/BTC exchange rate has dropped from 0.0807 BTC per ETH to 0.0414, a decline of 48.70%. This indicates that while both assets have risen in dollar terms, Bitcoin has captured far more relative value.
Even more telling is ETH’s performance against Solana (SOL). Prior to September 2023, one ETH could buy over 50 SOL, peaking at 125.19 SOL. Today, that figure has plummeted to just 17.49 SOL, representing a 63.55% drop. This sharp reversal highlights Solana’s rapid ecosystem growth and investor appetite for high-speed, low-cost alternatives.
One common narrative blames declining transaction fee revenue on Ethereum’s price weakness. However, data reveals a more nuanced reality.
From November 2023 to July 2024, Ethereum’s monthly transaction fee income (tip-only) consistently exceeded $33 million**, with peaks surpassing **$60 million—significantly higher than pre-transition levels. The average monthly fee income over the past 24 months stands at $32.8 million.
But a recent downturn is concerning: fees dropped to $27.96 million in August 2024**, and early September data suggests a further decline to around **$25.68 million. This reversal coincides with weakening market confidence in Ethereum’s ability to sustain long-term value accrual.
Layer 2 Surge: High Throughput, Low Cost to Ethereum
A key innovation post-PoS has been the introduction of blob transactions via EIP-4844, designed to reduce Layer 2 (L2) data publishing costs on Ethereum. The results have been dramatic:
- Arbitrum One: Daily average TPS increased from 9.68 to 21.49 (+122%)
- Base: TPS jumped from 4.33 to 34.41 (+694.69%)
- OP Mainnet: TPS rose from 4.15 to 6.43 (+54.94%)
Notably, Base now operates at 158.85% higher TPS than Ethereum, and Arbitrum exceeds it by 60.24%—a testament to L2 scalability.
However, this growth comes at a cost—literally—for Ethereum’s revenue model.
The top 20 blob submitters have collectively paid just $5.99 million** for **263.93 blobs**, averaging only **$2.27 per blob. Base, despite its explosive growth, has contributed only $109,300** in blob fees—while OP Mainnet paid a mere **$49,400.
👉 See how emerging blockchain trends are reshaping value flow—get ahead with live market insights.
This raises a critical question: If Layer 2s handle most user activity but pay minimal fees to Ethereum, how does ETH capture long-term value?
Currently, Ethereum acts as a secure settlement layer, but the economic feedback loop is weak. While lower fees boost L2 adoption, they also mean less direct value accrual to ETH—especially during periods of low network congestion.
Moreover, DeFi TVL on Ethereum dropped 22.13% post-blob rollout, while L2s like Base (+105.33%) and Linea (+414.02%) saw significant inflows. This shift suggests capital is migrating toward ecosystems offering better user economics—even if built atop Ethereum.
Staking Growth Slows as Competition Heats Up
Ethereum’s PoS model relies on staked ETH for security and yield distribution. Total staked ETH has grown 150.18% since the transition, now exceeding 34.38 million ETH.
Yet momentum is waning:
- 2023 daily staking growth: 0.17%
- 2024 YTD daily growth: 0.06%
- September 2024 daily growth: as low as 0.02%
This deceleration signals diminishing marginal returns for stakers—especially as liquid staking protocols like Lido, Coinbase, and ether.fi dominate supply (Lido alone holds over 9.75 million ETH).
Meanwhile, DeFi TVL on Ethereum has grown 50.12% in 2024, reaching a peak of $67.9 billion in June. While positive, this pales next to **Solana’s 242.20% growth** this year, pushing its TVL toward $4.78 billion.
A simple projection reveals a potential inflection point: if current trends hold, Solana could surpass Ethereum in TVL within 12 months.
This isn’t just about scale—it reflects divergent narratives. Ethereum emphasizes decentralization and security; Solana champions speed and user experience. In bull markets, the latter often captures speculative capital faster.
FAQ: Addressing Key Questions About Ethereum’s Future
Q: Did the PoS transition fail if ETH underperforms?
No—the transition achieved its core goals: energy efficiency, faster finality, and a deflationary monetary policy during low issuance periods. However, price performance depends on broader ecosystem demand, competition, and value accrual mechanisms beyond consensus design.
Q: Are lower fees bad for Ethereum?
Not inherently. Lower fees improve usability and enable L2 innovation. But if fee reductions aren’t offset by increased demand or new revenue streams (e.g., blob fees), long-term value capture weakens.
Q: Can Ethereum regain its dominance in DeFi?
It’s possible with continued innovation (e.g., account abstraction, intent-centric architectures). However, Ethereum must balance decentralization with user experience—a challenge as competitors optimize for speed and cost.
Q: Is staking still worth it for ETH holders?
Yes, but yields are declining (~3–4% APY). The value lies in supporting network security and gaining exposure to future upgrades like proto-danksharding and sharding.
Q: How do blob fees impact long-term sustainability?
Currently minimal, but blob fees could scale with demand. If network congestion returns, L2s may pay significantly more—potentially restoring fee income without sacrificing user experience.
Q: What’s the biggest threat to Ethereum’s ecosystem?
Fragmentation of liquidity and attention across L2s, combined with aggressive competition from chains like Solana and Bitcoin L2s (e.g., Stack). Without strong incentives to keep activity on Ethereum-native layers, value accrual remains at risk.
Conclusion: Rethinking Value Accrual in a Multi-Layer Future
Ethereum’s two-year PoS journey reflects both triumph and transition. Technically, it’s stronger than ever—secure, efficient, and evolving toward mass scalability through L2s.
But economically, it faces a paradox: success in reducing costs may be undermining its own value proposition. As Layer 2s absorb user activity at low cost, Ethereum risks becoming a silent backbone rather than an active value generator.
To thrive, Ethereum must strengthen its economic moat—whether through protocol-level fee sharing with L2s, enhanced staking utilities, or deeper integration of restaking and modular infrastructure.
The path forward isn’t about reversing progress—it’s about reengineering value flow in a world where most activity happens off-chain.