Layer 1 block space is not yet a commodity. Matt Hougan argues that the current low transaction fees may be due to oversupply rather than efficiency, and warns that as real-world assets, stablecoins, and DeFi grow to multi-trillion-dollar scales, market structure could change significantly.
On X on the 22nd, Hougan said the notion that L1 block space operates like a commodity is taking hold, but that belief may be wrong. He added that if infrastructure were a commodity, it should be standardized and interchangeable, yet institutions are concentrated on only a few networks such as Ethereum and Solana, with little interest in the top 20 blockchains.
He noted that major networks have secured far more bandwidth than demand, which helps keep fees low. Yet he cautioned that if stablecoins, RWAs, and DeFi scale to multi-trillion dollars, the current low-cost structure may not persist.
RWA.xyz data shows Ethereum accounts for 60-70% of the real-world asset tokenization market, including U.S. Treasuries, private credit, and tokenized funds. Solana and Binance Coin (BNB) follow, but together they account for about 20%. The remaining L1 networks lack liquidity and a robust development ecosystem, leaving little institutional demand.
Fees on major networks remain very low, with Ethereum averaging under $1 and Solana and BNB trading at under a cent. Hougan says this is not due to efficiency but to oversupply.
Ethereum has distributed traffic to Layer 2 rollups to relieve congestion, while Solana has boosted execution performance to raise throughput. As a result, supply has outpaced demand, helping keep fees low.
Hougan says that if DeFi total value locked expands to $1 trillion to $2 trillion and stablecoin market caps rise to multi-trillion dollars, block-space demand could surge. Only then will it be possible to judge whether L1 block space is a true commodity.
He also notes that as demand grows, leading chains may maintain pricing power, but block space remains potentially replicable and competitive. Progress in rollups and interoperability could weaken any single L1’s monopoly.
Chainlink (LINK) could be a winner in any scenario. In a world with thousands of connected chains or in a market dominated by a few L1s, value will be created in different ways.
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