In recent months, the decentralized finance (DeFi) landscape has witnessed a significant shift in capital flows. Since October, rising gas fees on the Ethereum network have driven investors and developers toward more cost-effective alternatives. As a result, Layer 2 solutions and multi-chain DeFi protocols have seen record inflows of capital—highlighting growing pressure on Ethereum’s scalability and user accessibility.
Back in 2014, Ethereum co-founder Vitalik Buterin criticized Bitcoin’s transaction costs, stating that *"internet money (BTC) shouldn’t cost $0.05 per transaction—that’s kind of absurd."* Ironically, today’s Ethereum network often sees transaction fees far exceeding that amount. At peak congestion in November 2021, even simple actions like authorizing a trade on Uniswap could cost users up to $50 in ETH gas fees, depending on network conditions.
Despite these high costs, Ethereum’s fundamentals remain strong. Over the past 30 days alone, more than 320,000 ETH have been burned—a daily average exceeding 10,000 ETH—thanks to the EIP-1559 fee reform. This has contributed to multiple days of deflationary supply contraction, providing robust support for ETH’s market price.
Yet, persistent high fees continue to deter retail participants and small-scale traders. Even Layer 2 scaling solutions, designed to reduce costs by processing transactions off-chain, are not immune to price spikes during periods of heavy usage. As new users flood into the Ethereum ecosystem daily, network congestion remains a recurring challenge.
The Rise of Low-Cost Alternatives
With Ethereum’s fees remaining prohibitively high for many use cases, users are increasingly migrating assets to EVM-compatible (Ethereum Virtual Machine) blockchains offering lower transaction costs. According to Dune Analytics, the total value locked (TVL) in cross-chain bridge protocols has been on a steady upward trend since early October.
One standout performer is the Ronin Bridge, which has gained significant traction over the past month. This growth is largely attributed to Axie Infinity players moving their assets to Ronin—a sidechain built specifically for low-cost gaming transactions.
👉 Discover how low-fee networks are reshaping DeFi participation and driving innovation across chains.
Top Protocols by Weekly Revenue
Recent data shows that Axie Infinity generated $32 million in revenue over the past seven days—second only to Ethereum itself at $383 million—and ahead of PancakeSwap on Binance Smart Chain, which earned $7.6 million. Notably, BSC-based DeFi platforms like PancakeSwap offer significantly lower transaction fees compared to Ethereum, making them attractive for frequent traders and yield farmers.
Winners in Total Value Locked (TVL)
The past week’s biggest gains in TVL were seen primarily among protocols operating outside Ethereum’s mainnet or those supporting multi-chain functionality. Projects such as Abracadabra.money, Yield Yak, Benqi, SpookySwap, and Loopring—all built on alternative chains or sidechains—experienced substantial increases in locked capital.
This trend underscores a broader movement: liquidity is spilling over from Ethereum to ecosystems where transaction efficiency and affordability are prioritized. In the short term, there is little indication that Ethereum’s high-cost environment will ease, suggesting this capital reallocation may continue.
Competitive Incentives Across Blockchains
To capitalize on Ethereum’s fee challenges, numerous blockchain platforms have launched aggressive incentive programs since April 2021:
- Polygon introduced its "$100M DeFi For All Fund" to support DeFi adoption over a 2–3 year period.
- Terra launched a $150 million ecosystem fund to boost application development within its network.
- Avalanche unveiled "AvalancheRush," a $180 million rewards program aimed at attracting top-tier DeFi projects.
- Celo, in partnership with Aave and Curve, launched the "DeFi for the People" initiative with over $100 million in funding, focusing on mobile-first DeFi access.
- Fantom announced a major incentive plan in August, allocating 370 million FTM tokens to align user, builder, and network incentives.
These strategic investments reflect an intensifying battle for developer mindshare and user adoption across the blockchain space.
Ethereum’s Resilience Amid Competition
Despite mounting competition, Ethereum continues to strengthen its core metrics. In Q3 2025, the network generated $1.96 billion in revenue—an increase of 511% compared to Q3 of the previous year. Of this, $1.34 billion was permanently removed from circulation via EIP-1559’s burn mechanism.
Other key indicators also show strong growth:
- Settlement value reached $536.5 billion, up 398% year-over-year.
- Daily active addresses hit 457,402—an increase of 24.1%.
- Network hash rate climbed to 705,663 GH/s, a 181% rise.
- Annual ETH supply inflation dropped to 0.79%, down 29% from 1.11% in the same quarter last year.
Additionally, ETH balances held on centralized exchanges have continued to decline. By early November 2025, only 9 million ETH remained in exchange wallets—a sign of reduced selling pressure and increased long-term holding sentiment.
Frequently Asked Questions (FAQ)
Q: Why are Ethereum gas fees so high?
A: Gas fees spike due to network congestion. When demand for block space exceeds supply—especially during NFT mints or high-volume trading—users must bid higher prices to get their transactions processed quickly.
Q: Are Layer 2 solutions cheaper than Ethereum mainnet?
A: Yes. Layer 2 networks like Optimism, Arbitrum, and Loopring process transactions off-chain and bundle them before submitting to Ethereum, drastically reducing per-transaction costs—often by over 90%.
Q: What is driving capital into multi-chain DeFi protocols?
A: Lower fees, faster transactions, and generous yield incentives on alternative chains make platforms like Avalanche, Fantom, and Binance Smart Chain appealing alternatives to congested networks.
Q: Is Ethereum losing its dominance in DeFi?
A: While Ethereum still leads in total value locked and developer activity, its market share is being challenged. However, upcoming upgrades like full sharding and further Layer 2 integration aim to restore scalability and competitiveness.
Q: How does EIP-1559 affect ETH supply?
A: EIP-1559 introduced a base fee burn mechanism. Every transaction now destroys part of the paid gas fee, making ETH deflationary during periods of high usage—supporting long-term value accrual.
Q: Can other blockchains surpass Ethereum in DeFi innovation?
A: While competitors offer better performance today, Ethereum maintains the largest developer community and smart contract security track record. True leadership depends on balancing decentralization, scalability, and innovation.
The surge in funding for Layer 2 and multi-chain DeFi platforms signals a pivotal moment in blockchain evolution. As users demand efficiency and affordability, networks that deliver seamless experiences will gain traction—pushing the entire ecosystem toward greater inclusivity.