This article explores topics like network security, client diversity, censorship resistance, network activity, Block space, ETH holding, developer activity, TVL (total value locked), stablecoins, and NFTs.

Network security!

I. Monetary Integrity:

• Ethereum burns its own tokens: Since August 2021, Ethereum has burned a portion of transaction fees, reducing the total supply. This "deflationary" system aims to increase the value of the remaining ETH.

• Burning depends on network activity: Busy networks burn more fees, while less busy ones burn less. This balances supply and demand.

II. Security:

• Ethereum is now more secure: In September 2022, Ethereum switched to a "proof-of-stake" system. This requires users to "stake" their ETH, making attacks much harder and more expensive.

• Millions of ETH are staked: Over 30 million ETH are currently staked, making attacks even more difficult.

• Energy consumption reduced: Switching to proof-of-stake reduced Ethereum's energy consumption by 99.5%.

III. Client Diversity:

• Different software is good: Having different software programs ("clients") running the network makes it more secure.

• Too much similarity is bad: If everyone uses the same software, a bug could harm the entire network.

• Aim for balanced diversity: No single client should have more than 33% of the market share.

IV. Censorship Resistance:

• Censorship is bad: Ethereum aims to be resistant to censorship, meaning anyone can use it freely.

• Different layers can censor: Builders, relays, and validators can all potentially censor transactions.

• Validators have the most power: Ultimately, validators can choose to ignore censorship attempts.

Network Activity

Block Space:

• Ethereum's block space hasn't been fully used lately, especially after "L2s" (layer 2 solutions) gained popularity.

• Most blocks (50%) are only 25-50% full, and very few (5%) are completely full.

Developer Activity:

• Compared to other blockchains, Ethereum's active developers declined less in 2023 (-25% vs. -30% average).

• New developers decreased significantly (-55%), while established developers increased (+37%).

• Ethereum still has a healthy number of monthly active developers (7,000).

Ethereum Holdings:

• 88 million ETH are held by regular users (EOA), 2 million by smart contracts, and 30 million by validators (some staked in liquid staking pools).

Network Security and Value:

• As of Feb 10th, 2024, over $500 billion worth of assets are secured by Ethereum.

Market Cap of Stablecoins:

As of Feb 10th, $69 billion worth of stablecoins reside on Ethereum, with $38 billion being USDT, $22 billion USDC, and the rest being others.

New Address:

The number of new addresses on Ethereum has been declining since April 2021. We had over 5 million new addresses then, but it has flattened to an average of 2.3 million since 2022.

Active Address:

• The number of active addresses has remained flat since 2022, averaging around 12 million per month.

Number of Transactions:

Transaction volume also flatlined around 37 million monthly, with a peak of 45 million in April 2021.

NFT Minting:

• The number of NFTs minted on Ethereum has significantly decreased in 2023.

• Ethereum has lost the market share when compared to other chains as shown above.

Ethereum's Rollup Vision Takes Shape:

Ethereum's plan to scale through rollups is gaining momentum. Rollups now handle many more transactions than the mainnet, and as they mature, they're attracting more TVL and stablecoin market cap.

However, despite optimizations in data compression and posting, rollups remain significantly more expensive than alternative Layer-1 blockchains in terms of transaction costs. This is because they compete with mainnet applications for block space, leading to higher gas prices during periods of high usage.

The upcoming Dencun upgrade aims to address this issue with EIP-4844, also known as proto-danksharding. This introduces a new transaction type where rollups can store data temporarily in "blobs" managed by Ethereum validators. Since these blobs are stored separately from the main blockchain data, they significantly reduce rollup transaction costs and make them independent of mainnet activity.

As a result, roll-up transactions are expected to become cheaper by 10x.

Final thoughts:

While Ethereum's overall network activity has shown signs of decline in some areas, several positive trends paint an encouraging picture for the future.

• Layer 2 scaling solutions are experiencing explosive growth, processing a significant portion of Ethereum's transactions and offering users lower fees and faster confirmation times. This trend indicates the effectiveness of Layer 2 solutions in addressing Ethereum's scalability challenges.

• Application-specific chains (app chains) tailored to specific use cases are gaining traction, offering optimized performance and scalability for particular applications.

• Restaking emerges as a novel mechanism, allowing users to leverage their staked ETH for additional rewards and security across the ecosystem. This innovation further incentivizes staking and strengthens network security.

• Yield-bearing stablecoins: These stablecoins offer attractive returns while maintaining stability, attracting liquidity.

Ref:

From PoW to PoS: the Ethereum Merge's game-changing impact explained
Five Fundamental Metrics To Evaluate Ethereum
Ethereum Statistics
Daily Active Ethereum Address
Ethereum NFT Mints
https://censorship.pics/
Ethereum On-Chain Data and Charts for Transactions, Fees and Network Activity Weekly block fill % since 2024-01-01
Developer Report: Analysis of Open-Source Crypto Developers by Electric Capital Stablecoins Circulating
Stablecoin Market Cap