For years, Ethereum reigned supreme as the go-to platform for decentralized applications (dApps) and smart contracts. But in recent times, the ecosystem has faced mounting pressure from both within and without. High gas fees, limited scalability, and stiff competition from nimble Layer 1 (L1) chains and fast-growing Layer 2 (L2) solutions have questioned Ethereum’s dominance.
Is Ethereum truly losing its edge, or is it simply evolving into a different role in the blockchain hierarchy?
Ethereum’s Gas Fees and Scalability Challenges
Ethereum’s scalability limitations are well-documented. Despite several upgrades, the network currently handles around 173.6 transactions per second (TPS) using blobs, or up to 607 TPS when including calldata. In contrast, competitors like Solana boast speeds of up to 65,000 TPS, while Avalanche claims over 4,500 TPS.
The consequences of Ethereum’s constrained throughput are most noticeable in its gas fees. Although the shift to Proof of Stake during “The Merge” in 2022 significantly reduced the network’s energy consumption, it didn’t meaningfully lower transaction costs. During periods of high activity, gas fees can soar to $50 per transaction, effectively pricing out casual users and small-scale DeFi participants.
These inefficiencies have become a major pain point for the Ethereum ecosystem, fueling an exodus of users and developers toward alternative blockchains offering faster speeds and lower costs, especially as Ethereum vs Layer 1 competitors becomes an increasingly pressing debate.
This has fueled a renewed focus on scalability solutions for Ethereum’s network, which many view as critical to maintaining its relevance in the face of growing competition.
The Rise of Layer 2s: Optimism, Arbitrum, Base, and More
As Ethereum continues to wrestle with scalability limitations and high gas fees, its most strategic answer lies in Ethereum’s Layer 2 solution. These solutions—built atop Ethereum—use technologies like optimistic and zero-knowledge rollups to process thousands of transactions off-chain, bundling them into batches that settle on the Ethereum mainnet. According to L2Beat, L2s now handle over 14-15 times more transactions than Ethereum’s base layer.
The result is lower fees, faster execution, and an environment capable of supporting more users and applications. This shift marks a significant phase in Ethereum Layer 2 adoption, as users seek alternatives without abandoning Ethereum’s security guarantees.
Among the standout L2s, Arbitrum has taken the lead. It regularly processes over 1.5 million transactions per day, at times surpassing Ethereum’s own mainnet. Arbitrum’s seamless compatibility with Ethereum, combined with its low-cost environment, has made it a hub for DeFi innovation, hosting popular projects like GMX, Radiant, and Vela Exchange.
Another rising star is Base, Coinbase’s Ethereum L2 launched in August 2023. Built using Optimism’s OP Stack, Base quickly gained traction by onboarding both Web3-native communities and mainstream users. Within six weeks of launch, it surpassed $500 million in total value locked (TVL)—a clear signal of rapid Ethereum Layer 2 adoption. Base has also become a dominant player in NFT activity, accounting for 97% of NFT minting volume among low-fee L2s.
RELATED: What’s Driving the Rapid Growth of Coinbase’s L2, Base?
Meanwhile, Optimism has focused less on building a single chain and more on enabling a network of chains. Its open-source OP Stack has become the backbone for multiple L2s—including Base, Worldcoin’s World Chain, and others within the “Superchain” initiative. This modular, interoperable approach supports Ethereum’s broader vision of horizontal scaling: a cohesive ecosystem of interconnected rollups, all secured by Ethereum’s base layer.
This direction has strong backing from Uniswap founder Hayden Adams, who sees it not as a deviation but the culmination of years of work toward scalable infrastructure.
The prevailing sentiment is clear: abandoning Ethereum’s Layer 2 solution now would be walking away just as the finish line comes into view.
Solana has a better roadmap, team, and and approach if the plan is to do defi on L1 /vertical scaling
Ethereum has been working towards L2 centric / horizontal scaling roadmap for 5+ years
You want to throw this away at the final stretch because of what reason?
— Hayden Adams 🦄 (@haydenzadams) April 19, 2025
Adams’ message was clear: Layer 2s aren’t a temporary fix—they’re a foundational part of Ethereum’s long-term plan for decentralization, scalability, and modular infrastructure. The question now is how this evolution will shape the impact of Layer 2 on Ethereum’s future.
Still, the rise of L2s brings new challenges. Users must navigate asset bridging, multiple wallets, and fragmented ecosystems. Questions of decentralization persist, as many L2s rely on centralized sequencers or multi-sig governance. Interoperability across L2s—and between L2s and Ethereum—remains an evolving frontier.
Yet despite these hurdles, the momentum is undeniable. Rollups have shifted the paradigm, signalling Ethereum’s commitment to scale not by overhauling its base layer, but by layering a flexible, purpose-built architecture around it—one that maintains Ethereum’s security while vastly expanding its capabilities. The impact of Layer 2 on Ethereum’s future is already redefining how the platform will operate in the years to come.
Related: Are Layer 2 Solutions Enhancing Ethereum—or Killing it?
Competing L1s: Solana, Avalanche, Sui, and Near
While Ethereum intensifies its commitment to Layer 2 scaling, a new generation of Layer 1 (L1) blockchains is taking a different approach—vertical scaling. Rather than building atop another layer, these platforms are optimizing their base layers to process more transactions natively, aiming for speed, simplicity, and mass adoption. The result is an increasingly competitive environment, with several L1s vying for the attention of developers, users, and institutions disillusioned with Ethereum’s bottlenecks.
In the ongoing battle of Ethereum vs Layer 1 competitors, Solana has emerged as Ethereum’s most serious competitor. Its monolithic architecture—which processes consensus, execution, and settlement all on the same layer—has allowed it to achieve unmatched throughput, currently averaging over 65,000 transactions per second (TPS) in real-world conditions. More importantly, Solana’s transaction fees remain minuscule, often $0.000005, making it highly attractive for users priced out of Ethereum’s volatile gas markets.
