Ethereum mainnet revenue sharply decreased, what are the reasons behind it?

Despite the sharp increase in monthly users and daily transaction costs on the second layer, Ethereum's first-layer network revenue has plummeted by 99% since March 2024. According to Token Terminal data, network fees reached an annual peak of $35.50 million on March 5, 2024. The Dencun upgrade went live on March 13, 2024, significantly reducing transaction costs on Ethereum's second layer. Post-upgrade, network fees steadily declined, hitting a low of $566,000 on August 31 and slightly rising to $578,000 on September 2, 2024. Following the Dencun upgrade, Ethereum L2 fees saw a significant decrease, sparking competition in L2 scaling solutions. L2Beat, a second-layer data resource, currently lists 74 Ethereum L2 scaling projects and 21 third-layer projects. Anoma CEO Adrian Brink believes that the number of L2 solutions built on the Ethereum network far exceeds market demand. Brink estimates that the number of second-layer scaling solutions is approximately 10 times the industry demand. This highly competitive environment has spurred a race to the bottom, with L2 competitors vying to offer customers the lowest transaction fees. This competitive landscape has attracted users to no longer settle directly on the Ethereum base layer, acting as a self-reinforcing mechanism that further reduces network fees. The reduced transaction costs from Dencun offset the deflationary pressure brought by EIP-1559, an Ethereum Improvement Proposal introducing a mechanism to burn a portion of fees on the network. The significant cost reduction implies a decrease in demand for Ether, the currency required to pay network transaction fees. Consequently, since the launch of the Dencun upgrade, the supply of $ETH has been steadily increasing. Ethereum's historically low transaction costs, coupled with insufficient demand, have led to $ETH's price falling below $3,000.