Current Price Trends and Onchain Metrics
Ether (ETH) has faced challenges in maintaining price levels above $3,200 from September 13 to September 19. Despite this price struggle, there are positive indicators in onchain metrics, particularly when compared to Ethereum’s competitors. Traders are increasingly curious about the timeframe in which Ether might resume its bull run, especially given its dominance in transaction fees and network deposits.
Ethereum’s Dominance in Onchain Volumes
No other blockchain comes close to Ethereum’s impressive $149.9 billion in onchain volumes over the past 30 days. In contrast, the second-largest competitor, BNB Chain (BNB), reported only $26.6 billion, marking an 82% deficit despite offering lower transaction fees. Notably, Ethereum’s activity surged by 37.7% in the last month, while BNB Chain experienced a 6% decline in volume.
Ethereum’s Fee Structure and Its Implications
While critics argue that Ethereum’s average transaction fee of $7.50 could hinder growth and retail adoption, this view neglects the increasing adoption of layer-2 scaling solutions like Arbitrum, Base, and Optimism. These layer-2 networks rely on Ethereum’s base layer for security and finality, incentivizing more independent validators and staking deposits.
Competition from Solana
The rapid growth of the Solana network represents a significant challenge for Ethereum. Solana has demonstrated an impressive 83% increase in onchain volume, driven by a total value locked (TVL) of $8.3 billion. Although Solana’s deposits are considerably lower than Ethereum’s $59.4 billion, it excels in decentralized exchange (DEX) volumes.
Fee Generation Comparison
Ethereum continues to lead in fee generation, which plays a crucial role in network security. Over the past 30 days, Ethereum generated $163.7 million in fees, while Solana earned $133.4 million and Tron came in third with $51 million. Notably, Solana’s top three decentralized applications (DApps)—Raydium, Jito, and Photon—collectively generated $338.5 million in fees within the same timeframe.
Staking Rewards: A Comparative Analysis
Some Ethereum critics claim that layer-2 rollups are insufficient for generating fees, yet Solana faces a similar predicament. According to StakingRewards, Solana’s staking reward rate is 6.2% annually, but the inflation rate for SOL is 5.2%, leading to a much smaller adjusted gain.
In contrast, Ethereum offers a 3.3% annualized staking reward rate, while its inflation rate is at 0.7% or lower. Although this difference may appear minor, Ethereum’s 2.6% adjusted return is significantly more attractive compared to Solana’s 1%. This positioning enhances Ethereum’s ability to attract institutional deposits, a vital factor in maintaining its leadership in total value locked (TVL).
Challenges and Future Scalability Plans
Ethereum’s primary challenge remains the lack of a clear strategy to achieve scalability without disrupting its thriving layer-2 ecosystem, which currently benefits from blob space and low-cost state bridging. Ethereum 3.0 aims to enhance scalability by reintroducing sharding and employing a zero-knowledge Ethereum Virtual Machine (zkEVM) at the base layer.
This innovative scaling approach could facilitate multiple execution shards, significantly increasing transactions per second. Joe Lubin suggests that this strategy will aggregate computation, though some speculate it might eventually render rollups obsolete. However, realizing these objectives may take several years.
Conclusion: Ethereum’s Market Potential
From an onchain perspective and considering its competitive advantage, Ether has the potential to outperform the broader altcoin market capitalization. However, its success will heavily depend on the effective execution of its roadmap.
This article is for informational purposes only and should not be construed as legal or investment advice. The views expressed herein are those of the author and do not necessarily reflect the opinions of Cointelegraph.
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