Ether (ETH) has struggled to maintain above $3,200 from November 13 to November 20. However, on-chain metrics have improved, especially when compared to some of Ethereum's direct competitors. This raises questions among traders: How long will it take for Ether to regain its upward momentum, as it still maintains dominance in transaction fees and deposit volumes on the network?
Blockchains ranked by 30-day DApp volume, USD | Source: DappRadar
No blockchain currently approaches Ethereum's on-chain transaction volume, which reached $149.9 billion in the past 30 days. The second-largest competitor, BNB Chain, only achieved $26.6 billion – 82% less despite having significantly lower transaction fees. Notably, Ethereum's activity increased by 37.7% last month, while BNB Chain decreased by 6%.
Ethereum leads in transaction fees, total value locked (TVL), and staking rewards
Some critics argue that Ethereum's average transaction fee of $7.50 is a barrier to growth and access for individual users. However, this view overlooks the increasing use of layer-2 scaling solutions such as Arbitrum, Base, and Optimism. These networks ultimately still rely on Ethereum as a foundational layer for security and transaction finality, thus creating incentives to attract more independent validators and staking deposits.
The impressive growth of the Solana network is being viewed as Ethereum's biggest Achilles heel, with on-chain transaction volume increasing by 83%, led by a total value locked (TVL) of $8.3 billion. Although the deposit amount is significantly lower than Ethereum's $59.4 billion, Solana excels in trading volume on decentralized exchanges (DEX).
Ethereum still maintains the lead in transaction fees, a key factor for network security, generating $163.7 million in transaction fees in the past 30 days, according to DefiLlama. During the same period, Solana earned $133.4 million, and Tron came in third with $51 million. Notably, Solana's top three decentralized applications (DApps)—Raydium, Jito, and Photon – generated $338.5 million in transaction fees over the 30-day period.
Comparison of staking rewards between Ethereum and Solana
Although some argue that Ethereum's layer-2 solutions do not generate enough transaction fees, Solana also faces a similar challenge. Solana's staking rewards are currently at 6.2% annually, but the SOL inflation rate is 5.2%, leading to significantly lower adjusted returns.
Ethereum staking rewards compared to ETH inflation rate | Source: StakingRewards
Meanwhile, Ethereum offers a staking reward rate of 3.3% per year, with an ETH inflation rate of only 0.7% or lower. Although this difference may seem small, Ethereum's 2.6% adjusted return is much more attractive than Solana's 1%. This helps Ethereum attract deposits from institutions, a key factor in maintaining its lead in total value locked (TVL).
Challenges and prospects of Ethereum
Ethereum's biggest challenge is the lack of a clear strategy for scaling without disrupting the layer-2 ecosystem. Current solutions like blob space and state bridges with low costs still provide benefits, but further improvements are needed.
Ethereum 3.0 aims to enhance scalability by redeploying sharding and implementing zero-knowledge Ethereum Virtual Machine (zkEVM) at the foundational layer. This solution could allow for the deployment of multiple processing shards, increasing the number of transactions per second. Joe Lubin considers this as a means of computational aggregation, and some experts believe it could eliminate dependence on rollup solutions. However, achieving these goals may take several years.
From an on-chain perspective and competitive advantage, Ether has superior potential compared to the market capitalization of other altcoins. However, its success will depend on the execution of the outlined roadmaps.