The Ethereum (ETH) network continues to lead in decentralized application (DApp) adoption when it comes to transaction volume and deposits. Competing chains like Solana (SOL) and BNB Chain (BNB) benefit from lower transaction fees, which boosts metrics like unique active addresses, but there is nothing stopping well-funded entities from inflating Ethereum’s DApp transaction volume.
In fact, the recent surge of activity on the Ethereum network is at odds with broader cryptocurrency market trends and contradicts other usage metrics. While it is impossible to verify manipulation, it is important to note that even a hefty $2.4 transaction fee could distort the numbers, especially in decentralized finance (DeFi) applications where deposits can exceed $1 billion.
Of note, the only network in the top 20 to see an increase in transaction volume was Ethereum, which grew an impressive 83% week-over-week. For perspective, similar protocols like BNB Chain, Polygon (MATIC), Solana, and TON (TON) saw average transaction volumes drop by more than 30%. Furthermore, Ethereum’s 475,980 addresses are a far cry from BNB Chain’s 1.18 million and Solana’s 1.62 million.
Interestingly, Ethereum’s surge in transaction volume did not coincide with a rise in users. Using unique active addresses interacting with DApps as a metric, Ethereum saw 8% fewer users than the previous week. This was better than its competitors, but ironic given the significant increase in transaction volume.
One could argue that the increase in Ethereum deposits may have offset the decline in activity, despite the relatively high fees leading to fewer users.
According to the data, the total value locked (TVL) in decentralized finance applications on Ethereum decreased by 17.5% over a seven-day period, while competitors such as Solana and Avalanche (AVAX) managed to attract deposits. Additionally, the number of DApp transactions on the Ethereum network did not spike during this period, suggesting that a more thorough analysis is needed to understand this anomaly.
The increase in Ethereum’s volume was largely driven by Balancer, which grew 422% over the seven-day period to a total of $40.6 billion. For example, this is 13x more than the total activity on the BNB chain over the same period. However, the significant increase in Balancer’s volume was not matched by improvements in other metrics. The DApp saw a 5% decrease in unique addresses and a 14% decrease in transaction volume over the same week.
Related: Low Bitcoin and Ethereum Fees May Not Always Be Good News
Excluding Balancer’s contribution, Ethereum’s seven-day volume growth actually decreased by 5%, as this single DApp accounted for 59.5% of the entire network’s volume. While it’s not uncommon for a single DApp to dominate a blockchain’s volume (BNB Chain is largely driven by PancakeSwap, and Uniswap has nearly 50% of the Polygon network), Ethereum’s reported activity increase should be viewed with caution due to the skew in the data from a single DApp.
It is difficult to determine the true demand for Balancer’s surge in trading volume. Even if some transactions within the DApp are slightly profitable, this does not definitively determine user intent. For example, Binance announced on July 1 that Balancer (BAL) tokens were on the watchlist for potential delisting, which could be related to unusual activity in the DApp, but establishing a direct link between the two events is complicated.
This article does not contain any investment advice or recommendations. All investment and trading moves involve risk, and readers should conduct their own research when making decisions.