Ethereum News Today: Galaxy Alex Thorn Criticizes Ethereum L2s for Withholding Fee Revenue

Galaxy Digital’s head of research, Alex Thorn, has criticized the business models of many Ethereum (ETH) layer-2 (L2) blockchains, labeling them “ETH extractive” due to concerns over how fee revenue is retained and redistributed. In a post on August 6, Thorn highlighted that most L2s keep a large share of user fees while contributing little back to the Ethereum L1 chain [1].

Thorn emphasized that many L2s are centrally controlled by a single entity or foundation, resulting in minimal value flowing back to ETH holders. He pointed out that most L2s do not even stake the ETH they collect in fees, further underlining the misalignment of incentives between the L2 operators and the broader Ethereum ecosystem [1].

Post-EIP-4844, the cost structure for L2s has seen some changes. According to Thorn, daily L2 blob confirmation costs and L1 gas spend have averaged around $10,000, while L2s earn between $100,000 and $400,000 in user fees per day. This disparity, he argued, creates a “nice margin” for L2s even after accounting for operational costs [1].

Thorn also contrasted payments between Base and the Optimism Collective, noting that over the last 180 days, Base paid $4.4 million to the Optimism Collective (OP), while all L2s combined paid $3.05 million to Ethereum L1 for blobs and gas. He further highlighted that Coinbase earned $14.9 million in Base fee revenue in Q2, with $443,000 in L1 data costs and $2.16 million paid to OP. This, he noted, means that “OP is literally making 4.8x more off Base than Ethereum is” [1].

The critique has reignited a long-running debate about the proper balance of economic value between L2 operators, upstream collectives, and the Ethereum mainnet. While the post-EIP-4844 update reduced L2 data costs through the use of blobs, the discussion remains contentious regarding how user fees are distributed and whether they promote the long-term health of the Ethereum network.

Thorn’s comments also coincided with Base’s recent graduation to Stage 1 on data aggregator L2Beat, a step toward decentralization outlined by Ethereum co-founder Vitalik Buterin. Stage 1 indicates improved fault proofs and governance safeguards, with Stage 2 representing full decentralization where no single group of actors can influence the state root outside of the code’s output [1].

Despite updates to security measures among several L2s, including Base, Thorn’s analysis underscores a growing concern: whether current L2 models prioritize Ethereum’s interests or serve primarily as profit centers for their operators. His remarks have positioned the debate within a broader framework of alignment and sustainability for the Ethereum ecosystem.

Source: [1] Galaxy’s Alex Thorn calls Ethereum L2s ‘ETH extractive’ amid fee retention concerns (https://cryptoslate.com/galaxys-alex-thorn-calls-ethereum-l2s-eth-extractive-amid-fee-retention-concerns/)