Avalanche, meanwhile, has positioned itself as the go-to chain for institutional DeFi and enterprise applications. Its standout feature, subnets, allows institutions to create application-specific blockchains with tailored parameters, such as compliance controls and consensus mechanisms. Additionally, Avalanche C-Chain (its EVM-compatible environment) continues to host high-performance DeFi applications with stable throughput and rapid finality.
Sui, developed by Mysten Labs, introduces a new smart contract language called Move, originally built by Facebook’s Diem team. What sets Sui apart is its object-centric model and parallel transaction execution, which allows non-conflicting transactions to be processed simultaneously. This innovation enables scalability without congestion, supporting real-world gaming and consumer apps like SuiFrens and Aftermath Finance. In its first year, Sui achieved a peak of 65 million transactions in a single day, highlighting its high throughput capabilities.
Near Protocol, on the other hand, focuses on user experience and mainstream accessibility. By enabling human-readable wallet names and leveraging a sharded, proof-of-stake architecture, Near aims to reduce the technical friction that hinders mass adoption. It has also introduced FastAuth, a system for seamless wallet creation using familiar login methods.
Collectively, these L1s are capitalizing on Ethereum’s ongoing scalability transition. They offer grants, simplified onboarding, and high-performance environments that appeal to developers looking to avoid Ethereum’s complex rollup architecture and rising costs. While Ethereum refines its modular roadmap, chains like Solana and Avalanche are already delivering low-latency, high-throughput experiences, making them strong contenders in the race for blockchain dominance.
Developer and User Migration Trends
The landscape of blockchain development and user engagement is undergoing a significant transformation. While Ethereum continues to be a dominant force, its growth trajectory is being challenged by emerging ecosystems that offer scalability and cost-efficiency.
According to Electric Capital’s 2024 Developer Report, Solana has emerged as the leading ecosystem for new developers, marking the first time since 2016 that another blockchain has surpassed Ethereum in attracting fresh talent. In 2024, Solana onboarded 7,625 new developers, reflecting an 83% year-over-year growth.
This surge is attributed to Solana’s low transaction fees, high throughput, and growing adoption.
Despite this shift, Ethereum maintains its position as the largest ecosystem by total developer activity, with a robust network of established developers and a wide array of decentralized applications. However, the rise of Layer 2 solutions and alternative Layer 1 blockchains indicates a diversification in developer interest and activity.
On the user front, decentralized applications (dApps) on platforms like Solana and Arbitrum are gaining traction due to their enhanced performance and lower costs. For instance, Drift Protocol on Solana has attracted a dedicated user base by offering efficient and cost-effective decentralized finance (DeFi) services. Similarly, GMX on Arbitrum has demonstrated strong user engagement, with notable daily fee generation, highlighting the appeal of Layer 2 solutions for DeFi applications.
These trends underscore a broader movement towards platforms that can offer scalability without compromising on decentralization. As users seek faster and more affordable blockchain experiences, developers are following suit, leading to a more diverse and competitive ecosystem landscape.
Real-World Applications and Ecosystem Strength
Despite rising competition, Ethereum continues to boast the most mature and expansive ecosystems in both decentralized finance (DeFi) and NFTs. It is also home to some of the industry’s most influential NFT marketplaces, including OpenSea and Blur, both of which originated on the Ethereum network and helped catalyze the early NFT boom.
Ethereum’s integration with traditional finance is steadily growing as well. Major financial institutions are exploring blockchain experiments through Ethereum-compatible Layer 2s and sidechains such as Polygon and zkSync, demonstrating a clear focus on Ethereum Layer 2 adoption for real-world use cases..
However, real-world blockchain applications are no longer exclusive to Ethereum. Solana is collaborating with Visa to facilitate stablecoin-based payments, aiming to modernize global remittances.
Together, these developments highlight a diversifying ecosystem where Ethereum leads in maturity and infrastructure, but alternative chains are making meaningful strides in real-world adoption.
Ethereum’s Next Act: From Powerhouse to Protocol Layer
Is Ethereum losing its edge? Not quite—it’s preparing for a new role in the decentralized world it helped build.
As the blockchain space matures, Ethereum is transitioning from being the center of dApp activity to becoming the settlement layer for a broader, modular, and multi-chain ecosystem. This isn’t a retreat—it’s a strategic evolution. Vitalik Buterin has long championed this vision of “modular scaling,” where Layer 2 rollups and appchains handle execution while Ethereum provides the security, data availability, and finality underneath it all.
It’s a shift from spotlight to infrastructure, from destination to foundation. Ethereum may not dominate headlines for TPS or low fees, but it remains the most secure, decentralized, and battle-tested protocol in Web3. And like TCP/IP quietly powers the internet, Ethereum could underpin a vast universe of rollups and chains—rarely seen, but always essential.
This change marks a new phase: not a race to outpace rivals on speed or cost, but a mission to anchor the ecosystem’s integrity. If Ethereum’s roadmap continues to deliver and its community stays cohesive, it won’t just remain relevant, it will become indispensable.
In Web3’s layered future, Ethereum is not fading. It’s settling in for the long haul.
Disclaimer: This article is intended solely for informational purposes and should not be considered trading or investment advice. Nothing herein should be construed as financial, legal, or tax advice. Trading or investing in cryptocurrencies carries a considerable risk of financial loss. Always conduct due diligence.
If you want to read more market analyses like this one, visit DeFi Planet and follow us on Twitter, LinkedIn, Facebook, Instagram, and CoinMarketCap Community.
