As Cointelegraph reported, asset management firm VanEck pointed out in its August 2024 crypto monthly review that the reasons for Ethereum (ETH)'s poor price performance include declining network revenue, policy choices and value extraction from layer-2 solutions.
VanEck said the consumer shift to high-throughput layer-1 blockchains like Solana (SOL) was partly responsible for Ethereum’s revenue decline. Analysts believe the best use case for public blockchains in their early stages is speculation.
The report explains that Ethereum has a first-mover advantage in the field of smart contracts and has become the main platform for decentralized finance. However, the rise of competitors such as Solana, Sui (SUI) and Aptos (APT) is diverting Ethereum's speculative demand.
VanEck noted that developers are increasingly deploying new tokens on these high-throughput networks to provide a better user experience and avoid Ethereum’s transaction bottlenecks.
Ethereum’s layer-1 revenue is being cannibalized by competing layer-2 networks, and internal and external competition is squeezing its revenue. Since the Dencun upgrade in March 2024, Ethereum network fees have fallen by 99%.
Anoma co-founder Adrian Brink said that there are currently too many scaling solutions for Ethereum, about 10 times the actual demand.
