Imposing Tariffs on Ethereum Layer 2 Solutions Is 'Toxic' for Growth, Says Scroll Exec

Ye Zhang, co-founder of Layer 2 smart contract platform Scroll, has sharply criticized proposals to impose fees on Ethereum Layer 2 solutions.

In a series of tweets on X, the exec called “tarriffing Layer 2s” “one of the most toxic ideas” for the blockchain’s future.

Ye Zhang Opposes L2 Fees

Zhang argued that such a move would trade long-term scalability and ecosystem growth for short-term revenue, a strategy he believes is better suited to centralized corporations than to Ethereum’s decentralized model.

He went on to highlight that Ethereum’s true strength lies not in extracting revenue through protocol fees but in its potential to serve as the central asset across a growing number of rollups.

With Ethereum already a dominant force in ecosystems like Arbitrum, Optimism, and zkSync, Zhang suggested that more rollups would lead to greater adoption of ETH, expanding its role as a store of value. He warned that imposing fees on Layer 2s could drive developers away and leave Ethereum with limited scalability and relevance in the long run.

“Ethereum doesn’t need to extract – it needs to enable. Ship faster, scale blobs 1000x more, scale execution to some degree. Make Ethereum DA attractive, ideally provide more value beyond security (interoperability, other shared components, liquidity bridges). Empower more aligned players.”

Value Leakage Concerns

While Zhang contended that Ethereum should focus on enabling Layer 2 expansion over imposing fees, the broader economic picture presents a growing challenge. As execution moves off-chain, Ethereum’s core network has seen a sharp decline in fee revenue, which, in turn, has raised concerns about value leakage.

As reported by CryptoPotato, Ethereum’s fee generation has plummeted from nearly $30 million in March 2024 to just $500,000 a year later, as Layer 2 networks like Arbitrum, Optimism, and Base capture most of the economic benefits. The shift has also impacted ETH’s burn rate, which led to a rise in net issuance and an increase in inflation to 0.79%.