Ethereum DApp volumes gain 38% in a month — Will ETH price follow?

Ether (ETH) price has struggled to maintain levels above $3,200 between Sept. 13 and Sept. 19. However, onchain metrics have improved, particularly when compared to some of Ethereum’s direct competitors. Traders are now questioning how long it will take for Ether to resume its bull run, given its dominance in fees and network deposits.

No blockchain comes close to Ethereum’s $149.9 billion in onchain volumes over the past 30 days. The second-largest competitor, BNB Chain (BNB), reached only $26.6 billion, 82% smaller despite offering much lower transaction fees. More importantly, Ethereum’s activity grew by 37.7% over the past month, while BNB Chain saw a 6% decline in volume.

Ethereum dominates in fees, TVL and staking rewards

Critics argue that Ethereum’s average transaction fee of $7.50 hinders growth and retail adoption, but this perspective overlooks the increasing use of layer-2 scaling solutions such as Arbitrum, Base, and Optimism. Ultimately, these networks rely on Ethereum’s base layer for security and finality, creating incentives for more independent validators and staking deposits.

The impressive growth of the Solana network is likely Ethereum’s biggest Achilles’ heel, evident in its remarkable 83% onchain volume growth, driven by a total value locked (TVL) of $8.3 billion. Despite having significantly lower deposits compared to Ethereum’s $59.4 billion, Solana leads in decentralized exchange (DEX) volumes.

Ethereum remains the dominant force in fees, crucial for network security, having generated $163.7 million in fees over 30 days, according to DefiLlama. Solana, on the other hand, earned $133.4 million in fees during the same period, with Tron in third place at $51 million. Interestingly, Solana’s three leading decentralized applications (DApps)—Raydium, Jito, and Photon—generated an impressive $338.5 million in fees within 30 days.

While Ethereum critics point to layer-2 rollup solutions as insufficient in generating fees, Solana faces a similar challenge. SOL (SOL) stakers and investors are not benefiting from the success of its DApps. According to StakingRewards, Solana’s staking reward rate stands at 6.2% annually, while the equivalent SOL inflation rate is 5.2%, meaning the adjusted gain is much smaller.

Ethereum staking reward vs. ETH inflation rate. Source: StakingRewards

In contrast, Ethereum staking offers a 3.3% annualized reward rate, while the equivalent ETH inflation rate stands at 0.7% or lower. Although this difference may seem minor at first, Ethereum’s 2.6% adjusted return is a far more attractive proposition compared to Solana’s 1%. In practical terms, this positions Ethereum to capture institutional deposits, a key factor in maintaining its leadership in total value locked (TVL).

Related: Solana-based DApps rake in record fees as memecoin frenzy returns

Ethereum’s biggest challenge appears to be the lack of a clear strategy for achieving scalability without disrupting its layer-2 ecosystem, which currently benefits from blob space and relatively low-cost state bridging. Ethereum 3.0 aims to improve scalability by reintroducing sharding and leveraging a zero-knowledge Ethereum Virtual Machine (zkEVM) at the base layer. 

This innovative scaling approach could enable multiple execution shards, increasing transactions per second. Joe Lubin views it as a way to aggregate computation, while some speculate it could eventually eliminate rollups. However, achieving these objectives may take years.

From an onchain perspective and in terms of competitive advantage, Ether has the potential to outperform the broader altcoin market capitalization, but its success will depend on the delivery of its roadmap.