EigenLayer Founder Reiterates Support For Ethereum, But Why Is ETH Struggling?

Despite scalability and high gas fees facing Ethereum, the founder of EigenLayer, a liquidity restaking platform, insists the network is superior

Despite the narrative suggesting layer-2 scaling solutions are hurting ether (CRYPTO: ETH), Mustafa Al-Bassam, the co-founder of Celestia, believes the native token of the layer-1 blockchain is “underrated.”

Why ETH Is Underrated

In a post on Substack, Al-Bassam said that while layer-1 tokens have been rallying, ETH is lagging behind. However, he feels the layer-1 token is “secretly having an amazing year.”

The co-founder highlighted the thriving rollup ecosystem in Ethereum, which he said is “by far the largest and most successful.”

“This ecosystem is growing rapidly and is bringing new use cases and applications to Ethereum every day,” he wrote.

As of Sept. 30, data from L2Beat showed the layer-2 ecosystem in Ethereum managing over $38 billion, Arbitrum being the largest with over $20 billion, followed by Base.

Layer-2 scaling solutions are designed to handle transactions off-chain, thereby reducing the load on the layer-1 blockchain and making transactions faster and cheaper.

However, as more activity is shifted off-chain, the layer-1 network becomes inflationary. This is because the layer-1 blockchain still generates new blocks and adds new ether to the circulating supply, even though the activity on the layer-1 chain is decreasing.

To counter this, layer-1 networks are burning ether, which reduces the circulating supply and offsets the new ether being added to the network. However, the rate at which ether is being burned has slowed down significantly in recent months.

According to Ultra Sound Money, ether was inflationary for 10 days in September and is currently burning ether at a rate of 0.000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000