Ethereum is facing challenges at current market rates. As of September 12, this second-largest cryptocurrency has had difficulty gaining traction, remaining below $2,400. The daily chart indicates a consistent decline for ETH, with the range between $2,400 and $2,800 emerging as a significant liquidation zone.
Ethereum Revenue Dips to May 2020 Levels
Apart from price fluctuations, another trend is becoming evident. Observers note that not only is the ETH price declining, but there is also a significant drop in revenue corresponding with this sell-off. As of now, the daily revenue generated by the smart contracts platform has fallen to levels not seen since May 2020.
To clarify, “revenue” refers to the fees that are paid to validators when they authorize transactions or execute smart contracts on the blockchain. While this decline is concerning, some analysts remain optimistic, asserting that Ethereum’s future potential is bright, despite the revenue challenges.
This optimism is rooted in various advancements. A primary factor is the belief that gas fees on Ethereum have decreased and are not as burdensome as many perceive. Over the years, multiple updates have been implemented to reduce the cost of mainnet transactions.
Following the congestion that occurred during the last bull market from 2020 to 2021, which led to exorbitant gas fees, Ethereum developers advocated for layer-2 solutions. Platforms like Arbitrum, OP Mainnet, and Base currently hold billions in total value locked (TVL), as seen in L2Beat data, and are gaining user trust.
Importantly, even though these solutions process transactions off-chain, there have been no significant hacks that would deter participation or raise security concerns.
Due to their success, leading tech firms and cryptocurrency exchanges, including Sony and Coinbase, have been actively involved. Coinbase supports Base, while Sony is gearing up to launch its own layer-2 solution, Soneium.
The Scaling Success: Continuous Development and Improvement
The swift uptake of Ethereum layer-2 solutions has alleviated stress on the main layer, which may account for the declining fees. Furthermore, the Dencun upgrade has reduced layer-2 gas fees even more, making these options increasingly affordable.
This success in scalability has led observers to predict a promising future for the platform. Before the advent of layer-2s, Ethereum struggled to retain users due to prohibitively high gas fees, which drove many toward alternatives such as Solana, Tron, and Avalanche.
As a measure of this success, meme coin activity on Ethereum continues to be strong, even as it wanes on Solana and shifts to Tron. According to Coingecko, some of the most valuable meme coins, like Pepe and Floki, are hosted on Ethereum, while others, such as Brett, are part of Base’s network ecosystem.
The platform is also advancing. Following the shift to proof-of-stake with The Merge, the immediate goal is to enhance on-chain scalability.
Vitalik Buterin, the co-founder of Ethereum, has stated that this will be accomplished in stages, progressing from Purge to Splurge. Ultimately, the aim is to implement Sharding, which would enable the platform to process millions of transactions per second without relying on off-chain methods.
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