Original author: Marcel Pechman

Original title: Ethereum DApp volumes gain 38% in a month — Will ETH price follow?

Source: Cointelegraph

Compiled by Koala, Mars Finance

Despite the surge in the number of DApps on Ethereum, it seems like all currencies except ETH are pumping. What's going on with this?

ETH coin ETH has been struggling to maintain a level above $3,200 between September 13th and September 19th. However, on-chain indicators have improved, especially compared to some direct competitors of Ethereum. Given ETH's dominance in fees and network deposits, traders are now questioning how long it will take for ETH to recover the Bull Market.

Blockchain ranked by 30-day DApp volume, USD. Data Source: DappRadar

In the past 30 days, no on-chain volume of any blockchain can rival the $1499 billion of Ethereum. The second largest competitor, BNB Chain, only reached $266 billion, and despite much lower Money Laundering, it has shrunk by 82%. More importantly, Ethereum's activity has risen by 37.7% in the past month, while BNB Chain's volume has decreased by 6%.

Ethereum dominates in terms of fees, TVL, and stake rewards

Critics argue that the average transaction fee of 7.50 USD for Ethereum hinders rise and retail adoption, but this overlooks the increasing use of layer 2 scaling solutions such as Arbitrum, Base, and Optimism. Ultimately, these networks rely on the security and finality of Ethereum's base layer, creating incentives for more independent validators and stake deposits.

The astonishing rise of Solana network may be the biggest fatal weakness of Ethereum, with its on-chain volume rising as high as 83%, thanks to a Total Value Locked (TVL) of 8.3 billion USD. Although Solana's deposits are much lower compared to Ethereum's 59.4 billion USD, Solana is leading in terms of Decentralization Exchange (DEX) volume.

According to DefiLlama data, Ethereum remains the dominant force in terms of fees, which is crucial for network security, generating $163.7 million in fees in the last 30 days. On the other hand, Solana generated $133.4 million in fees during the same period, with Tron coming in third at $51 million. Interestingly, Solana's three leading decentralized applications (DApps) - Raydium, Jito, and Photon - generated an impressive $338.5 million in fees in the last 30 days.

Despite critics of Ethereum pointing out that layer 2 scaling solutions are not sufficient to generate fees, Solana also faces similar challenges. SOL stakers and investors have not benefited from the success of its DApps. According to StakingRewards data, Solana's stake return rate is 6.2% per year, while SOL's inflation rate is 5.2%, which means the adjusted returns are much smaller.

ETH Ethereum stake rewards and ETH inflation rate. Source: StakingRewards

By contrast, the annualized return rate of staking ETH is 3.3%, while the inflation rate of ETH is 0.7% or lower. Although this difference may seem small at first glance, compared to Solana's 1%, the adjusted return rate of 2.6% for staking ETH is more attractive. In practical terms, this allows staking ETH to attract institutional deposits, a key factor in maintaining its leading position in Total Value Locked (TVL).

The biggest challenge facing ETH is seemingly the lack of a clear strategy to achieve scalability without disrupting its Layer 2 ecosystem, which currently benefits from blob space and relatively low-cost state bridge. ETH 3.0 aims to improve scalability by reintroducing Sharding and leveraging Zero-Knowledge Ethereum Virtual Machine (zkEVM) at the base layer.

This innovative expansion method can achieve multiple Sharding executions, thereby increasing the volume per second. Joe Lubin sees it as a way of aggregated computing, while some speculate that it may eventually eliminate aggregation. However, achieving these goals may take several years.

From the perspective of on-chain and competitive advantages, Ether has the potential to surpass a wider range of alts' market capitalization, but its success will depend on the implementation of its roadmap.