The Ethereum network’s primary revenue stream from layer-2 (L2) scaling solutions — known as blob fees — has plummeted to its lowest weekly level of 2025, according to on-chain data from Etherscan. This sharp decline highlights ongoing challenges in Ethereum’s post-upgrade economic model and raises questions about the long-term sustainability of its data-centric fee structure.
In the week ending March 30, Ethereum collected just 3.18 Ether (ETH) in blob fees — equivalent to roughly $6,000 at current market prices. This represents a dramatic 73% drop from the previous week and a staggering over 95% decrease compared to the week of March 16, when blob fee income exceeded 84 ETH. The volatility underscores the fragile state of demand for blob space despite Ethereum’s efforts to position itself as a foundational layer for scalable blockchain activity.
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Understanding Blob Fees and the Dencun Upgrade
Blob fees are payments made by L2 networks to Ethereum for storing temporary data off the main chain. This mechanism was introduced with the Dencun upgrade in March 2024, a pivotal moment in Ethereum’s evolution toward scalable, low-cost transactions.
Prior to Dencun, most L2s posted transaction data directly onto Ethereum’s mainnet, consuming valuable block space and driving up gas fees. The introduction of blobs — short for “binary large objects” — allowed this data to be stored temporarily in a more efficient format, drastically reducing costs for users on L2 platforms like Arbitrum, Optimism, and Base.
While this was a win for scalability and user experience, it came at a cost: a steep reduction in fee revenue for Ethereum validators. At the time of the upgrade, asset manager VanEck reported that total ETH fee income dropped by as much as 95%, largely due to the shift from high-cost calldata to cheaper blob storage.
“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 post.
Despite expectations that increased L2 adoption would naturally fill this gap, usage remains inconsistent. The network currently has far more blob capacity than is being utilized, leaving potential revenue on the table.
Volatile Revenue Trends Post-Upgrade
Since the Dencun implementation, blob fee income has been anything but stable. According to analytics platform Dune, weekly earnings spiked to nearly $1 million in November 2024 — likely driven by surging L2 activity and speculative demand. However, recent weeks have seen a steep reversal, with income now hovering near multi-month lows.
This inconsistency reflects broader uncertainty about Ethereum’s role in the decentralized ecosystem. While the network successfully offloaded transaction processing to L2s, it now depends heavily on those same chains generating enough data traffic to justify its new economic model.
As arndxt, author of the Threading on the Edge newsletter, noted:
“Ethereum’s future will revolve around how effectively it serves as a data availability engine for L2s.”
For now, that engine is running below capacity.
The Road Ahead: Pectra Upgrade and Scaling Priorities
Ethereum developers are aware of these challenges and are already planning adjustments. The upcoming Pectra Upgrade, expected later in 2025, aims to refine how blob space is allocated and priced. Proposed changes include dynamic pricing models and increased blob limits per block, which could improve utilization rates and stabilize income.
However, some experts argue that Ethereum’s current strategy prioritizes growth over profitability. In a March 17 post, Sassal, founder of The Daily Gwei, summarized the prevailing mindset:
“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 long-term vision assumes that once L2 ecosystems mature and user adoption grows exponentially, blob fees will naturally rebound. But critics point out that such growth may take years — if it happens at all.
Michael Nadeau, founder of The DeFi Report, calculated 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 from pre-Dencun times. While hyperbolic in scale, the figure illustrates the immense challenge ahead.
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These keywords reflect common queries from developers, investors, and analysts monitoring Ethereum’s transition into a data-layer-focused protocol.
Frequently Asked Questions (FAQ)
Q: What are blob fees on Ethereum?
A: Blob fees are charges paid by layer-2 networks to store temporary transaction data on Ethereum. Introduced in the Dencun upgrade, they enable cheaper transactions while maintaining security through data availability.
Q: Why did Ethereum's blob fees drop so sharply?
A: The decline is due to underutilization of blob space by L2 networks. Despite lower costs encouraging adoption, current transaction volumes aren’t high enough to generate consistent fee income.
Q: How does the Dencun upgrade affect Ethereum users?
A: It significantly reduces transaction costs on L2s by moving data storage off the main chain. Users benefit from faster, cheaper trades and interactions across DeFi, NFTs, and gaming apps.
Q: Will Ethereum ever recover its lost fee revenue?
A: It depends on L2 adoption. If usage grows substantially, blob fees could stabilize or increase. However, matching pre-upgrade fee levels would require exponential growth in activity.
Q: What is the Pectra Upgrade?
A: Pectra is a planned Ethereum upgrade focused on improving blob efficiency, increasing capacity per block, and potentially introducing variable pricing to better match supply and demand.
Q: Is low blob fee income bad for Ethereum?
A: In the short term, it reduces validator rewards and network income. Long-term, it may be a necessary trade-off for achieving mass scalability and maintaining dominance in the smart contract ecosystem.
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Final Thoughts
Ethereum’s journey through the post-Dencun era reveals a network in transition — one that has sacrificed immediate revenue for long-term scalability. While the drop in blob fees raises valid concerns about economic sustainability, it also reflects a deliberate strategy: prioritize infrastructure growth first, monetize later.
The success of this approach hinges on whether layer-2 ecosystems can drive enough user activity to fill existing data capacity. With the Pectra Upgrade on the horizon and continued innovation across rollups and zk-tech, Ethereum remains positioned at the center of blockchain evolution — even if its income statements tell a story of patience over profit.
For developers, investors, and users alike, understanding this shift is crucial. Ethereum is no longer just a transaction processor; it’s becoming the backbone of a decentralized internet — powered by data, driven by scale, and waiting for demand to catch up.