The second largest cryptocurrency, Ethereum (ETH), has achieved a noteworthy milestone, according to crypto analytics firm IntoTheBlock. The firm has reported that ETH has officially crossed the threshold of 100 million addresses with a balance, marking what they call a “milestone moment for crypto adoption.”
While some had previously claimed that Ethereum had reached this milestone, crypto analytics firm Glassnode reported that the number of non-zero ETH addresses exceeded 100,000 back in July. IntoTheBlock clarified this discrepancy by explaining that their method excludes “dust” addresses with balance values less than 0.00001 ETH. They believe that such addresses should not be counted for this metric to be considered significant.
Ethereum’s Supply On The Rise
Just a week ago, IntoTheBlock reported that ETH’s supply had been rising for the first time since December 2022. This increase in supply can be attributed to low transaction fees and a growing daily issuance, contributing to an inflationary trend. However, its inflation rate remains relatively low at 0.44% annually, significantly below Bitcoin’s.
One notable aspect affecting Ethereum’s ecosystem is the decrease in fees. Demand for its Mainnet has been slowing down in recent months, partly due to the migration to layer 2 solutions and declining application usage on the Mainnet. As a result, fees on ETH have reached their lowest levels since April 2020.
These low fees represent a challenge to Ether’s “ultrasound money” thesis. The reduced fees have resulted in less ETH being burned, reducing deflationary pressure. Additionally, the amount of ETH minted per day has been increasing as more ETH is staked, further contributing to inflationary rewards. Despite this, its net issuance remains lower than Bitcoin’s.
The transition of activity to layer 2 solutions on Ethereum has been a primary driver of the decreasing fees and declining volumes from NFT collections. In the past, NFTs were a major contributor to Ethereum’s fees, but this week, they accounted for just 8% of ETH being burnt.
As speculative activity on the Ethereum Mainnet diminishes, and layer 2 solutions continue to grow, Ethereum fees are likely to remain low. The introduction of EIP-4844 is expected to reduce L2 fees further, representing a significant shift for Ethereum.
It’s a trade-off between high revenues and a deflationary supply in favor of attracting mainstream users through layer 2 solutions. This transition could shape the future of Ethereum and its role in the broader cryptocurrency ecosystem.