Ethereum's Gas Fee Volatility and Its Impact on DeFi Growth and User Behavior

Ethereum's gas fee volatility has long been a double-edged sword for decentralized finance (DeFi). While high fees during peak demand periods have historically deterred casual users, recent upgrades and layer-2 innovations have reshaped the landscape, creating new opportunities for investors. This article examines how Ethereum's evolving fee dynamics-driven by protocol upgrades, Coinbase's withdrawal fee shifts, and layer-2 adoption-are redefining DeFi's growth trajectory and user behavior, with a focus on long-term investment potential.

The Evolution of Ethereum Gas Fees: From Spikes to Stability

Ethereum's gas fees have seen dramatic swings since 2020. The 2021–2022 NFT boom drove average fees to over 500 gwei, making transactions prohibitively expensive for many users, according to a PatentPC blog. The London Hard Fork in 2021 introduced a two-part fee model (base fee + tip), aiming to stabilize costs, but it wasn't until the Dencun upgrade in 2024 that meaningful progress was achieved. By enabling lower-cost transactions via layer-2 rollups, Dencun reduced Ethereum's mainnet activity and slashed protocol revenue by 99% compared to 2021 levels, as noted in a FinanceFeeds report. By November 2025, average gas fees had plummeted to $0.41, with occasional spikes like the $50-per-swap event in February 2025 highlighting residual volatility, as reported by CoinLaw.

The Pectra upgrade in 2025 further amplified scalability, increasing blob throughput to 10MB per block and cutting layer-2 fees by up to 50%, according to Coinotag. These upgrades have enabled Ethereum to process 24,192 transactions per second in November 2025, a testament to its maturing infrastructure, as noted in a CryptoBasic post. However, the long-term economic sustainability of Ethereum remains a concern, as reduced mainnet revenue could weaken validator incentives and network security, as highlighted in the FinanceFeeds report.

Coinbase's Fee Shift and the Acceleration of Layer-2 Adoption

Coinbase's 2025 withdrawal fee changes have emerged as a pivotal factor in user migration to layer-2 solutions. As Ethereum mainnet fees averaged $3.78 in 2025 (down from $5.90 in March 2024), Coinbase's Base layer-2 network became a critical alternative, offering sub-cent transactions and sequencer-based scalability, as noted in a CoinLaw report. During Q3 2025, Base's average daily revenue reached $185,291, with 86.1% derived from priority fees driven by decentralized exchange (DEX) activity, according to the same report. This trend underscores a clear correlation: as mainnet congestion or centralized exchange fees rise, users increasingly adopt layer-2 solutions to avoid costs.

The integration of stablecoins like PayPal's PYUSD with layer-2 networks has further accelerated adoption. By 2025, PYUSD's on-chain value locked (TVL) exceeded $100 billion, with over 500,000 weekly transactions processed via layer-2 platforms, according to a Coinotag post. This shift not only reduces reliance on centralized exchanges but also positions Ethereum as a backbone for global digital asset infrastructure.

MyEtherWallet's Push for Layer-2 and DeFi's Resilience

MyEtherWallet's advocacy for layer-2 solutions in 2025 aligns with broader industry trends. The Pectra upgrade's EIP-7702 (account abstraction) and EIP-7251 (data availability) have streamlined user interactions, making DeFi more accessible, according to Coinotag. These improvements are particularly impactful for projects like RentStac (RNS), which tokenizes real estate income through Special Purpose Vehicles (SPVs), bridging traditional finance and DeFi, as described in a Cryptopolitan article. By enabling transparent, yield-generating assets, RentStac and similar platforms are attracting institutional capital, even amid occasional gas spikes.

However, DeFi's growth has not been without turbulence. High-profile exploits, such as the $116 million Balancer loss and $93 million Stream Finance shortfall, have prompted initiatives like RedStone's Credora platform and the Ethereum Protocol Advocacy Alliance (EPAA) to enhance security and regulatory compliance, as reported in a Coinotag post. These reforms are critical for long-term adoption, as trust and transparency remain barriers to mainstream DeFi participation.

Layer-2 Financials and DeFi's Correlation with Network Growth

Ethereum's layer-2 solutions-Arbitrum, Optimism, and Base-have become linchpins of DeFi growth. By Q3–Q4 2025, total value locked (TVL) across layer-2 networks exceeded $43.3 billion, with Arbitrum processing 46 million monthly transactions and Base reporting 3.2 million active users, according to CoinLaw. Layer-2 fees averaged $0.08 in 2025, a stark contrast to the mainnet's $1.85, making these solutions cost-effective for high-volume use cases, as reported in the same source.

Arbitrum's dominance in stablecoin circulation-surpassing $5 billion in 2025-further illustrates the symbiotic relationship between layer-2 scalability and DeFi liquidity, as noted in a Coinfomania article. Protocols like GMX, Radiate, and Aave have leveraged Arbitrum's low fees to incentivize stablecoin deposits, boosting TVL and user engagement. Meanwhile, projects like Mutuum Finance (MUTM) are pioneering tokenized lending pools, with $18.55 million raised and plans for a Q4 2025 launch, as reported in the CryptoBasic post.

Investment Opportunities in a Post-Volatility Era

For investors, the key lies in balancing Ethereum's foundational role with layer-2's scalability. While Ethereum's mainnet revenue decline raises concerns, its role as a settlement layer for layer-2 networks remains irreplaceable. Projects that integrate real-world assets (RWAs), like RentStac, or enhance security, like RedStone's Credora, offer compelling long-term potential.

Layer-2 solutions themselves present attractive opportunities. Arbitrum's TVL growth and Base's user acquisition metrics suggest strong network effects. Additionally, tokenized funds-up 2,000% since 2024-highlight Ethereum's expanding role in institutional finance, as reported in the Coinotag post. However, investors must remain cautious about short-term volatility from token unlocks, such as Linea's 2.88 billion token release in November 2025, as noted in the Coinfomania article.

Conclusion

Ethereum's gas fee volatility is no longer a barrier but a catalyst for innovation. Through protocol upgrades, layer-2 adoption, and DeFi's integration with traditional finance, the ecosystem is evolving toward a model where low-cost, high-throughput transactions coexist with robust security and regulatory compliance. For investors, the path forward lies in supporting projects that bridge these advancements-whether through scalable layer-2 infrastructure, RWA tokenization, or enhanced risk frameworks. As the network matures, Ethereum's ability to adapt will define its dominance in the next era of decentralized finance.