Ethereum, Solana, and Bitcoin See Sharp Drop in Onchain Activity, Coin Metrics Study Shows

Layer one (L1) blockchain networks, including Ethereum, Solana, and Bitcoin, have experienced a significant reduction in onchain and market activity in 2024.

Coin Metrics researchers Tanay Ved and Matías Andrade have published a report highlighting the challenges faced by layer one (L1) blockchain networks amid a significant reduction in onchain and market activity throughout 2024.

The report, titled ‘L1 Blockchain Fees H1 2024: As Activity Slows, Networks Adjust,’ analyzes data from प्रमुख L1 networks such as Ethereum, Solana, and Bitcoin. It sheds light on the changing dynamics in the blockchain landscape as total fees and token performance fell short of the highs observed earlier this year.

According to the report, Ethereum's total fees experienced a substantial decline, reaching $1.15 million per day by the end of H1. This marks a significant drop from the peak of $2.1 million observed in January 2024. Similarly, Solana's total fees also saw a notable decrease, reaching $724,000 per day, down from the highs of $1.2 million earlier this year.

Interestingly, the report also highlights the impact of these changes on high-throughput networks like Solana, which are typically optimized and used extensively for processing more frequent transactions of lower value.

“Solana total fees also saw a sharp decline from the highs of $1.2 million/day earlier this year, reaching $724,000 /day by the end of H1,” the report noted. “High-throughput networks like Solana are optimized for and see a higher volume of smaller transactions.”

Furthermore, the report also points out that the drop in activity extends beyond total fees, with L1 networks also grappling with broader market consolidation, which influences token prices and overall sentiment in the space.

“Solana began the year with strong gains but saw a sharp decline as the market cooled off, despite its high-speed transaction capabilities,” the report stated. “Meanwhile, Ethereum, despite the recent transition to proof-of-stike, was also affected by the decrease in network activity.”

“The competition among these networks has driven rapid technological advancements, ranging from Ethereum's transition to proof-of-stake with the Merge, to Solana focusing on high-speed transactions, and Avalanche introducing customizable subnet architecture,” the researchers added.

As the blockchain landscape continues to evolve, Coin Metrics' report underscores the critical role of fee mechanisms in ensuring the sustainability of L1 blockchain networks. Validators and miners rely heavily on these fees, which are usually paid in the network's native token, to be incentivized for participating in the network.

Despite the recent declines, the report also highlights efforts by networks like Ethereum to enhance accessibility and performance through improvements such as the introduction of blobs and lower layer two (L2) transaction fees. While this development has reduced total fee income, it positions Ethereum to potentially benefit from future activity surges, striking a balance between network security and scalability.

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