Ethereum income plummets, sparking heated debate in the community. Is the warning bell of recession ringing?

Written by: David, Deep Tide TechFlow

In the past few days, the hottest debate on crypto Twitter in the English-speaking community has been about the discussion of Ethereum's income.

On September 7, AJC, the Enterprise Research Manager at Messari, posted a message pointing out that the Ethereum network is falling into "death." He stated that despite the ETH price reaching a new high in August, Ethereum's revenue for that month was only $39.2 million.

This data represents a decrease of 75% compared to 157.4 million USD in August 2023, and a decrease of 40% compared to 64.8 million USD in August 2024. At the same time, this is also the fourth lowest monthly revenue level in Ethereum's history since January 2021.

AJC lamented that the fundamentals of Ethereum are collapsing, but everyone seems only to care about the rise in ETH prices, regardless of whether the network is actually healthy. Two days after this post was made, it has already garnered nearly 380,000 views and almost 300 replies.

Why is there so much attention on discussing the fundamentals of Ethereum now?

The timing is indeed very subtle. ETH is currently at the peak of a bull market, with prices hitting new highs repeatedly, but the underlying network activity and Ethereum's own positioning are quietly changing.

After the Dencun upgrade in 2024, Layer 2 solutions such as Base and Arbitrum have gained prominence, significantly reducing main chain transaction fees and causing income to shift to these scaling layers; following the popularity of the coin-stock gameplay this year, SBET and BMNR are competing to reserve ETH, and mainstream finance and Wall Street are beginning to turn ETH into a tool for increasing financial leverage.

And now, Ethereum itself seems more like a banner of altruism reminiscent of Lei Feng, fluttering in response to market trends and guiding others, yet it is full of holes itself?

The decline in income is indeed an undeniable fact, but whether this is a signal of the Ethereum network's own decline is a matter of differing opinions within the community.

Proponents: Income is the lifeline, the alarm bell has rung.

The core view of ACJ and other proponents is actually quite simple: income is the correct measure for judging L1.

Specifically, the income of a chain mainly comes from transaction fees and block space usage fees, which are the core manifestations of users' actual demand for your chain.

As the largest platform in the cryptocurrency world, Ethereum's core competitive advantage lies in its "block space demand": it enables the network to efficiently handle smart contracts and decentralized applications, which is more advantageous than Bitcoin's mere value storage, and it is also a significant narrative point that distinguishes it from Bitcoin.

But now the income is approaching zero, which means that the demand for the main chain is shrinking. Even though L2 is flourishing, AJC believes that the entire ecosystem lacks new users to support the usage of so many L2s.

You may wonder why income is linked to the fundamentals of Ethereum.

The logic of the original poster and supporters is that income is received and destroyed in the form of ETH, which directly drives the deflationary mechanism of ETH. If income collapses, the amount destroyed decreases, increasing the supply pressure of Ether, making it difficult to maintain long-term value.

More importantly, during the last bull market cycle, the Ethereum community boasted about the high income on-chain as "block space premium," proving the strong demand for the network. Now the situation has reversed, and this is not a coincidence, but a real collapse of the demand driver.

Although somewhat pessimistic, a relatively neutral viewpoint is that the network itself is the asset. Prices can be driven up in the short term through speculation, but detached from the fundamentals, they will eventually return to reality. This pattern has been proven countless times in other cryptocurrency infrastructure projects.

From an observer's perspective, the revenue logic of AJC does make sense, at least reflecting the risks hidden beneath the ETH bull market bubble. However, if other ecological indicators, such as on-chain activity, are ignored, this viewpoint may be somewhat biased.

Opposition fires on all cylinders: Is a decrease in income a good thing?

As soon as AJC's viewpoint was released, the comment section instantly became a battlefield, with opponents fully unleashing their firepower, expressing their strong disagreement with this recession theory.

