Ethereum’s Roadmap: Layer 2 Scaling & Staking Upgrades
Ethereum remains the dominant smart contract blockchain, but it faces increasing competition from Solana, Avalanche, and other Layer 1 blockchains that offer faster and cheaper transactions. In response, Ethereum is undergoing a major transformation through its Layer 2 scaling solutions, staking upgrades, and the upcoming Dencun upgrade.
1. The Dencun Upgrade: Ethereum’s Big Scalability Push
Ethereum’s biggest challenge has always been scalability and transaction costs. While Ethereum is the most widely used blockchain for DeFi, NFTs, and smart contracts, its network gets congested, causing high gas fees and slow transaction speeds.
The Dencun upgrade (expected in 2024) aims to solve these problems by making Layer 2 transactions significantly cheaper and more efficient.
A. What is the Dencun Upgrade?
The Dencun upgrade is a combination of two major Ethereum upgrades:
Deneb – Enhances Ethereum’s consensus layer (staking and security improvements).
Cancun – Implements key changes to Ethereum’s execution layer (where transactions happen).
B. Key Feature: Proto-Danksharding (EIP-4844)
The biggest highlight of Dencun is Proto-Danksharding (EIP-4844), which dramatically reduces Layer 2 transaction fees by introducing "blobs"—a new way to store temporary transaction data.
Currently, Layer 2 solutions like Arbitrum, Optimism, and Base use rollups to bundle transactions and process them off-chain before settling on Ethereum. However, they still rely on Ethereum’s expensive calldata storage, keeping Layer 2 fees relatively high.
With Proto-Danksharding, Ethereum will provide a new storage mechanism that drastically reduces rollup costs, making Layer 2 transactions cheaper and faster.
2. Layer 2 Networks: Arbitrum, Optimism, and Base
Layer 2 solutions are Ethereum’s answer to high gas fees and slow transactions. Instead of competing with Ethereum, they work alongside it, enabling users to interact with dApps at a fraction of the cost.
A. Arbitrum
The largest Layer 2 network with the highest total value locked (TVL).
Uses Optimistic Rollups to scale Ethereum.
Home to many DeFi projects (GMX, Radiant, Camelot).
B. Optimism
Uses Optimistic Rollups, like Arbitrum, but with lower fees and faster withdrawal times.
Powers Base (Coinbase’s Layer 2 network) and other OP Stack chains.
Profit-sharing model: Revenue generated on Optimism is reinvested into ecosystem development.
C. Base (Coinbase’s L2)
Built on Optimism’s OP Stack, but with direct Coinbase integration.
Rapid growth due to strong adoption from retail investors and developers.
Coinbase’s influence helps push Ethereum scaling forward.
With Dencun’s fee reductions, these Layer 2 solutions will become even more competitive, further cementing Ethereum’s dominance.
3. Ethereum Staking & Liquid Staking Upgrades
Ethereum’s transition to proof-of-stake (PoS) has opened new opportunities for staking. However, capital inefficiencyand centralization concerns remain key challenges.
A. How Staking Works on Ethereum
Users stake 32 ETH to become a validator and help secure the network.
Validators earn rewards but must lock their ETH, limiting liquidity.
Partial withdrawals were introduced after Ethereum’s Shanghai upgrade in 2023.
B. The Rise of Liquid Staking
Liquid staking protocols like Lido, Rocket Pool, and Frax ETH solve the liquidity problem by allowing users to stake ETH and receive staked ETH tokens (stETH, rETH) in return. These staked tokens can be used in DeFi, lending, and trading.
1. Lido (LDO)
Largest liquid staking provider (over $30 billion staked ETH).
Users receive stETH, which accrues staking rewards automatically.
Centralization concern: Lido holds over 30% of all staked ETH.
2. Rocket Pool (RPL)
Decentralized alternative to Lido, with permissionless node operators.
Lower minimum staking requirement (16 ETH vs. Ethereum’s 32 ETH).
Users receive rETH, a liquid staking derivative.
With more people using liquid staking and staking withdrawals available, Ethereum staking is becoming more accessible, further securing the network.
4. Ethereum vs. Solana & Avalanche: Can Ethereum Keep Up?
Ethereum is the largest smart contract blockchain, but faster and cheaper Layer 1s are gaining ground.
A. Solana (SOL): The High-Speed Challenger
Ultra-fast transactions (~65,000 TPS vs. Ethereum’s ~30 TPS).
Lower fees ($0.0001 per transaction vs. Ethereum’s ~$5-20).
Growing DeFi and NFT adoption, but centralization concerns remain.
Solana has gained massive momentum, especially in DeFi and memecoins. However, its occasional network outagesraise concerns about reliability.
B. Avalanche (AVAX): Subnet Innovation
Uses subnets to create custom blockchain environments.
Cheaper than Ethereum and supports high transaction speeds.
Institutional adoption growing due to private blockchain capabilities.
Avalanche is competing as a scalable Ethereum alternative but has struggled to attract liquidity away from Ethereum’s ecosystem.
C. Why Ethereum Still Holds the Lead
Despite its higher fees, Ethereum still dominates in:
✔️ Total Value Locked (TVL) – Ethereum holds over $60 billion in DeFi liquidity, compared to $3-4 billion for Solana & Avalanche.
✔️ Security & decentralization – Ethereum is more secure than Solana’s centralized validator set.
✔️ Network effects – Ethereum has the largest developer community and strongest brand recognition in crypto.
However, if Ethereum fails to reduce fees and improve transaction speeds, Solana and Avalanche could take more market share.
5. Is Ethereum Losing Market Share?
Ethereum’s dominance has slightly declined due to faster, cheaper Layer 1s. However, its Layer 2 expansion and staking upgrades will keep it highly competitive.
A. The Shift to Multi-Chain
Users no longer rely on just one blockchain.
Many developers deploy on multiple networks (Ethereum, Solana, Avalanche).
Cross-chain technology makes it easier to move assets between chains.
B. Ethereum’s Multi-Layered Future
Ethereum’s Layer 2 expansion will allow it to:
✔️ Compete with Solana on speed (sub-second transactions on L2s).
✔️ Offer lower fees (thanks to Dencun’s cost reductions).
✔️ Maintain security and decentralization.
If Ethereum can successfully scale through Layer 2s, it will continue to dominate DeFi, NFTs, and smart contracts.
Ethereum’s Path Forward
Ethereum faces strong competition from Solana and Avalanche, but its scaling upgrades, staking improvements, and Layer 2 growth will keep it a leader in blockchain development.
Short-term outlook: Ethereum’s fees remain high, but Layer 2 adoption is accelerating.
Long-term outlook: Ethereum’s multi-layer ecosystem will make it unstoppable if it can successfully scale.
Will Ethereum maintain its dominance, or will Solana and Avalanche take more market share? The battle for blockchain supremacy is far from over.