How Rollups Change Ethereum’s Revenue Model

Ethereum’s revenue model is shifting from execution-heavy gas fees on Layer 1 to data availability and settlement fees driven by rollups. As more transactions move to Layer 2, Ethereum captures less direct execution revenue but gains new value channels through blob fees (EIP-4844) and its role as the ultimate security and settlement layer. The long-term outcome depends on whether blob demand reaches sustained capacity and whether sequencing value is routed back to Ethereum validators.

What was Ethereum’s revenue model pre rollups?

Before the rollup era, Ethereum’s revenue model was straightforward: most economic activity happened directly on Layer 1, generating substantial gas fees from on-chain execution. After the London upgrade in August 2021, EIP 1559 introduced a dual fee structure with a dynamic base fee that is burned and an optional priority tip paid to validators. As blocks are produced, the base fee is removed from circulation, which can create deflationary pressure on ETH during periods of high activity. Validators capture value through issuance and priority tips, while the protocol captures value through the burn mechanism.

The model was simple but hard to scale. During peak congestion, average transaction fees could spike dramatically, and complex operations like NFT trades could become extremely expensive. Layer 1 revenue could be strong in high activity periods, but high costs priced out everyday users and constrained adoption, pushing Ethereum toward a rollup centric architecture.

What revenue streams do rollups create for Ethereum?

Rollups reshape Ethereum’s revenue structure by shifting value capture toward data availability and settlement. After EIP 4844 went live in March 2024, rollups began paying blob fees to post compressed transaction data to Ethereum, creating a separate fee market distinct from Layer 1 execution gas. Blob fees are burned, contributing to ETH’s burn driven value capture, even though the fee level depends on supply and demand for blob space.

Beyond blob fees, Ethereum captures value by providing final settlement and security guarantees that rollups depend on. Each rollup ultimately pays for publishing data and for anchoring state transitions to Ethereum. However, the distribution of value is debated: many Layer 2s earn significant revenue from transaction fees and MEV, while centralized sequencers often capture most of that value instead of passing it back to Ethereum or users. Proposed changes like a blob fee floor aim to reduce persistent underpricing and strengthen Ethereum’s pricing power in data availability.

Why do fees move from L1 execution to L2?

Ethereum’s L1 scalability bottleneck

Fees move from Layer 1 to Layer 2 because higher usage creates congestion, which slows confirmation and raises gas prices. Ethereum historically prioritized security and decentralization over raw throughput, and increasing transactions per block can make node operation more expensive, weakening decentralization and potentially stressing consensus. This constraint makes Layer 1 execution economically inefficient for mass market usage.

Rollups make execution cheaper while keeping Ethereum security

Rollups move most computation off Layer 1 and only post minimal data to Ethereum. By batching many transactions into fewer Layer 1 postings, rollups spread costs across users, reducing the per transaction fee. This modular setup lets Ethereum focus on data availability and settlement while execution happens on Layer 2, so users typically pay much lower fees while still inheriting Ethereum’s security.

How do blob fees (EIP 4844) change value capture?

Blob fees create a new burn driven revenue path

EIP 4844 introduces a dedicated market for data availability via blobs, separate from execution gas. Blob fees are burned, creating an additional ETH burn channel that is not tied to Layer 1 execution demand. In practice, blob fees can stay low when blob space is abundant, which reduces near term revenue impact even if rollup usage grows.

The long term tipping point depends on blob demand reaching capacity

If rollup demand grows enough to consistently saturate blob capacity, blob fees can rise quickly due to the market’s adjustment mechanism. In that scenario, blobs could become a meaningful source of ETH burn and value capture, but the size and timing of that effect depends on adoption, blob supply, and how quickly demand catches up.

Why do rollups affect Ethereum’s security budget?

Lower Layer 1 fees can reduce validator revenue pressure relief

As activity shifts to Layer 2, direct demand for Layer 1 execution gas can fall, which can reduce fee income that historically contributed to validator rewards. If sequencers and Layer 2 actors capture most of the transaction fees and MEV, Ethereum may capture less value than the total economic activity happening across its rollup ecosystem.

Based rollups aim to route more value back to Ethereum

One proposed direction is based rollups, where Ethereum validators play a larger role in ordering or sequencing, potentially redirecting some sequencing value to Layer 1. If more rollup driven value accrues to validators through fees, it can improve the sustainability of the security budget without relying as much on issuance.

How can Ethereum sustain revenue in a rollup first future?

A sustainable rollup centric model likely depends on stronger data availability pricing and deeper integration between Layer 2 usage and Layer 1 value capture. Mechanisms such as a blob fee floor, along with scaling upgrades that increase blob supply, can make data availability a more reliable revenue stream as usage grows. In parallel, designs like based sequencing can redirect a share of sequencing value to Ethereum validators, realigning incentives so Ethereum captures more of the economic activity that its security ultimately underwrites.

Conclusion

Rollups are transforming Ethereum’s revenue model from execution-driven gas fees to data availability and settlement-based value capture. While Layer 1 execution fees may decline, blob fees and security-driven demand create new mechanisms for ETH burn and validator incentives. The long-term sustainability of Ethereum’s security budget now depends on blob market saturation, effective data pricing, and whether sequencing value flows back to Layer 1.