This is how Polygon can be a threat to the ETH price

The transaction costs, either gas partieson the Ethereum (ETH) network can be sky high. So high, in fact, that making transactions on the network is almost impossible. For this reason, there are so-called layer-2 (L2) built scale solutions on the Ethereum network. Such protocols, such as Polygon (MATIC), allow Ethereum transactions to be done much more efficiently, but the success of such protocols could also put the ETH price at risk.

Coinbase warns

The American crypto exchange reports that Coinbase. In a research report, posed that in the future layer-2 scaling solutions such as Polygon can, as it were, ‘cannabalize’ the turnover of the Ethereum network. Especially when such protocols become even more popular in the future than they already are.

“The future of L2s could well become a zero-sum game, as the L2 that houses the majority of decentralized applications could one day power the entire Ethereum ecosystem. That suggests that L2s could eventually draw revenue from Ethereum itself.”

Over the past 12 months, the revenue from scaling solutions has been only 1% of the revenue of the Ethereum network itself. That means that the threat Coinbase predicts is not necessarily an issue yet.

“Over the past 12 months, Token Terminal has reported that Ethereum has earned a total of $9.971 billion in revenue, compared to a total of only about $78 million on Arbitrum, Polygon and Optimism combined.”

Ethereum Merge

The crypto exchange states that as soon as Ethereum switches to proof-of-stake (PoS) after the merge in Septemberthe scaling solutions may cause a drop in strike yields and this could negatively affect the price of ETH.

“If more user activity migrates to L2s and those L2s need their own tokens to facilitate transactions, that could potentially reduce staking revenue for validators who will earn less on those net transaction costs. If that discourages staking on the platform, that could increase the size of the ETH liquid circulating supply, potentially hurting ETH prices.

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