Layer-2 Adoption and Ethereum Mainnet Congestion: Regime-Aware Causal Evidence Across London, the Merge, and Dencun (2021-2024)

TL;DR

This study provides causal evidence that increased Ethereum Layer-2 rollup adoption significantly reduces mainnet congestion and fees, especially before the Dencun upgrade, using a regime-aware error-correction model over a 1245-day period.

Contribution

It offers the first cross-regime causal estimate of how L2 adoption decongests Ethereum and introduces a reusable template for monitoring scaling strategies.

Findings

A 10% increase in L2 adoption reduces median base fees by about 13%.

L2 adoption decreases congestion indicators like block utilization.

Pre-Dencun, L2 adoption significantly decongests Ethereum; post-Dencun effects are less precise.

Abstract

Do Ethereum's Layer-2 (L2) rollups actually decongest the Layer-1 (L1) mainnet once protocol upgrades and demand are held constant? Using a 1245-day daily panel from August 5, 2021 to December 31, 2024 that spans the London, Merge, and Dencun upgrades, we link Ethereum fee and congestion metrics to L2 user activity, macro-demand proxies, and targeted event indicators. We estimate a regime-aware error-correction model that treats posting-clean L2 user share as a continuous treatment. Over the pre-Dencun (London+Merge) window, a 10 percentage point increase in L2 adoption lowers median base fees by about 13% -- roughly 5 Gwei at pre-Dencun levels -- and deviations from the long-run relation decay with an 11-day half-life. Block utilization and a scarcity index show similar congestion relief. After Dencun, L2 adoption is already high and treatment support narrows, so blob-era estimates are statistically imprecise and we treat them as exploratory. The pre-Dencun window therefore delivers the first cross-regime causal estimate of how aggregate L2 adoption decongests Ethereum, together with a reusable template for monitoring rollup-centric scaling strategies.