Income from Ethereum (ETH) activity is no longer guaranteed to support the network as a separate Layer 1 entity. Due to recently lowered gas prices, even validators have seen a limited flow of base fees.
Ethereum (ETH) successfully lowered its fees, with some of the DEX, swapping and NFT traffic offloaded to rollup chains. This also means that as an L1, Ethereum is no longer a viable source of direct fees, and this shift in conditions will be felt in the coming months.
Data from Token Terminal determined Ethereum was a prime source of fees on a six-month basis, easily surpassing TRON. However, in the short term, weekly fees have fallen off a cliff and the L1 chain generated only $7.2M in fees.
The full effect of the newly lowered gas fees may not yet be reflected in the bottom line of validator nodes. Previously, validators have survived periods of relatively low fees with the increased compensations they get on days of heightened activity.
Ethereum fees also rose three times in just a day, after dipping under 1 gWei in early September. There are also signs that the lowered activity levels may continue, as traffic and liquidity continue to grow on the leading L2 chains.
The shrinking of Ethereum L1 revenues arrives at a time when Bitcoin (BTC) mining is still viable. Other L1 chains are also still producing fees and rewards. However, Ethereum may be the first to see the breakdown of the L1 narrative.
Node reward slowly drops for Ethereum stakers
More than 27% of all ETH is locked for staking, valued at more than $125B in total. That value was intended to secure the network while allowing for annualized gains of up to 2.89% until recently.
Ethereum staking reward has been sliding, and it has gone down by around 11% for the past month. The lower fees led to a reward of 2.05%, much lower than previously estimated calculations.
For a single-stake node of 32 ETH, even at current prices an individual would have to invest more than $80,000. For that locked-up value, daily rewards are around $8. Staking at this point in the market also contains price and volatility risk, meaning the returns may be inadequate compared to the initial investment.
What saves staking and L1 revenues is the fact that most deposits are still in the money, being made at a much lower ETH price. Also, some of the validators use ICO treasuries and other sources of ETH accrued at a lower price, so their outright investment is much lower.
Ethereum validators turn to MEV fees for higher income
In 2024, securing the Ethereum network is not enough, requiring validators to resort to Maximum Extractable Value (MEV). This approach orders transactions in a block in a way that brings the biggest possible revenues from gas fees, priority fees, or other payments for specific block composing.
The difference between block propagation and the basic transaction execution is dramatic. Base returns from Ethereum transactions have an APY of only 0.29%. The inclusion of MEV boost and transaction ordering raises that yield to 2.89% with some validators.
Overall, ETH rewards have slid slowly since late 2022, both for execution and consensus. The presence of MEV and block builders already makes up to 90% of blocks produced. Block-building also creates different economic incentives, as fees get redirected to entities like BeaverBuild.
The current situation on Ethereum arrived slowly, after multiple resolutions that the L1 layer was not suitable to directly trade and build apps. In the past two years, traffic and apps moved away. However, the L1 block space to secure L2 activity was infact not as expensive and valuable.
The recent episode of low fees also revived the talk of Ethereum’s L1 being a dead chain. However, the network still carries its usual level of more than 330K daily active wallets. Direct on-chain activity comes from Tether (USDT) and other stablecoin transfers.
Additionally, L1 cannot be considered dead if it is instrumental to the functioning of rollup chains. All big L2 have a regular schedule of posting blobs on Ethereum, though this is not a major source of revenue for validators.
Ethereum may also revive its influence and direct usage, mostly because of its liquidity. At this point, USDT and other assets are still more widely accepted in their Ethereum version. Some users may be reluctant to bridge their assets back and forth, or risk being caught in a smaller, less liquid ecosystem.
Cryptopolitan reporting by Hristina Vasileva
Ethereum as a Layer 1 produces minimal revenues, compared to the required upfront investment for staking. Despite this, Ethereum block space remains key for L2 networks to wrap and secure their transactions.
Amazon’s journey from a modest online bookstore to the world’s largest online retailer is a narrative of innovation, disruption, and relentless ambition. Today, Amazon dominates the e-commerce landscape, setting the standard for online shopping with its vast product selection, lightning-fast delivery, and customer-centric approach. This article explores the evolution of Amazon’s leadership in online shopping, examining the key strategies, innovations, and challenges that have shaped its rise to the top.
The Early Days: From Bookstore to Everything Store
Amazon was founded by Jeff Bezos in 1994 as an online bookstore, capitalizing on the internet’s potential to reach a global audience. The decision to start with books was strategic; books were easy to ship, did not require much storage space, and had a universal appeal. From the beginning, Bezos envisioned Amazon as more than just a bookstore. His long-term goal was to create the “everything store,” a one-stop-shop where customers could find and purchase anything they needed online.
The initial success of Amazon was driven by its innovative approach to e-commerce. While traditional bookstores were limited by physical space, Amazon offered an extensive catalog of books that was virtually limitless. The company’s early focus on customer satisfaction, with features like customer reviews, personalized recommendations, and a user-friendly interface, set it apart from competitors.
By 1997, Amazon had gone public, and its rapid growth continued. The company began to expand its product offerings beyond books, gradually adding categories like music, electronics, and toys. This diversification was essential to Amazon’s strategy of becoming the go-to online retailer for all consumer needs. The company’s ability to offer a wide range of products, combined with its commitment to customer service, established it as a leader in online shopping.
