On-chain activity on Ethereum, Solana and Avalanche has increased even as network revenues for all three protocols have declined. ETH, SOL and AVAX have each fallen more than 50 percent year-over-year.
The divergence between rising usage and falling revenue points to severe fee compression. More transactions are settling on these chains, but the average fee per transaction has collapsed, reflecting a more competitive block space market.
Ethereum's activity growth is concentrated on its L2s—Arbitrum, Optimism and others—which settle transactions at a fraction of mainnet cost. That boosts ecosystem throughput but reduces direct fee revenue accruing to the L1. EIP-4844 (Proto-Danksharding), already live, cut blob fees for L2s further, accelerating that dynamic.
Solana's high-throughput, low-cost architecture draws consistent volume, but its design structurally suppresses per-transaction validator revenue. More activity does not translate linearly into more revenue.
Avalanche's subnet model lets application-specific chains set their own fee structures, which supports ecosystem growth on the C-chain. But if demand for block space at higher price points does not keep pace with transaction volume, the same fee compression applies.
Lower token prices compound the revenue problem. ETH is trading around $3,150, with SOL and AVAX also down more than 50 percent over the past year. For proof-of-stake chains, that directly erodes the security budget—the dollar value of staked assets securing the network falls alongside token price. Protocol treasuries holding native tokens face the same pressure: the same fiat expenditure now requires selling more tokens, diluting the ecosystem.
The structural tension is clear: lower fees drive adoption and make complex dApp interactions economically viable, but they also reduce the revenue that funds validator incentives, grants and protocol development. L1s are exploring alternative value capture—Ethereum's L2 sequencer fees are one example—but no model has resolved the tradeoff at scale.
For Ethereum, Solana and Avalanche, sustaining a high-activity, low-cost user base while keeping economic incentives intact for validators and core development remains the central unsolved problem.
