Ethereum's Revenue Decline Sparks Community Debate: Is This a Warning Sign of Recession?

Over the past few days, one of the hottest debates in the crypto community has been about Ethereum’s revenue.

On September 7, AJC, Enterprise Research Manager at Messari, posted a post claiming that the Ethereum network is “dying.” He pointed out that although ETH’s price hit new highs in August, Ethereum’s revenue for the month was only $39.2 million.

This figure represents a 75% decrease compared to $157.4 million in August 2023 and a 40% drop compared to $64.8 million in August 2024. Furthermore, this marks the fourth-lowest monthly revenue in Ethereum’s history since January 2021.

AJC remarked that Ethereum’s fundamentals are collapsing, yet people seem to care only about ETH’s price increases, ignoring the health of the network. Two days after the tweet was posted, it has already received nearly 380,000 views and close to 300 replies.

Why is Ethereum’s fundamentals being discussed so intensely now?

The timing is indeed intriguing. ETH is currently at the peak of a bull market, with its price repeatedly hitting new highs, but the activity on the network and Ethereum’s positioning are quietly shifting.

After the Dencun upgrade in 2024, Layer 2 solutions like Base and Arbitrum have risen to prominence, significantly reducing transaction fees on the mainnet and shifting revenue to these scaling layers. Meanwhile, this year’s trend of tokenized financial instruments has seen SBET and BMNR competing to accumulate ETH, as mainstream finance and Wall Street begin turning ETH into a tool for financial leverage.

Now, Ethereum seems more like an altruistic flag, waving to respond to market trends and pointing the way for others, while bearing its own struggles.

The drop in revenue is an undeniable fact, but whether this signals a decline in the Ethereum network itself is a matter of debate within the community.

Proponents: Revenue is the Lifeblood, and the Alarm Has Sounded

The core argument of AJC and other supporters is straightforward. Revenue is the proper metric to evaluate Layer 1 blockchains.

Specifically, the revenue of a blockchain primarily comes from transaction fees and fees for using block space, which directly reflects user demand for the chain.

Ethereum, as the largest platform in the crypto space, has its core strength rooted in block space demand. This advantage allows the network to efficiently handle smart contracts and decentralized applications, setting it apart from Bitcoin, which primarily serves as a store of value. This differentiation has long been a major narrative in Ethereum's favor.

However, with revenue now approaching zero, it signals a decline in user demand for the main chain. Even though Layer 2 solutions are thriving, AJC argues that the ecosystem lacks sufficient new users to sustain the usage of so many Layer 2 networks.

You might wonder why revenue is tied to Ethereum’s fundamentals.

The logic of the original poster and proponents is that revenue is collected in ETH and subsequently burned. This directly fuels Ethereum’s deflationary mechanism. If revenue collapses, the burn rate decreases, increasing the supply pressure on ETH and making it difficult to maintain long-term value.

What’s more, during the last bull cycle, the Ethereum community proudly showcased the chain's high revenue as evidence of block space premiums, demonstrating strong network demand. Now that the situation has reversed, proponents argue this is not a coincidence but rather a genuine collapse in demand drivers.

Although the view is pessimistic, a more neutral perspective suggests that the network itself is the asset. While prices can be inflated by speculation in the short term, they inevitably return to reality if disconnected from fundamentals. This pattern has played out countless times in other crypto infrastructure projects.

From an observer’s standpoint, AJC’s revenue-based logic does hold merit as it highlights the hidden risks beneath ETH’s bull market exuberance. However, if one overlooks other ecosystem indicators such as on-chain activity, this perspective might seem somewhat one-sided.

Opponents Strike Back: Is Declining Revenue Actually a Good Thing?

AJC’s argument quickly turned the comment section into a battleground, with opponents strongly disagreeing with the notion of Ethereum’s decline.

Unlike typical Ethereum defenders, these critics are approaching the issue from a broader perspective. Their main counterpoint is this:

Viewing Ethereum as a tech company that aims to maximize revenue is fundamentally flawed. Ethereum is better understood as a cryptocurrency, a commodity with inelastic supply, or even as an emerging economy.

