Ethereum Layer-2 Networks Surge with $35 Billion Total Value Locked

Ethereum experiences a paradox as its layer-1 (L1) DeFi activity appears muted, despite ether reaching record highs. In August, Ethereum mainnet fees amounted to $44 million, marking a 44% decrease from the previous month.

Layer-2 (L2) networks like Arbitrum and Base show significant growth, with total value locked (TVL) at $20 billion and $15 billion respectively.
The transition raises questions about whether L2s are cannibalizing Ethereum's DeFi or if the ecosystem is evolving into a multi-layered architecture.
AJ Warner from Offchain Labs suggests Ethereum serves as a “global settlement layer,” focusing on high-value issuance and institutional activities not fully captured in DeFi metrics.
Ethereum is seen as a secure but slow base network, while L2s offer faster, cheaper transaction processing, appealing for everyday DeFi use.
L2s facilitate fast-paced trading strategies and act as testing grounds for innovations like Uniswap V4’s hooks.
Smaller liquidity providers prefer L2s for better yields, whereas larger ones remain on Ethereum for security and liquidity depth.
Flagship protocols like Aave and Uniswap still heavily rely on Ethereum, but there’s an incremental shift toward L2s for Uniswap.
User experience improvements steer newcomers directly to L2s, suggesting that the L1 vs. L2 debate isn't zero-sum.
As of September 2025, a mix of liquidity sources includes bridged assets from Ethereum, natively minted funds, and external bridges.

Ethereum establishes itself as the secure settlement engine for global finance, while rollups like Arbitrum and Base serve as execution layers for innovative DeFi applications.