Execution is a commodity. The value is in the data and settlement. L1s like Ethereum now monetize data availability via blobs, while L2s like Arbitrum and Optimism compete on execution cost, driving margins to zero.
the-modular-blockchain-thesis-explained
Blog
Why Execution Layer Gas Fees Are Becoming a Commodity
The modular blockchain thesis is not just a tech stack—it's an economic force. As execution layers proliferate, the price of pure computation is racing toward marginal cost, eroding the core revenue model for today's leading rollups.
introduction
THE COMMODITIZATION
The End of the Execution Layer Cash Cow
Execution layer revenue is collapsing as modularity and L2 competition turn gas fees into a low-margin commodity.
L2s are the new commodity vendors. They compete on price and UX, not protocol revenue. Arbitrum Nitro and OP Stack forks create interchangeable execution environments where user experience, not the chain itself, captures value.
The profit shifted upstream. Revenue pools moved to shared sequencers like Espresso and decentralized sequencer sets, which extract value from ordering, not computation. Execution layer fees fund security, not profits.
Evidence: Ethereum's post-Dencun L1 fee revenue dropped over 90% as blob fees replaced calldata. Arbitrum and Base now process more transactions than Ethereum for a fraction of the cost per transaction.
key-trends
EXECUTION LAYER COMPETITION
The Commoditization Pressure Points
The race for block space is shifting from consensus to execution, turning raw gas fees into a race-to-the-bottom commodity.
01
The Problem: Monolithic Inefficiency
Bundling consensus, data availability, and execution creates a bloated fee market. Users pay for security they don't need for simple swaps. This is the core inefficiency that modular chains like Celestia and EigenDA exploit by unbundling data availability.
~90%
Redundant Cost
1
Monolithic Stack
02
The Solution: Specialized Execution Layers
Rollups and app-chains compete purely on execution cost and speed. With shared security from Ethereum or Celestia, the differentiating factor becomes gas price and latency. This creates direct competition between Arbitrum, Optimism, zkSync, and Starknet.
$0.01
Target Fee
~1s
Finality Goal
03
The Aggregator Endgame
Users won't manually compare L2 gas prices. Aggregators like UniswapX, CowSwap, and 1inch will source liquidity and route transactions across the cheapest execution venue, treating L2s as interchangeable commodities. This is the ultimate price pressure.
100%
Automated
Zero
User Overhead
04
The Verifier Commodity
Proof systems (ZK or Fraud) are becoming standardized libraries. With RISC Zero, SP1, and gnark, generating validity proofs is becoming a cheap, off-the-shelf service. Execution layers compete on who can run the verifier most efficiently.
~$0.001
Proof Cost
Open Source
Verifiers
deep-dive
THE COMMODITIZATION
The Modular Economic Engine: Why Fees Collapse
Modularity decouples execution from consensus, transforming gas fees into a low-margin commodity through hyper-competition.
Execution is a commodity. The core innovation of modular blockchains like Celestia or EigenDA is separating execution from consensus. This creates a competitive execution marketplace where rollups like Arbitrum, Optimism, and zkSync compete for users based on price and performance.
Fees race to marginal cost. In a monolithic chain, high fees are a revenue feature. In a modular stack, execution layers are thin clients with minimal state. Their operational cost approaches the data availability fee plus proving cost, creating a fee floor set by Celestia or EigenLayer, not monopoly rent.
The L2 business model breaks. Projects like Polygon previously monetized via high, inelastic block space. Now, with shared security from Ethereum and cheap DA, their primary lever is fee undercutting. The economic moat shifts from chain loyalty to developer tools and user experience.
Evidence: The OP Stack fork wars. Any team can deploy a cheap L2 using the OP Stack or Arbitrum Orbit. This proliferation of chains forces fee compression, as seen with Base and Blast competing on transaction cost while sharing the same underlying tech stack.
