Worst Month for ETH Since August 2020: Crucial Metric Highlighted by Researcher

As a seasoned crypto investor with over a decade of experience in this wild and unpredictable world of digital assets, I’ve learned to take every narrative shift with a grain of salt. The disappearance of the “Ultra Sound Money” label from Ethereum (ETH) might seem like a blow at first, but it’s far from tragic.

As a seasoned crypto investor, I’d like to share my perspective on Ethereum (ETH). Contrary to the idea that it functions as a deflationary cryptocurrency, its transaction fees are too minimal to maintain an adequate burn rate. This means that the value of “Ultra Sound Money” narrative, which was associated with ETH, may be diminishing. However, this is not necessarily a tragic event for Ethereum as the second-largest cryptocurrency in the market.

Ethereum (ETH) fees lowest since August 2020, data says

In simple terms, August 2024 marks a challenging period for Ethereum (ETH) regarding network fees generated, being one of the lowest since the DeFi Summer of 2020. This significant drop – over 20 times from its peak – can be attributed to the shift of network activity towards Layer 2 solutions and the implementation of blobs by ERC 4337, as suggested by researcher Thor Hartvigsen in a recent discussion on Twitter.

Is it possible that Ethereum (ETH) is no longer considered “ultra sound money” due to recent developments? Here’s a breakdown:— Thor Hartvigsen (@ThorHartvigsen) August 29, 2024

Hartvigsen examines ETH transaction fees from multiple perspectives, including those of stakers, non-stakers, and others. Interestingly, he observes a drop of more than 90% in the specific fee distribution to stakers by the year 2024.

Consequently, Ethereum’s (ETH) annual inflation rate stands at approximately 0.7%. This, coupled with a prolonged price stability for ETH, could potentially concern both the Ethereum community and traders.

Simultaneously, these significant shifts offer their own benefits, an analyst observes. To a degree, such transformations were expected for Ethereum’s L1 (Layer 1).

As a researcher examining the blockchain landscape, I’ve always found it challenging to justify the exorbitant $100 transaction fees on the mainnet. These fees were never sustainable in the long run, and they significantly hindered the network’s usability for everyday users. However, disregarding the issue of L2 fragmentation, the network has become noticeably more usable today.

Compared to other players in the field, our current inflation rates are significantly lower. For example, as U.Today has shared before, the Cardano (ADA) community experienced an inflation rate of approximately 2.5% in August 2024, which they find favorable.

Solana (SOL) and Avalanche (AVAX), two significant proof-of-stake networks, experience an inflation rate of approximately 14-15%, whereas Polkadot (DOT) hovers around 10% in this particular metric.

Ultra-sound money thesis is gone: ETH in search of new narratives?

Generally speaking, the analyst acknowledges that Ethereum no longer stands out due to its net deflationary nature. Similar to other infrastructure layers, it’s necessary to find alternative methods for determining its value.

Concurrently, the Ethereum (ETH) community highlights four optimistic financial arguments for ETH, remaining bullish despite the current circumstances.

As an analyst, I’m excited to report that Ethereum is running smoothly and efficiently across all major layers 2 (L2). Here are some key points:

— liam 📜 (@daddysether) August 30, 2024

Liam, who oversees the community for Ethereum’s Layer 2 project Scroll, views the current distribution of ETH tokens as “a balanced and long-term emission model,” which helps Ethereum maintain its position as a leading platform for smart contracts.

The Ethereum (ETH) price is sitting at $2,520, being 0.3% down in the last 24 hours.

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2024-08-31 17:30