Ethereum’s Supply Burn Drops in 2024 Despite High Fee Spending

Key Takeaways:

• Uniswap-related contracts dominated Ethereum’s usage in 2024, emphasizing the growing demand for on-chain trading.
• Fees spent on stablecoin movements and DEX usage have overtaken ETH transfers, solidifying Ethereum as a financial settlement layer.
• Ethereum’s gas price correlation with ETH’s market price appears to be weakening, potentially signaling a shift in user behavior.

Ethereum’s latest transaction fee report from CoinShares highlights a crucial shift in how users interact with the network. According to the data, the most frequently used smart contracts in 2024 were tied to Uniswap, reinforcing the dominance of decentralized exchanges (DEXs) in Ethereum’s ecosystem.

More notably, fees spent on stablecoin transactions and DEX usage now exceed those of simple ETH transfers. This suggests that Ether is evolving beyond just a payment network, becoming a broader financial infrastructure where stablecoins and decentralized finance (DeFi) activities take center stage.

Source: CoinShares

Another key observation is the decline in Layer 2-related fees. Previously, Layer 2 networks contributed significantly to Ethereum’s total transaction fees.

However, this trend reversed in the latter half of 2024, mainly due to the cost-saving effects introduced by EIP-4844, which improved data efficiency and reduced fees on rollups. This shift indicates that while Layer 2 solutions remain vital for Ethereum’s scalability, cost optimizations have lessened their burden on users.

Ethereum’s Supply Burn Drops Despite High Fee Spending

While total transaction fees in USD remained similar between 2023 and 2024, ETH’s supply burn declined. This was due to higher gas prices in 2023, which burned more ETH, and a higher ETH price in 2024, reducing the number of tokens burned for the same fees.

Source: CoinShares

This decline could impact Ethereum’s deflationary model, slowing supply reduction and influencing price trends. The interplay between transaction demand, gas fees, and ETH’s value will be key in shaping its future monetary policy.

Gas Prices and ETH Price Correlation Begins to Shift

ETH’s gas fees have historically surged during bull markets due to network congestion, but this trend appears to be shifting in 2024. Unlike previous cycles, gas fees have remained relatively stable despite price movements. This change is likely driven by the growing adoption of Layer 2 solutions and alternative blockchains, which reduce mainnet activity.

Source: CoinShares

Additionally, as Ethereum matures, transaction costs are becoming more influenced by real-world purchasing power rather than speculative demand. If this pattern continues, gas fees may become less volatile and more predictable, aligning with broader economic factors.

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