From this perspective, declining revenue is not a problem but rather a positive signal of successful design. Lower revenue can foster broader user adoption and ecosystem growth.

David Hoffman, co-founder of Bankless, compared Ethereum to early Singapore or Shenzhen, describing it as a haven for business freedom. In such an environment, the focus should not be on how much tax the city collects but rather on whether it drives infrastructure development and economic growth.

Similarly, Vivek Raman, a former Wall Street trader and founder of Etherealize, pointed out that Bitcoin generates almost no revenue, yet it is not considered to be in decline. Why should Ethereum be judged solely by its revenue?

Their reasoning draws heavily from Ethereum founder Vitalik Buterin’s early vision, which framed Ethereum as a commodity with inelastic supply. Its value is driven by supply and demand dynamics rather than quarterly financial reports. In fact, excessive revenue could lead to negative network effects, as high gas fees might deter users.

This perspective can be traced back to Vitalik’s original vision. In the Ethereum whitepaper, Vitalik described ETH as the “crypto fuel” of the network, often likened to digital oil. Its value depends on supply and demand rather than corporate-style earnings reports.

High fees, which are a source of revenue, have already been shown to hinder user adoption and create a negative cycle. The community views this as a form of anti-network effect.

From this standpoint, the decline in Ethereum mainnet revenue is seen by many as a positive development.

Since the Dencun upgrade in 2024, Layer 2 solutions have offloaded much of the main chain’s workload, leading to reduced revenue. However, this has lowered transaction fees, making it easier for everyday users to engage with DeFi, NFTs, and even institutional applications.

In the comment section, Tom Dunleavy, Venture Director at Varys Capital, stated outright that Layer 1 revenue is actually a barrier to ecosystem growth.

Ethereum community member and trader Ryan Berckmans backed this up with data, noting that with 60% of stablecoin market cap residing on Ethereum, recognition from the U.S. Treasury Secretary, and improved activity metrics across the chain, it’s hard to see this as a sign of decline.

Ethereum at a Crossroads

This heated debate, while lively, actually touches on a fundamental question: how should Ethereum be valued?

Judging from the comment section, many opponents argue that Ethereum is transitioning from a bustling execution layer to a stable global settlement layer. Using the valuation logic of a tech stock, which heavily relies on revenue, might be overly rigid in this context.

From the perspective of tech stocks, revenue is undoubtedly a critical metric. If the collapse in revenue truly signals weakening demand, then the risk of a short-term bull market bubble bursting becomes significant.

However, the counterarguments in the discussion emphasize a multi-faceted narrative. They highlight Ethereum’s ecosystem health and long-term transformation, suggesting that revenue itself is not the most important factor. Instead, Ethereum’s valuation stems from its broad acceptance and the crypto ecosystem’s reliance on it.

While the debate might come to an end, Ethereum’s journey is far from over.

The shift from being a crypto-tech platform to becoming a global economic entity is bound to come with growing pains. These include challenges such as declining revenue and Layer 2 solutions eating into market share.

Yet, this transformation could be a necessary step toward Ethereum’s maturation.

It’s similar to the evolution of the internet, moving from the early days of paid dial-up services to the widespread adoption of free broadband. On the surface, telecom operators saw a decline in per-user revenue, but the scale of the digital economy grew exponentially.

Ethereum is currently at a similar inflection point. The drop in mainnet revenue could very well pave the way for broader ecosystem growth. The rise of Layer 2 solutions is not "stealing" Ethereum’s value but amplifying its strategic role as a settlement layer.

More importantly, this debate itself highlights Ethereum’s unique position in the crypto world. No one would passionately argue over Bitcoin’s "declining revenue" because its role as digital gold has long been accepted.

The reason Ethereum sparks such intense discussions is precisely because it carries a more complex and ambitious vision.

When Ethereum thrives, the entire ecosystem benefits. Who knows? The next turning point for the bull market might just start here.