Ethereum Remains Revenue King as Competing L1s Get Crushed

Crypto network fees and revenue are good indicators of the state of markets. In bull markets, demand is high, and fees and revenue increase, however, the opposite occurs when the bears have control of things.

Around half a year into the current bear market cycle, many crypto network revenues have fallen lower than the asset prices themselves.

This pattern has been observed by the founder of Crypto Pragmatist, Jack Niewold, on June 7, who revealed why he thinks Ethereum remains the king of the crop.

THE STATE OF DEFI

A thread on how the last 180 days have affected crypto fees and revenue:

— Jack Niewold (@JackNiewold) June 6, 2022

Ethereum is King of The Fees

With network fees in mind, Ethereum became unusable for the average person in November and May when gas prices skyrocketed to three figures. However, some were still willing to pay that much to use the network, which is a testament to Ethereum block space demand.

“Ethereum blockspace is a premium product: something that goes after the highest-end, those customers that are most willing to pay at any price. Just look at the BAYC land sale.”

Niewold observed that alternative layer-1 networks do not benefit from this fee reflexivity “as their competitive advantage dies down in periods of lower activity.”

He used Solana as an example which has seen value moved on-chain crushed over the past couple of months. Five outages this year have also been a detriment to Solana, which was once believed to be an “Ethereum killer.”

This graph looks very concerning if you are building applications on Solana. Economic activity in the last two months has collapsed. pic.twitter.com/XfEoL9vYT3

— Jim Greco (@jgreco) June 6, 2022

As a result, alternative layer-1s may be overvalued, he added, or they could be “valued on potential, not activity.”

Fee Pigs

A Token Terminal chart was used to illustrate the top ten “fee pigs” over the past six months. They all managed to cross $10 million in daily revenue during the bull cycle peak but are struggling to reach $1 million at the moment. The conclusion was pretty clear:

“And Ethereum, as always, remains the king.”

So where is fee revenue growing?

Optimism and Hop Protocol have had strong weeks, probably due to the Optimism airdrop.

Here’s a look at the top revenue growers of the last 180 days:

No real themes here, other than a few prominent narrative rotations. pic.twitter.com/6GJmTXCMkj

— Jack Niewold (@JackNiewold) June 6, 2022

Ethereum’s average daily fees over the past week have been just over $10 million per day, according to Cryptofees.

The bullish on-chain metrics have not been reflected in the prices of the underlying asset, however, as the sell-off continues.

Ethereum has dumped 6% over the past 24 hours in a fall to $1,750 at the time of writing, according to CoinGecko. The world’s second-largest crypto has lost 12% over the past week and is now down 64% from its November all-time high.