- The number of transactions on Ethereum’s network has dropped to a five-month low.
- An extract from The Block’s Data and Insights newsletter is provided below.
Activity on Ethereum ETH +7.13% has been lulling. The seven-day moving average of the network’s transaction count settled at 1.12 million per day, a level not seen since February, marking a five-month low.
There is more than one transaction involved in this lag. The number of active wallet addresses has also drastically decreased, down to about 400,000.
Upon initial observation, Ethereum’s once-bustling metropolis could appear to have transformed into a serene neighborhood. The Ethereum ecosystem is not necessarily doomed, despite this decline in Layer 1 activity.
Layer 2 solutions are more than making up for the slack while the main chain appears to be taking a break.
Base, Coinbase’s Layer 2 product, has a staggering 3.83 million transactions, making it the clear leader. The surge in activity indicates that customers are become more accustomed to and inclined toward Layer 2 solutions for their daily transactions. These networks retain Ethereum’s strong security features while providing quicker and less expensive transactions.
The Ethereum ecosystem is significantly impacted by this change in user behavior. The main Ethereum chain may eventually serve as a settlement layer for these solutions as more activity shifts to Layer 2s, rather than directly managing individual user transactions.
This change may result in more environmentally friendly gas prices on the main chain:
- Maybe improving accessibility for more significant transactions or important exchanges between smart contracts.
- Additionally, this makes it possible to use Ethereum’s foundation layer resources more effectively.
It also calls into doubt ETH’s long-term value proposition, though:
- How will the majority of user activity on Layer 2s with their own token ecosystems impact the demand for and usefulness of ETH?
- Will Ethereum’s function as the foundation of this developing ecosystem be sufficient to propel its further expansion and uptake?
We’ll be watching to see if the link continues to develop or if the stagnation in Layer 1 activity is accompanied by an increase in Layer 2 activity.
Disclaimer : This article was created for informational purposes only and should not be taken as investment advice. An asset’s past performance does not predict its future returns. Before making an investment, please conduct your own research, as digital assets like cryptocurrencies are highly risky and volatile financial instruments.
