Ethereum’s ecosystem has welcomed a new layer-2 (L2) solution, Ethereum R1, which is gaining attention for its distinct approach to scalability.
Unlike existing L2 solutions, Ethereum R1 does not come with a native token or governance structure.
The project, which operates entirely through donations, aims to bring decentralisation and neutrality back to Ethereum’s scaling efforts.
Ethereum R1 developers have criticised many current L2 projects, suggesting they have veered too far from the core principles of decentralisation and scalability.
The developers stated in a post,
“Most L2s today are acting more like new L1s than an Ethereum scaling solution.”
They pointed out issues like opaque governance, private allocations, and centralised control in other solutions.
By contrast, Ethereum R1 is designed to be "a commodity" — simple, replaceable, and free from such dependencies.
The project’s team insists that its goal is to offer a roll-up solution built on credible neutrality, decentralisation, and censorship resistance.
Ethereum's base layer has been facing significant challenges, particularly with regard to revenue.
In March 2024, Ethereum’s Dencun upgrade reduced fees for existing L2 solutions, but by September, revenue from the base layer had dropped nearly 100%.
This dramatic fall was primarily attributed to the increased demand for L2 solutions, which diverted traffic away from the base layer.
In April 2025, Ethereum’s transaction fees hit a five-year low of just $0.16 per transaction, driven by the diminishing demand for block space.
Q1 2025 witnessed a significant drop in Ethereum's base layer revenue.
Many analysts have raised concerns over the long-term implications of L2 incentives.
Ethereum’s core user base appears to be moving toward the cheaper, faster L2 solutions, which raises questions about whether this will undermine the Ethereum base layer’s revenue model.
Some believe that Ethereum’s increasing reliance on L2 networks could weaken the base layer’s value proposition.
Ethereum’s Layer-2 Ecosystem Sees Significant Demand Despite Revenue Decline
Despite the revenue slump, Ethereum's relevance in the market continues to grow, particularly in the layer-2 space.
Recent data from Growthepie revealed a significant rise in active Ethereum addresses, with a 62% week-on-week increase.
Furthermore, Layer-2 dominance on the Ethereum network surged by 57%, highlighting the increasing shift towards more scalable solutions.
Ethereum’s market sentiment has also remained high, with 82% of market participants expressing positive sentiment towards ETH, far surpassing Solana and Bitcoin, which lagged behind with 3.6% and 2.7%, respectively.
Moreover, a surge in whale activity has been noted, with significant ETH purchases amounting to millions of dollars.
For instance, one whale, identified as ‘0xDdb4,’ acquired 1,856 ETH worth $3.44 million USDC, while another trader, ‘0xf84d,’ borrowed $1.64 million USDC to buy 1,259 ETH.
Ethereum’s price has recently shown signs of recovery after a brief dip below $1,400 in April 2025.
On 1 May, ETH’s price crossed $1,870 for the first time in weeks.
Currently, it has dropped to around $1,830.
This positive momentum coincides with technical indicators suggesting a potential reversal of Ethereum’s recent downward trend.
Some analysts believe that Ethereum has reached a local bottom, and further gains could push ETH beyond the $2,000 mark.
However, the road to recovery is not without challenges.
The price dip on 30 April, which saw ETH briefly fall to $1,736, highlighted the volatility in the market, exacerbated by a large number of forced liquidations.
Ethereum’s chart has also displayed a head and shoulders pattern, which often signals a reversal of trend, raising questions about the future direction of the price movement.
With Ethereum R1's launch, the Ethereum community is now debating whether this donation-driven, token-free approach could become a viable model for other layer-2 solutions.
Ethereum R1’s emphasis on decentralisation and resistance to centralised governance models has garnered attention, especially as many existing L2 projects are increasingly criticised for their opaque governance and venture funding ties.
The success or failure of Ethereum R1 could significantly influence the future development of Ethereum’s scaling solutions.
If it proves effective, it could set a new precedent for L2 solutions that prioritise decentralisation and neutrality over profit-driven incentives.
Despite this model, its success hinges on sufficient user and developer adoption, considering the financial challenges within the wider Ethereum ecosystem.
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