Unlike the typical E-Guardian, opponents view Ethereum through a larger narrative, and their core counterargument is:

Treating Ethereum as a technology company pursuing income maximization is completely a cognitive categorization error. Ethereum now resembles more of a cryptocurrency, a good with inelastic supply, or an emerging economy.

From this qualitative perspective, the decline in revenue is not a problem but rather a positive signal of successful design, as it better facilitates broader user adoption and ecological growth.

Taking David Hoffman, the co-founder of Bankless, as an example, he compares Ethereum to early Singapore or Shenzhen, a paradise conducive to business freedom. In such an environment, your focus should not be on how much tax this city can collect, but rather on whether this city has driven the growth of infrastructure and the economy.

Former Wall Street trader and founder of Etherealize, Vivek Raman, stated that Bitcoin has almost no income and is not considered a recession; so why should Ethereum be judged based on income?

Their logic actually originates from the early vision of Ethereum founder Vitalik Buterin, which states that Ethereum is a commodity with inelastic supply, and its valuation relies on the dynamics of supply and demand rather than quarterly reports. Excessive income can easily lead to negative network effects, and charging too much gas can scare away users.

In fact, the viewpoints of these opposition groups can be traced back to Vitalik's early vision.

In the white paper, Vitalik describes ETH as the "cryptographic fuel" of the network, which the community often likens to digital oil, with its value depending on supply and demand dynamics rather than quarterly reports like a company.

High costs (source of income) have been proven to hinder user adoption, creating a negative feedback loop, which the community perceives as a counter-network effect.

Therefore, the decline in revenue from the Ethereum mainnet is seen as a good thing to some extent in their eyes.

After the Dencun upgrade in 2024, L2 transferred the main chain load, resulting in reduced income. However, this equals a lower fee threshold, attracting the general public to engage in DeFi, NFTs, and even institutional-level applications.

In the comments section, Tom Dunleavy, the head of venture capital at Varys Capital, bluntly stated that L1 revenue is a stumbling block for ecological growth.

Ethereum community cycle trader Ryan Berckmans threw out the data: When the market cap of stablecoins is 60% on Ethereum, and it has been highlighted by the U.S. Treasury Secretary, with various on-chain activity indicators improving, what kind of recession is this?

The next crossroads of Ethereum

This debate, while lively, actually touches on a fundamental question: how should we value Ethereum?

From the comments, most opponents believe that Ethereum is shifting from a busy execution layer to a solid global settlement layer. If you apply the logic of tech stocks and use revenue for valuation, it seems a bit too rigid.

From the perspective of technology stocks, revenue is obviously the most important. If a collapse in revenue is indeed a signal of weak demand, then the risk of a short-term bull market bubble bursting is not small.

The various counterattacks in the comment section are essentially a multi-indicator narrative that emphasizes the ecological health and long-term transformation of Ethereum. The income itself is not very important; its valuation comes from the level of recognition from all parties and the entire crypto ecosystem's dependence on Ethereum.

The debate may be over, but the story of Ethereum is far from over.

Transitioning from a crypto technology platform to a global economy certainly comes with growing pains, such as declining revenue and L2 eating into market share.

But this transformation may be the necessary path for Ethereum to mature.

Just like the internet has evolved from the early days of paid dial-up to the widespread availability of free broadband, on the surface, the single-user revenue for operators has decreased, but the scale of the entire digital economy has achieved exponential growth.

Ethereum is currently at a similar turning point: the decline in mainnet revenue may just be creating space for larger-scale ecological prosperity. The rise of L2 is not about "snatching" value from Ethereum, but rather amplifying Ethereum's strategic value as a settlement layer.

More importantly, this debate itself illustrates Ethereum's unique position in the crypto world—no one would have a heated debate over Bitcoin's "declining revenues" because everyone has already accepted it as digital gold.

The reason Ethereum has sparked such enthusiastic discussion is precisely because it carries a more complex and grander vision.

Ethereum is healthy, and everyone benefits. Who knows if the next bull market turning point will start from here?