EXECUTION LAYER ANALYSIS
The Race to the Bottom: Execution Fee Compression
Comparing the fee structures and economic models of leading execution layers, highlighting the commoditization of block space.
| Metric / Feature | Ethereum (Base Fee + Priority Fee) | Solana (Local Fee Markets) | Avalanche C-Chain (Dynamic Fees) | Arbitrum (L2 Surge Pricing) |
|---|---|---|---|---|
Base Fee Model | EIP-1559 Burn + Priority Fee Auction | Localized Fee Markets per State | Dynamic Min Base Fee (Snowman++) | L1 Data Cost + L2 Compute Surcharge |
Typical Swap Cost (USD) | $2 - $15+ | < $0.01 | $0.10 - $0.50 | $0.10 - $0.80 |
Fee Predictability | Low (Auction Volatility) | High (Outside Congestion) | Medium (Algorithmic Adjustment) | Medium (Tied to L1 + Congestion) |
Max Theoretical TPS (Sustained) | ~30-50 | ~2,000-3,000 | ~450 | ~4,000-7,000 (theoretical) |
Primary Revenue Sink | ETH Burn (Protocol) | SOL Burn (Protocol) | AVAX Burn (Protocol) | ETH (L1 Data), ARB (Sequencer Profit) |
Commoditization Driver | MEV & Priority Fee Auctions | Parallel Execution & Low Hardware Costs | Subnet Competition & Fixed Cost Design | Sequencer Competition & Proof Compression |
Fee Floor Determinant | L1 Block Space Scarcity | Validator Operational Cost | Subnet Staking Cost | L1 Calldata Cost + Prover Cost |
counter-argument
THE COMMODITY TRAP
The Rebuttal: Can Brand and Ecosystem Save Fees?
Network effects and brand loyalty are insufficient moats against the commoditization of execution.
Execution is a commodity. The core function of processing transactions—opcode execution, state updates—is standardized across EVM chains. This creates a perfect market where users choose the cheapest, fastest option.
Brand loyalty is ephemeral. Users follow liquidity and yield, not logos. The migration from Uniswap v2 on Ethereum to v3 on Arbitrum demonstrates that ecosystem tools, not the base chain, drive adoption.
Ecosystems are portable. Successful dApp suites like Aave and Chainlink deploy on every major L2. This multi-chain presence decouples application success from any single chain's fee structure.
Evidence: The 2023-24 L2 fee wars show chains like Base and Blast competing on sub-cent transactions. Their growth comes from subsidized periods, not inherent technical superiority.
takeaways
EXECUTION LAYER COMMODITIZATION
TL;DR for Protocol Architects
The value capture in the execution layer is shifting from raw block space to specialized services, turning base gas fees into a low-margin commodity.
01
The Problem: MEV is the Real Revenue
Validators earn more from MEV extraction than from base gas fees. This creates misaligned incentives and degrades user experience.\n- Base fee revenue is ~10-20% of total validator income on Ethereum.\n- Protocols must compete in a market where execution quality (slippage, front-running) is more valuable than cheap gas.
~80%
MEV Share
Low Margin
Base Fees
02
The Solution: Specialized Execution Layers
Rollups and app-chains are commoditizing L1 execution by offering sovereign block space with tailored features.\n- Arbitrum Stylus and zkSync Era offer lower, predictable costs.\n- Solana and Monad compete on ~100ms block times and parallel execution.\n- The competition is on UX, not just $/gas.
~100ms
Block Target
10-100x
Cheaper Gas
03
The New Battlefield: Intents & Auctions
Execution is becoming an auction for user intent fulfillment, not just transaction ordering. This abstracts gas from users entirely.\n- UniswapX and CowSwap use solver networks.\n- Across and LayerZero use optimistic relays.\n- Users submit desired outcomes; competing solvers bid for the right to fulfill them, paying gas on the user's behalf.
Gasless
User UX
Auction-Based
Execution
04
The Infrastructure Play: Shared Sequencers
Decoupling sequencing from execution creates a neutral, competitive market for block building, further commoditizing the base layer.\n- Espresso Systems and Astria provide shared sequencing layers.\n- Enables atomic cross-rollup composability.\n- Reduces reliance on any single L1's execution environment, turning it into a commodity compute resource.
Neutral
Sequencing
Atomic
Composability
ENQUIRY
Get In Touch
today.
Our experts will offer a free quote and a 30min call to discuss your project.
NDA Protected
Confidentiality24h Response
Time to ValueDirectly to Engineering Team
No Sales Fluff10+
Protocols Shipped
$20M+
TVL Overall