Ethereum's High Gas Costs: A Catalyst for Layer 2 Adoption and Long-Term Value Creation?

Ethereum's journey from a congested, high-fee network to a scalable, modular infrastructure has been marked by transformative upgrades. While gas fees have plummeted by 95% since their 2021 peaks, the historical pain points of network congestion and cost inefficiency served as a catalyst for the explosive growth of Layer 2 (L2) solutions. Today, Ethereum's post-Dencun and Fusaka upgrades are not only addressing these legacy issues but also creating a fertile ground for L2 adoption, positioning scalability solutions as a compelling investment opportunity.

The Evolution of Ethereum's Gas Fees and Network Congestion

Ethereum's gas fees, once a barrier to mass adoption, have seen a dramatic decline. As of late December 2025, the average transaction fee hovers between $0.30–$0.33, a stark contrast to the $0.80 average in 2024 according to YCharts. This reduction is attributed to protocol-level innovations such as the Dencun hard fork (introducing proto-danksharding) and the Fusaka upgrade, which increased the gas limit to 60 million and introduced PeerDAS (Peer Data Availability Sampling). PeerDAS allows nodes to verify data availability by sampling only 1/8 of each blob, reducing bandwidth and storage requirements by 80%. These upgrades have enabled Ethereum to process up to 100,000+ transactions per second across L2s, effectively mitigating congestion while maintaining security and decentralization.

Layer 2 Solutions: From Necessity to Strategic Advantage

The initial surge in L2 adoption was driven by necessity-users and developers sought alternatives to Ethereum's high fees. However, post-2025 upgrades have transformed L2s into strategic infrastructure. For instance, Arbitrum and Optimism now handle $772 billion in stablecoin settlements, while Base and zkSync Era offer fees as low as $0.03 during low-congestion periods. The Fusaka upgrade further amplified this trend by reducing L2 transaction costs by 40–60%, with fees potentially dropping to $0.001–$0.01 per transaction.

This shift is reflected in Ethereum's Total Value Locked (TVL), which retains over $70 billion as of November 2025, with L2s accounting for a growing share. The network's dominance in tokenized real-world assets- with $12.5 billion in 2025-and its role in institutional-grade applications (e.g., U.S. treasury tokenization) underscore its value proposition. Meanwhile, L2s are becoming the default for DeFi, NFTs, and GameFi, with smart contract deployments on Ethereum hitting 8.7 million in Q4 2025.

Investment Opportunities in Scalability Infrastructure

The interplay between Ethereum's base layer and L2s creates a unique investment thesis. First, Ethereum's institutional adoption-evidenced by a $12.7 billion net inflow for U.S. spot ETFs in 2025-reinforces its role as foundational infrastructure. This demand is likely to drive sustained growth in L2 usage, as developers and enterprises prioritize cost efficiency without compromising on Ethereum's security.

Second, the modular architecture post-Fusaka enables L2s to scale independently while leveraging Ethereum's data availability. For example, Blob Parameter Only (BPO) forks allow incremental adjustments to blob capacity without full hard forks, ensuring flexibility for rollups. This modularity reduces the risk of network bottlenecks and enhances the long-term viability of L2s as scalable, interoperable solutions.

Third, the market capitalization of L2 solutions is poised to grow as Ethereum's ecosystem expands. While Ethereum retains 90% of the market cap in its broader ecosystem according to CoinDesk, fees are increasingly shifting to L2s. This dynamic mirrors the early days of cloud computing, where infrastructure providers (akin to L2s) captured value from a growing base layer.

Risks and Considerations

Despite the optimism, challenges remain. Vitalik Buterin has highlighted gaps in Ethereum's scalability roadmap, including the need for full sharding and a decentralized mempool. Additionally, competition from alternative blockchains like Solana and BNB Chain could pressure L2s to innovate further. However, Ethereum's first-mover advantage, institutional backing, and ongoing upgrades such as planned 128-blob blocks position it to maintain its dominance.

Conclusion: A Win-Win for Ethereum and Scalability Solutions

Ethereum's historical gas fee challenges were a double-edged sword: they spurred the development of L2s while also highlighting the need for protocol-level upgrades. Today, the network's post-Dencun and Fusaka upgrades have created a virtuous cycle-lower fees on L1, higher throughput on L2s, and a robust ecosystem for decentralized applications. For investors, this translates to a compelling opportunity: backing scalability solutions that are not only solving Ethereum's legacy pain points but also enabling its next phase of growth.

As Ethereum transitions from a monolithic to a modular architecture, the value creation is no longer confined to the base layer. Instead, it is distributed across a network of L2s, each contributing to a more scalable, efficient, and accessible blockchain ecosystem.