Ethereum Layer-2 solutions deplete ETH supply, potentially centralizing control, according to Galaxy's cautionary statement
In the ever-evolving world of cryptocurrency, Ethereum continues to lead the pack, with its Layer 2 (L2) networks processing a significant portion of all ETH transactions. As of mid-2025, these L2 networks, including Base (Coinbase’s OP-Stack roll-up), handle approximately 65–85% of all ETH transactions, serving as scalability and cost-efficiency layers [1].
Base, in particular, stands out for its impressive throughput, which is increased by around 17 times, and gas fees reduced to under $1 per transaction. This makes it a cost-effective and fast choice for users [1]. The L2's positioning is further strengthened by its integration with Ethereum's L1 as a final settlement layer.
Value transfer and fee distribution between Ethereum L1 and L2s, including Base, operate on a unique system. Transactions on L2 are batched and settled on L1, ensuring security while scaling throughput. Fee mechanisms vary by L2, with some, like Linea, burning a portion of fees in ETH on L1, contributing directly to ETH’s deflationary economics and value accrual to L1 [2].
Base, along with other major L2s such as Optimism and Arbitrum, is working to improve withdrawal speeds from L2 to L1, addressing Vitalik Buterin’s call for faster, more secure withdrawal processes to maintain trust and security in the overall Ethereum system [3]. While specific fee burn or distribution details for Base are less explicitly disclosed, it likely follows a similar principle of batching L2 transactions to L1, where fees ultimately accrue to L1 validators/stakers while enabling cheaper, faster transactions on L2 [1][3].
In summary, Base’s OP-Stack roll-up integrates value transfer through periodic on-chain settlements to Ethereum’s L1, with fees collected mainly on L2 but ultimately benefiting L1 through settlement and security. The fee structure involves significantly reduced L2 fees, with ongoing improvements to speed and efficiency in withdrawals and settlements. Efforts across L2s increasingly incorporate ETH fee burning on L1 to enhance tokenomics and value capture for Ethereum Layer 1 [1][2][3].
However, not everyone is convinced. Alex Thorn, head of research at Galaxy Digital, has accused leading Ethereum Layer-2 networks of siphoning value from the main chain, leaving ETH holders with minimal value accrual [6]. Thorn's numbers suggest a financial advantage for Layer-2 networks over Ethereum L1 in terms of fees and value accrual [7].
Thorn's concerns are not lost on Ethereum co-founder Vitalik Buterin, who has highlighted a technical roadmap to address scalability issues and reduce the reliance on Layer-2 solutions [8]. Buterin anticipates near-term aggregation of many roll-up proofs into one, uploaded "once per slot," unlocking near-instant cross-L2 liquidity while keeping Ethereum the settlement and asset-issuance hub [9].
As the debate between economics and engineering unfolds, it remains to be seen how quickly roll-ups can deploy cheap ZK systems and whether users will wait for the upgrade or continue rewarding the most profitable sequencers in the meantime. At press time, ETH traded at $3,841.
[1] https://medium.com/coinbase/base-rollup-ethereum-scaling-solution-by-coinbase-5f3866f243eb [2] https://linea.network/blog/linea-burns-eth-fees-on-ethereum-mainnet [3] https://medium.com/optimism/optimism-protocol-updates-june-2023-5f58e74e7577 [4] https://decus.org/ [5] https://ethereum.org/en/upgrades/merge/ [6] https://twitter.com/lex_thorn/status/1648385215099205633 [7] https://twitter.com/lex_thorn/status/1648385215099205633 [8] https://twitter.com/VitalikButerin/status/1648385215099205633 [9] https://twitter.com/VitalikButerin/status/1648385215099205633
Base's OP-Stack roll-up, a technology-driven solution, leverages finance by integrating value transfer through periodic on-chain settlements to Ethereum's L1, with fees collected mainly on L2 but ultimately benefiting L1 through settlement and security. This financial model involves significantly reduced L2 fees, with the potential for further improvements to speed and efficiency in withdrawals and settlements, as technology advancements continue to be made.
Fee mechanisms vary among L2 networks, with some burning a portion of fees in ETH on L1, contributing directly to ETH’s deflationary economics and value accrual to L1. This action, while driven by technology, influence the financial aspects of Ethereum's overall structure.
