Ethereum’s DAP rate is up 83%, but there may be a catch.
The Ethereum network continues to lead the adoption of decentralized applications (DApps) volumes and deposits. Although competing chains like Solana and BNB Chain benefit from lower transaction fees that boost metrics like unique active addresses, there's nothing stopping well-funded entities from increasing Ethereum DApp volumes.
In fact, the increase in activity on the Ethereum network is distinct from broader cryptocurrency market trends and even contradicts other usage metrics. While it is impossible to prove any fraud, one should be aware that even a high transaction fee of $2.4 can distort the figures, especially for decentralized finance (DeFi) applications, where deposits can exceed $1 billion.
It is noteworthy that Ethereum is the only network among the 20 to report an increase in volume, showing an impressive 83% growth compared to the previous week. For perspective, similar protocols such as BNB Chain, Polygon, Solana, and TON saw their average volume drop by more than 30 percent. Moreover, Ethereum's 475,980 addresses pale in comparison to BNB Chain's 1.18 million and Solana's 1.62 million.
Interestingly, the increase in Ethereum volume has not been correlated with an increase in user numbers. Using specific active addresses associated with DApps as an indicator, Ethereum saw 8% fewer users compared to last week, which is better than its competitors but paradoxically shows a significant increase in volume.
Despite having fewer users due to relatively high fees, the growth of Ethereum deposits may suggest that the decline in activity could be mitigated.
According to the data, the total value of Ethereum locked in DeFi fell by 17.5% in seven days, while competitors such as Solana and Avalanche managed to attract deposits. Additionally, the number of DApp transactions on the Ethereum network did not increase during this period, suggesting that more in-depth analysis is needed to understand the anomaly.
Ethereum's volume growth was mainly driven by a 422% increase in balances in seven days, totaling an impressive $40.6 billion. To illustrate, this is 13 times more than the total activity on the BNB Chain during the same period. However, the increase in balance maxima was not accompanied by improvements in other parameters. The DApp saw a 5% drop in unique addresses and a 14% drop in transactions in the same week.
Related: Low Bitcoin and Ethereum Fees May Not Necessarily Be Good News
Excluding Balancer's contribution, Ethereum's volume increased by 5% over seven days, with this single DApp accounting for 59.5% of the total network volume. While it's not unusual for a single DApp to dominate blockchain volume — BNB Chain is largely dominated by Pancake Swap, and Uniswap has a 50% stake in the Polygon network — Ethereum's reported activity growth should be viewed with caution due to the distortion caused by a single DApp. Data.
Determining the true motivation behind Balancer's increase in size is challenging. Although some transactions in the DApp are slightly profitable, this does not completely determine the user's needs. For example, the Binance exchange announced on July 1 that it had placed the Balancer (BAL) token on a watch list, which may be linked to unusual DApp activity, although establishing a direct link between the two events is complicated.
This article does not contain investment advice or recommendations. Every investment and business activity involves risk, and readers should do their own research when making a decision.
