As the bull market transitions into altcoin season, it seems Ethereum (ETH) is running out of time to prove itself. Since the current uptrend began at the end of 2023, ETH’s performance has been closely watched. However, over the past year, it appears ETH has fallen short of market expectations. Looking at the numbers: since October 2023, ETH’s maximum rally has been around 170%, struggling to break through the $4,000 barrier consistently. In contrast, Bitcoin (BTC) has seen gains of over 300% in the same period, while Solana (SOL) has surged by more than 1300%. Many consider ETH as a bellwether for the arrival of altcoin season, yet as several established altcoins have experienced explosive short-term gains, ETH’s momentum appears to be lacking.

As the reigning “king of blockchains,” is Ethereum being underestimated by the market, or is this performance within expectations? Is this a case of “the old general is still capable” or “past his prime”?

A Year of Stagnation in On-Chain Metrics

Examining on-chain data, Ethereum has shown neither significant declines nor meaningful growth over the past year. It has essentially been treading water.

Daily transaction count, a critical metric of network activity, paints a picture of stability with slight fluctuations. Looking at Ethereum’s daily transaction count chart over the past year, it resembles a flatline with minor bumps, much like a heartbeat monitor. On December 8, 2023, Ethereum’s mainnet recorded 1.18 million daily transactions. Fast forward to December 8, 2024, and this number sits at 1.22 million—a marginal increase. During this period, only January 2024 saw a temporary spike to 1.96 million daily transactions, while most of the year remained within the 1–1.3 million range.

The trend in gas fees provides an even clearer reflection of Ethereum’s on-chain activity. From late 2023 to early 2024, Ethereum’s gas fees remained relatively high, averaging over 40 Gwei and peaking at around 100 Gwei. However, with the rise of new blockchains like Solana, a significant decline in Ethereum gas fees became apparent in the charts. This drop was especially notable between July and September, with fees hitting a low of just 0.3 Gwei. Although there has been some recovery recently, gas fees have generally stayed below 20 Gwei. Previously, the rapid adoption of Layer 2 solutions was driven by Ethereum’s prohibitively high gas fees. Now that gas fees have finally come down, it seems unclear where the users have gone. One might argue that it is precisely the exodus of users that has caused gas fees to drop significantly.

As for active addresses, the pattern is quite similar to the trend in daily transaction numbers. According to data from Ethereum explorers, the daily count of active Ethereum addresses and ERC-20 addresses has shown little to no growth, remaining roughly at the same levels as before the start of the bull market.

Users Move to L2, Capital Stays on L1

Where have Ethereum’s users gone? Weekly on-chain activity data provides some clues. A year ago, Ethereum’s active addresses made up around 50% of all Layer 2 activity. Over time, this proportion has steadily decreased. Currently, Ethereum’s mainnet active addresses account for only about 24% of the total active addresses across all Layer 2 solutions, while Layer 2 platforms have seen a clear upward trend in user activity.

In December 2023, Ethereum’s mainnet was the most active blockchain, accounting for approximately 32.48% of overall activity. However, by December 2024, the most active chain had shifted to Base, which now holds a 50% share. Ethereum’s mainnet has dropped to second place with 19%, followed by Arbitrum at 9.2%.

When it comes to Total Value Locked (TVL), Ethereum’s mainnet remains the top choice for large capital holders. In December 2023, Ethereum’s mainnet accounted for roughly 95% of all stablecoin TVL. While its share has slightly decreased over the past year, it still dominates with approximately 91%. Notably, TVL is one of the few metrics for Ethereum that has seen significant growth over the past year. In December 2023, Ethereum’s TVL stood at approximately $28.8 billion. By December 2024, this figure had surged to around $77.5 billion—an increase of 2.69x. This growth rate outpaces Ethereum’s price increase, reflecting the broader rise in asset values during the bull market. Among Layer 2 solutions, Arbitrum and Base rank second and third in stablecoin TVL, respectively.

In terms of revenue, Ethereum’s mainnet remains the most profitable chain within the Ethereum ecosystem. Over the past year, Ethereum’s revenue share has consistently stayed above 80%, and as of December 8, 2024, it accounts for 92%. Base has emerged as the second-highest revenue generator in the Ethereum ecosystem this year.

Ethereum’s market cap has also remained dominant within its ecosystem, maintaining a share of approximately 98%. Despite declining on-chain activity, the proportion of its market cap aligns closely with its share of TVL. However, in the broader crypto market, Ethereum’s market cap share has steadily decreased over the past year, now accounting for just 13.4%.

Despite the decline in on-chain activity, large capital flows continue to favour Ethereum’s mainnet. Comparing the ratio of total TVL to active users, Ethereum boasts the highest “value per user” across all chains. This metric stands at $178,700 for Ethereum’s mainnet, compared to $3,315 for Base and $1,972 for Solana. This underscores Ethereum’s position as the chain with the highest “user value density” in the ecosystem.

Uniswap’s Departure: A Looming Concern

From the data available, Uniswap remains Ethereum’s undisputed top application. In terms of DEX activity, Uniswap V2 and V3 together account for over 97% of the trading volume on Ethereum’s mainnet. On Ethereum’s burn leaderboard, Uniswap has long held the top spot. As of December 9, Uniswap burned 6,372 ETH over the past 30 days, compared to just 4,594 ETH burned by simple Ethereum transfers.

If Uniswap shifts most of its trading activity to its own Unichain, Ethereum’s mainnet activity and burn rate could see a significant drop. According to Forbes, Uniswap’s transition to its own chain could result in Ethereum validators losing approximately $400–500 million in annual revenue. However, the financial loss is secondary to the broader threat this poses to Ethereum’s deflationary narrative. Uniswap’s universal router is the top gas spender on Ethereum, consuming 14.5% of total gas fees and burning $1.6 billion worth of ETH to date.

Summarizing the above metrics, several trends are evident. Ethereum’s on-chain activity has seen little to no growth over the past year, and its share within the Ethereum ecosystem has been gradually declining. This indicates that new users are predominantly opting for Layer 2 solutions or alternative blockchains. Emerging chains like Solana, Sui, and Aptos, for instance, are experiencing rapid growth in these areas.

This brings us back to the initial question: has Ethereum’s fundamental landscape undergone a significant shift? Or is ETH undervalued? Based on the data, Ethereum’s mainnet appears to be evolving into a liquidity hub for institutional and large-scale capital. Even though gas fees have dropped significantly, Ethereum’s mainnet still struggles to compete with Layer 2 solutions or other blockchains in terms of transaction fees and speed. Ethereum’s mainnet is no longer a haven for small retail investors. It has also lost its community advantage in trending categories like MEME coins. Instead, it now caters to users with lower transaction frequency but higher security requirements. From this perspective, Ethereum’s ecosystem role is shifting—liquidity and security are becoming its final moat.

Author: Frank

This article reflects the views of PANews guest contributors and does not represent PANews’ position. PANews assumes no legal liability for the content. The article and opinions herein do not constitute investment advice.

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