Ethereum’s Growth Depends on 2 Key Areas Amid Uncertain Future

A report from Coinshares has highlighted that the influence of Ethereum (ETH) in the cryptocurrency sector is being directed by two key elements: marketplaces and stablecoins.

Nevertheless, while the network is gaining traction in these areas, the future for new applications remains ambiguous.

Decentralized Exchanges Lead the Way

The report, published on September 24, showed that marketplaces and stablecoins constitute slightly over half of Ethereum’s current usage. The rising popularity of Decentralized Finance (DeFi) protocols and the flourishing stablecoin market are pivotal to this trend, underlining Ethereum’s foundational role for numerous crypto projects.

According to the study, platforms like decentralized exchanges (DEXs) and Non-Fungible Tokens (NFT) marketplaces have solidified the network’s reputation as the preferred blockchain for tokenized assets.

Uniswap, for instance, was responsible for at least 15% of the transaction fees accrued on Ethereum during the first half of 2024. The OpenSea NFT marketplace was also recognized as a significant source of fees on the blockchain, though its impact has considerably declined since peaking at $572 million in H1 2022.

Furthermore, the survey revealed that over $135 billion worth of stablecoins are currently in circulation on Ethereum, featuring the two leading cryptocurrencies by market cap, Tether (USDT) and USD Coin (USDC).

These digital currencies depend on the blockchain’s structure to preserve their stability against fiat currencies while enhancing liquidity for DeFi platforms and ensuring effortless cross-border transactions.

Ethereum Struggles to Identify Sustaining Use Cases

Despite these advantages, the Coinshares report posed a critical question: what lies ahead?

Analysts suggest that the network’s recent updates, such as its shift to Proof-of-Stake (PoS) and the continuous development of Layer 2 (L2) scaling solutions, have positioned it well for future expansion. However, upcoming innovations remain uncertain, and the need for new decentralized applications (dApps) is not guaranteed.

CoinShares proposes that Ethereum’s future achievements may rely on its capability to exceed its existing use cases. There is potential for enterprise adoption, gaming, and advancements related to the metaverse, yet real-world demand and implementation are vital. Ethereum will need to engage developers to explore the full possibilities of blockchain technology in daily life.

In a summary of the findings shared on X, James Butterfill, head of research at the crypto asset management firm, stated that the value of ETH is primarily influenced by “demand for Ethereum transactions” or how much users are willing to pay for services on the network, rather than factors like staking yield.

The report noted that most transaction fees on the network come from a “very small set of services,” which mainly involve speculation or basic value transfers. Thus, Butterfill argued that the network needs to prioritize establishing “sustainable on-chain utility” to ensure its long-term value.