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Ethereum continued its dominance in the Layer-1 space, securing ~ 57% (~ $75 Mn) of the total TVL in the market. As of Dec’ 24, the network supports ~ 4.9K dApps, accounted for ~ 195.37 Mn unique active wallets and handled ~ 378.84 Mn. A pivotal moment for Ethereum in 2024 was the implementation of the Dencun Upgrade, which introduced proto-danksharding (EIP-4844) and was aimed to decrease gas fees by up to tenfold.
For more such detailed insights, read our in-depth “Crypto Outlook 2025” report.
The Dencun Upgrade
The Dencun Upgrade was officially rolled out in March 2024, and was one of the most significant updates to Ethereum since its transition to Proof-of-Stake. It introduced proto-danksharding through EIP-4844, which fundamentally changed how data is stored on Ethereum by introducing “blobs” or temporary data containers.
Blobs act as temporary off-chain storage for Layer 2 transaction data within Ethereum blocks. Instead of permanently storing this data in Ethereum’s call data, blobs are held on the main chain for a limited period, typically around three weeks.
Following the Dencun upgrade and the activation of blobs, Layer 2 transaction fees declined by more than ~ 90%. This significant cost reduction, coupled with improved transaction finality, made many L2s more cost-effective than even low-cost blockchains such as Solana.
The introduction of blobs also significantly increased the appeal of Ethereum’s Layer 2 ecosystem. For instance, Base experienced a 525% surge in transaction volume following the Dencun upgrade.
Ethereum ETFs
In May’ 24, the SEC approved eight spot Ethereum ETFs on major exchanges including following the successful launch of Bitcoin ETFs earlier in the year. These Ethereum ETFs began trading in July and garnered investor interest quickly.
By Dec’ 24, holdings in Ethereum ETFs surged to ~ $12.29 Bn (~ 3.48 Mn ETH) with Grayscale’s ETHE leading the race with an AUM of ~ $4.91 Bn followed by Blackrock’s ETHA with an AUM of ~ $3.6 Bn.
Ethereum Turned Inflationary
Ethereum transitioned to an inflationary state after being deflationary from Q4’ 22 to Q1’ 24. Since the start of 2024, ETH emissions started to exceed burns, and in the month of April, Ethereum became inflationary.
Since the Merge, a total of ~ 1.9 Mn ETH have been burned while ~ 1.84 Mn ETH have been issued and the supply is projected to reach the Merge level (~ 120.5 Mn) in 2025. Uniswap continued to be the leading contributor to ETH burns in 2024, followed by ETH transfers and Tether.
Ethereum in 2025: The year of Pectra upgrade
One of the major highlights for 2025 would be the Pectra Upgrade which will start to roll out in early 2025 and will be split in two phases. This upgrade will address high transaction fees, scalability issues, and complexity for new user onboarding.
Account abstraction will allow users to pay gas fees with various tokens, increasing flexibility and potentially eliminating fees entirely. Smart contract efficiency is likely to be enhanced through EIP-7692, which will help to reduce deployment costs and improve user experience. The zk-proof upgrade will improve how Ethereum processes zero-knowledge cryptography and help achieve higher levels of additional privacy, security and scalability benefits.
Validator upgrades include an increase in staking limits, from 32 ETH to 2,048 ETH, which will help in optimizing network performance. The implementation of Verkle trees will help to improve data management, scalability and reduce storage costs, while PeerDAS (Data Availability Sampling) will help to enhance Layer 2 solutions, making them faster and more cost-effective.
Owing to the Pectra upgrade, there is likely to be an increased interest towards ETH both in terms of adoption and investor activity which could lead to a bullish trend in Ethereum as we venture into 2025 and also help Ethereum ETFs outperform Bitcoin ETFs.
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