As a seasoned analyst with over two decades of experience in the ever-evolving world of digital currencies, I find myself consistently intrigued by the dynamic dance between Ethereum (ETH) and its competitors. The current struggle of ETH to maintain prices above $3,200 may have some investors feeling uneasy, but a closer look at the onchain metrics paints a different picture.
Over the period from September 13th to 19th, the value of Ether (ETH) has found difficulty staying above $3,200. On the other hand, on-chain indicators have shown improvement, notably when contrasted with Ethereum’s immediate rivals in the market. As a result, investors are contemplating how much longer it will take for Ether to rekindle its bullish trend, given its strong position in transaction fees and network deposits.
Among all blockchain platforms, none has come close to Ethereum’s $149.9 billion worth of on-chain transactions within the last thirty days. The second largest competitor, Binance Smart Chain (BNB), managed only $26.6 billion – a figure 82% smaller, despite charging lower transaction fees. What’s more striking is that Ethereum’s activity surged by 37.7% over the past month, while Binance Smart Chain experienced a decrease of 6% in its volume.
Ethereum dominates in fees, TVL and staking rewards
Opponents contend that Ethereum’s typical transaction fee of around $7.50 slows down growth and retail acceptance, but this viewpoint disregards the rising popularity of layer-2 scaling options like Arbitrum, Base, and Optimism. Essentially, these networks are reliant on Ethereum’s fundamental layer for security and finality, thereby fostering motivation for additional independent validators and staking deposits.
As a researcher, I’m struck by the rapid expansion of the Solana network, which seems to present a significant challenge for Ethereum, particularly in terms of on-chain volume growth, an impressive 83% increase. This surge is primarily fueled by a massive $8.3 billion Total Value Locked (TVL). Although Solana’s TVL is dwarfed by Ethereum’s staggering $59.4 billion, it outranks Ethereum in the realm of decentralized exchange (DEX) volumes, demonstrating its leadership in this area despite lower initial deposits.
Over the past month, Ethereum has continued to lead in transaction fees, playing a significant role in network security, with a total of $163.7 million generated. Meanwhile, Solana earned approximately $133.4 million in fees during the same period, placing it second behind Ethereum, while Tron trailed in third at around $51 million. Notably, the top three decentralized applications (DApps) on Solana—Raydium, Jito, and Photon—collectively generated a substantial $338.5 million in fees over the same 30-day span.
Critics of Ethereum argue that layer-2 rollup solutions aren’t enough to generate substantial fees, and it seems Solana encounters a comparable issue. Stakers and investors in SOL (Solana) are not fully reaping the rewards of its DApps success. According to StakingRewards, the annual staking reward rate for Solana is 6.2%, but the actual inflation rate of SOL is 5.2%. This implies that the actual profit gained after adjusting for inflation is reduced significantly.
Compared to Ethereum, staking in Solana provides a lower annualized return rate of 1%, while Ethereum offers a higher reward rate of at least 3.3%. Initially, this difference might appear small, but when compared to Solana’s return, Ethereum’s adjusted return of 2.6% looks much more appealing. This higher return rate is significant in attracting institutional deposits, which play a crucial role in maintaining Ethereum’s dominance in terms of total value locked (TVL).
The main issue facing Ethereum seems to be finding a definite approach for scaling its capabilities without causing disruption to its layer-2 environment, which currently thrives on blob storage and cost-effective state transfers. Essentially, Ethereum 3.0 plans to enhance scalability by reintroducing sharding as a strategy and utilizing a zero-knowledge Ethereum Virtual Machine (zkEVM) at its core layer.
As a researcher delving into this novel scaling strategy, I am excited about its potential to support numerous transaction execution units (shards), thereby potentially boosting transactions per second. Following Joe Lubin’s perspective, this technique appears to be an effective means of consolidating computations. Some even suggest that it might eventually render rollups obsolete; however, realizing these aspirations could take several years.
Viewing it from a blockchain standpoint, Ether may surpass the overall altcoin market cap, offering a competitive edge. However, this achievement hinges on the fulfillment of its outlined plans or roadmap.
As a researcher, I wish to clarify that this analysis serves as a source of general knowledge and is not intended to replace professional legal or investment advice. The perspectives, insights, and viewpoints shared here are my own and may not align with or represent those held by CryptoMoon.
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2024-11-20 01:06