Ethereum R1 Layer-2 Solution Launched Amid Scalability Concerns

A group of developers within the Ethereum ecosystem, operating independently of the Ethereum Foundation, have introduced Ethereum R1, a layer-2 (L2) scaling solution designed to enhance the network's scalability and efficiency. This solution does not include a native token and relies entirely on donations, without any venture funding, pre-mined token allocations, or a governance token. The developers emphasized that general-purpose L2s should be simple, replaceable, and free from centralized dependencies or risky governance, aligning with the principles of credible neutrality, decentralization, and censorship resistance.

The announcement reflects growing concerns within the Ethereum community about the current direction of many layer-2 scaling solutions. Some view these solutions as potentially misaligned with the interests of the base layer, acting more like new layer-1 (L1) blockchains with private allocations, opaque governance, and centralized control. This concern is exacerbated by the significant impact of Ethereum's Dencun upgrade in March 2024, which lowered fees for its layer-2 networks and led to a 99% collapse in revenue on the Ethereum base layer by September. As a result, transaction costs on the Ethereum network base layer dropped to a five-year low of roughly $0.16 per transaction in April 2025, due to a lack of demand for block space on the base layer.

Ethereum's transaction fees are determined by demand and network traffic, with higher demand and network traffic translating into higher fees for the base layer and more revenue. Critics argue that this provides perverse incentives for layer-2 networks to grow at the expense of the base layer. However, protocols continue to argue that Ethereum's many layer-2 networks are a feature, not a bug, offering users a virtually unlimited number of high-throughput chains to choose from, as opposed to the singular one-size-fits-all approach employed by monolithic blockchain protocols.

The introduction of R1 comes at a time when Ethereum is experiencing significant growth and increased adoption. The network has seen a surge in active addresses, with a 62.7% increase in just one week, reaching a record high of 15.4 million. This growth is indicative of the network's strength and the increasing interest from both individual users and institutional investors. The dominance of Layer 2 solutions has also grown, further highlighting the importance of scalability in the Ethereum ecosystem.

The R1 solution is part of a broader effort to enhance Ethereum's scalability and user experience. Vitalik Buterin, the founder of Ethereum, has outlined his vision for the platform's development, focusing on security, decentralization, and privacy. The upcoming Pectra update, scheduled for release on May 7, 2025, will introduce new features that optimize ETH accounts and validators, further enhancing Layer 2 scaling solutions. These developments are expected to make Ethereum more efficient and user-friendly, attracting more users and developers to the platform.

The R1 solution is a significant step forward in Ethereum's journey towards becoming a more scalable and efficient network. By addressing the challenges of transaction processing speeds and costs, R1 aims to make Ethereum more accessible and attractive to a wider audience. As the network continues to grow and evolve, solutions like R1 will play a crucial role in ensuring its long-term success and sustainability.