Innovation and Expansion: The Prime Revolution
One of the most significant milestones in Amazon’s evolution was the launch of Amazon Prime in 2005. For an annual fee, Prime members received free two-day shipping on eligible purchases, a proposition that was revolutionary at the time. The introduction of Prime was a game-changer, transforming customer expectations and further solidifying Amazon’s leadership in online shopping.
Prime was more than just a shipping service; it was a strategic move to create customer loyalty. The subscription model incentivized customers to make Amazon their default shopping destination, as the more they used Prime, the more value they received. Over time, Amazon expanded the benefits of Prime to include streaming video and music, exclusive deals, and other perks, making it an indispensable service for millions of customers.
The success of Prime can be measured by its membership numbers, which have grown exponentially over the years. As of 2024, Amazon Prime has over 200 million members worldwide, a testament to the value it offers. The Prime membership model has been so successful that it has influenced the broader retail industry, with many competitors launching their own subscription services in response.
The Technology Edge: Fulfillment and Logistics
Amazon’s dominance in online shopping is not just a result of its vast product selection and customer-centric approach; it is also rooted in its technological prowess. The company has invested heavily in building a state-of-the-art fulfillment and logistics network, which has been a critical factor in its ability to offer fast, reliable delivery to customers.
Amazon’s fulfillment centers, which are strategically located around the world, are marvels of automation and efficiency. These facilities use advanced robotics, artificial intelligence, and data analytics to manage inventory, process orders, and ship products with unparalleled speed. The company’s ability to deliver products quickly and accurately is a key reason why customers choose Amazon over other online retailers.
In addition to its fulfillment centers, Amazon has developed a vast logistics network that includes its own fleet of planes, trucks, and delivery vehicles. The company’s investment in logistics has allowed it to reduce its reliance on third-party carriers like UPS and FedEx, giving it greater control over the delivery process. This vertical integration has enabled Amazon to offer services like same-day and next-day delivery, further enhancing its competitive advantage.
Moreover, Amazon’s logistics innovations extend beyond its own operations. The company’s delivery service partner (DSP) program has created opportunities for small businesses to operate delivery routes for Amazon, while its crowd-sourced delivery platform, Amazon Flex, allows individuals to deliver packages using their own vehicles. These initiatives have expanded Amazon’s delivery capacity and ensured that it can meet the growing demand for fast shipping.
Expanding the Ecosystem: Marketplace and AWS
Another key component of Amazon’s success in online shopping is its ability to create a comprehensive ecosystem that extends beyond retail. The Amazon Marketplace, launched in 2000, has been instrumental in expanding the company’s product selection and driving revenue growth. The Marketplace allows third-party sellers to list their products on Amazon’s platform, giving customers access to a wider range of goods and enabling Amazon to earn a commission on each sale.
The success of the Marketplace has been staggering. Today, over half of the products sold on Amazon are from third-party sellers, many of whom are small and medium-sized businesses. The Marketplace has also been a critical factor in Amazon’s global expansion, as it allows sellers from around the world to reach customers in different markets without the need for a physical presence.
In addition to the Marketplace, Amazon Web Services (AWS) has played a crucial role in the company’s growth and profitability. Launched in 2006, AWS offers cloud computing services to businesses, allowing them to store data, run applications, and scale their operations with ease. AWS has become the backbone of the internet, powering everything from startups to large enterprises. The revenue generated by AWS has given Amazon the financial flexibility to invest heavily in its retail operations, including its logistics network, Prime, and original content for Prime Video.
Challenges and Criticisms
While Amazon’s leadership in online shopping is undeniable, it has not been without challenges and criticisms. The company’s dominance has raised concerns about its impact on competition, with critics arguing that Amazon’s scale and market power give it an unfair advantage over smaller retailers. There have also been concerns about the treatment of workers in Amazon’s fulfillment centers, with reports of grueling conditions and low wages sparking public outcry and calls for better labor practices.
Amazon has also faced scrutiny over its impact on the environment. The company’s rapid delivery services, which require a vast logistics network, contribute to carbon emissions and environmental degradation. In response, Amazon has pledged to achieve net-zero carbon emissions by 2040 and has invested in renewable energy and electric vehicles to reduce its environmental footprint.
Despite these challenges, Amazon continues to grow and innovate, constantly pushing the boundaries of what is possible in online shopping. The company’s ability to adapt to changing consumer preferences, invest in technology, and create a seamless shopping experience has ensured its position as the leader in e-commerce.
The Future of Amazon in Online Shopping
As Amazon looks to the future, it faces both opportunities and challenges. The rise of new technologies like artificial intelligence, machine learning, and automation will continue to shape the e-commerce landscape, and Amazon is well-positioned to leverage these innovations to enhance its operations and customer experience.
The company is also likely to continue expanding its ecosystem, integrating its retail operations with other services like AWS, Prime Video, and Alexa. This integration will further entrench Amazon in the daily lives of consumers, making it even more difficult for competitors to challenge its dominance.
In conclusion, Amazon’s leadership in online shopping is the result of a relentless focus on customer satisfaction, innovation, and scale. From its early days as an online bookstore to its current status as a global e-commerce giant, Amazon has consistently pushed the boundaries of what is possible in retail. As the company continues to evolve, it will undoubtedly remain a dominant force in the world of online shopping, shaping the future of commerce for years to come.
