Ethereum (ETH) demand is largely driven by the token’s use in on-chain applications and token transfers, according to a report by CoinShares.
Ethereum’s Use-Cases Have Increased, But Long-Term Value Is Missing
In a recently published detailed report, CoinShares’ Matthew Kimmell noted that despite Ethereum’s potential to host popular applications in the future, investors are struggling to see a significant value proposition in its native ETH token.
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Since its inception in July 2015, Ethereum has made big strides as it has continually witnessed the emergence of new use-cases, starting from simple token transfers, to use in on-chain applications, decentralized finance (DeFi) protocols, and, most recently, non-fungible tokens (NFTs).
According to the report, Ethereum began to see broader utility from 2018 onwards, when its major use shifted from token transfers to simple on-chain applications, digital identity systems, and on-chain withdrawals.
From 2020 onwards, Ethereum has facilitated more complex use-cases such as protocol staking, liquidity mining, MEV (maximum extractable value), bridges, oracles, and second-layer technologies. Although the increasing use-cases might sound favorable for Ethereum at the surface level, the challenge lies in ETH usage being concentrated among a limited range of services.
The report reads:
However, the hard truth is that a very small set of services consistently makes up the majority of Ethereum usage, and these sets largely revolve around speculation or simple value transfer, not necessarily the type of complex “real-world utility” use cases originally envisioned by the developers of the Ethereum Foundation.
The chart below confirms this observation, showing that simple token transfers and application interactions comprise the bulk of ETH usage, followed by infrastructure, intermediary operations, and contract management.
Marketplaces Dominate Application Usage, Stablecoins Lead Token Transfers
The report highlights that on-chain marketplaces – especially decentralized exchanges (DEXes) like Uniswap – dominate application interactions. Notably, over 90% of transaction fees originate from marketplace activity.
In the first half of 2024, Uniswap alone captured about 15% of Ethereum transaction fees. This is not surprising, as the leading DEX recently achieved the…
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