Galaxy head of research Alex Thorn criticized the business model of many Ethereum (ETH) layer-2 (L2) blockchains as “ETH extractive.”
In an Aug. 6 social media post, Thorn argued that L2 networks retain most of the fee revenue while contributing relatively little back to the Ethereum L1.
Thorn added that most L2s are controlled by single companies or foundations, which means “very little value accrues to ETH holders,” and “most L2s don’t even stake back the ETH they collect in fees.”
Post EIP-4844
Pointing to post-EIP-4844 dynamics, Thorn noted that aggregate L2 blob confirmation costs and L1 gas spend have hovered around $10,000 per day, while L2s earn from $100,000 to $400,000 daily in user fees.
As a result, L2 earnings leave “a nice margin even including running the chain.” Blobs are dedicated spaces offering data storage used by layer-2 blockchains built on top of Ethereum.
He also contrasted payments from Base to the Optimism Collective, since Base uses the OP Stack, versus payments from L2s to Ethereum. Over the last 180 days, Base paid $4.4 million to OP, while all L2s combined paid $3.05 million to Ethereum L1 for blobs and gas.
Thorn further claimed Coinbase made $14.9 million in Base fee revenue in Q2, with $443,000 in L1 data costs and $2.16 million paid to OP, saying “OP is literally making 4.8x more off Base than Ethereum is.”
The critique culminated in a broader alignment question, to which Thorn responded:
“…They aren’t really ‘eth aligned…’ they look pretty ‘Eth extractive’ to me.”
Long-running debate
Base graduated to Stage 1 in April on data aggregator L2Beat, an intermediate decentralization tier envisioned by Ethereum co-founder Vitalik Buterin.
Stage 1 indicates improved fault-proofs and governance safeguards, while Stage 2 is defined by an L2 having no group of actors that can post a state root other than the output of the code, even unanimously.
The L2 powered by Coinbase was among other chains that recently updated their security measures to prevent ways to block messages to the mainnet other than compromising at least 75% of the network’s security council.
Thorn’s argument revives a long-running debate over how much economic value L2s should return to Ethereum versus to their operators or upstream collectives.
The post-4844 cost structure lowered L2 data costs by introducing blobs, but the balance between user fees retained by L2s and L1 spend and staking remains contested.