Ethereum Demand Driven By Use In On-Chain Applications, Token Transfers: CoinShares
Ethereum (ETH) demand is driven by its use in on-chain applications and token transfers. Despite its potential, investors find limited long-term value in ETH. Since its launch in July 2015, Ethereum has evolved from simple token transfers to hosting decentralized finance (DeFi) protocols and non-fungible tokens (NFTs). From 2018, its utility expanded to include digital identity systems and on-chain withdrawals. Complex use-cases emerged post-2020, including protocol staking and liquidity mining, but ETH usage remains concentrated in a few services. Decentralized exchanges (DEXes), particularly Uniswap, dominate application interactions, generating over 90% of transaction fees. In the first half of 2024, Uniswap accounted for 15% of Ethereum transaction fees. Token transfers, especially with stablecoins like USDT and USDC, are significant in network activity. Layer-2 solutions have improved scalability but reduced demand for Ethereum's base layer. ETH trades at $2,613, with USDT and USDC holding market caps of $119 billion and $36 billion, respectively.
