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The torch bearer in the Layer-1 segment had a pretty eventful year while maintaining its leading position. At the time of recording, Ethereum accounted for 54.47% of the overall DeFi market total value locked (TVL) while hosting 4,373 decentralized applications, of which 954 were DeFi-related.
In terms of total unique active wallets, Ethereum had a total of 146.38 Million wallets, but the leader in this metric was BNB Chain with 536 million wallets, followed by WAX, Hive, and Polygon. However, Ethereum was the leader in NFT volume, with $55 billion generated to date. The second place in the same metric was taken by Ronin, with just $4.27 billion volume generated, highlighting the significant difference as compared to Ethereum.
The most underwhelming metric for Ethereum is the number of transactions conducted. When considering the all-time data, Ethereum sits in 12th position with just 294 million transactions conducted to date. More scalable solutions, including Polygon, had conducted 579 million transactions, while WAX led the charts with approximately 13 billion transactions. This suggests that Ethereum has a long way to go besides leading other significant metrics when conducting swift and cost-effective transactions on its blockchain.
Ethereum Shanghai Upgrade
The Ethereum Foundation ensured its infrastructure stakeholders got what they duly deserved in the Ethereum Shanghai Upgrade. It primarily allowed validators to withdraw their staked Ether (ETH) previously locked in the network. This upgrade enhanced the blockchain’s functionality, potentially reducing transaction costs and improving flexibility for users managing their staked ETH.
Fig: Total ETH Withdrawn
The upgrade went live on the Ethereum Mainnet on April 12 at the epoch of 194048. At that time, the upgrade effectively unlocked $34.89 billion in staked ETH, ready to be withdrawn. This also anticipated a huge withdrawing sentiment from Ethereum Staking. However, just after a month of the upgrade, a total of 22.58 million ETH was deposited into the staking contract, valued at $40.64 billion at that time. Considering the latest figures, since the upgrade, 5.07 million ETH had been withdrawn, of which 3.46 million ETH was fully withdrawn while 2.25 million ETH was the rewarded ETH.
Ethereum Burning
After the Ethereum London hard fork upgrade, which introduced EIP-1559 in August 2021, the journey to make ETH a deflationary asset began. The upgrade changed how transaction fees are calculated and paid. In simple terms, it introduced a “base fee” for transactions, which get burned (permanently reduced from circulation), and an optimal “tip” to speed up transactions. Burning the base fee reduces the total supply of Ethereum over time, potentially making it a deflationary asset. The more transactions there are, the more Ethereum gets burned, gradually decreasing the total supply.
Fig: ETH Supply
Since the Merge (September 15, 2022), 1,108,891 ETH were burned while 836,045 ETH were issued. This means that the total supply of Ethereum over the mentioned period has reduced by 0.19% (-272,849 ETH).
Fig: ETH Supply Projection
The total supply of Ethereum, which started with 72.40 million ETH in circulation in 2015, reached a peak of 120.50 million ETH in 2022, just before the merger. Since then, Ethereum has been able to showcase a deflationary nature as the current total supply is around 120.30 million ETH, a reduction of 0.16%. Based on the burning rate, by the end of 2025, Ethereum can reduce its total supply to 117.70 million ETH, -2.32% from its peak.
Yearly Wind Down
When we said that Ethereum had a pretty eventful year, we meant it. In May, Vitalik came out with a strong caution against re-staking on Ethereum, which could introduce risks into the ecosystem and complicate the roles of Ethereum validators beyond their primary duty of verifying the core protocol rules.
In August, it was reported that the Republican presidential candidate and former US President Donald Trump had ETH in his investment portfolio, which amounted to around half a million. According to his financial disclosure, the amount of ETH was assumed to be proceeds from NFT sales, wherein Trump earned $298,000 in licensing fees from the NFT sale—quite a mainstream adoption for Ethereum.
In September, ARK Investment submitted its Ethereum Spot ETF application to the SEC while partnering up with 21Shares, a leading ETF provider. The ARK 21Shares Ethereum ETF tracks Ethereum’s value using the CME CF Ether-Dollar Reference Rate, an index of major ETH spot exchanges.
In October, six ether futures financial products started to be officially traded. They are as follows:
- BitWise Ethereum Strategy ETF (AETH)
- BitWise Bitcoin and Ether Equal Weight Strategy ETF (BTOP)
- ProShares Ether Strategy ETF (EETH)
- ProShares Bitcoin & Ether Equal Weight Strategy ETF (BETE)
- Bitcoin & Ether Market Cap Weight Strategy ETF (BETH)
- VanEck Ethereum Strategy ETF (EFUT)
In November, BlackRock, the largest asset management company, also filed for a spot Ethereum ETF with the SEC, fueling a new bullish sentiment among its investors.
Future Outlook
Ethereum, having completed ‘The Merge’, is now progressing towards its next significant upgrade, ‘The Surge’, to address the critical issue of high gas fees. This is part of a broader roadmap outlined by Ethereum co-founder Vitalik Buterin, which includes several stages: The Merge, The Surge, The Scourge, The Verge, The Purge, and The Splurge. Each stage has specific goals, such as moving to proof-of-stake consensus, scaling to over 100,000 transactions per second, avoiding centralization, simplifying the protocol, and more.
| Stage | Name | Goal |
| 1 | The Merge | Move to Proof-of-Stake (PoS) consensus |
| 2 | The Surge | Rollup-centric scaling to 100,000+ transactions per second |
| 3 | The Scourge | Avoid centralization and other protocols risks from MEV |
| 4 | The Verge | Verifying blocks to become “super easy” |
| 5 | The Purge | Simplify the protocol and reduce the costs of running network nodes |
| 6 | The Splurge | “Fix everything else” |
The Surge focuses on rollup-centric scaling, a method where a layer-two chain (L2) processes transactions and batches them for the primary blockchain (L1). This approach significantly reduces gas fees, a barrier to Ethereum’s mainstream adoption. The upcoming upgrades will also introduce smart contract wallets, simplifying onboarding and account recovery and making cross-blockchain transfers easier.
Further developments, such as proto-Danksharding and Danksharding, are planned to enhance scalability and efficiency. Smart contract wallets will be introduced in upcoming upgrades, simplifying onboarding processes, aiding account recovery, and facilitating cross-blockchain transfers.
Ethereum’s roadmap places a strong emphasis on privacy upgrades for fund transfers, envisioning individual addresses per transaction to enhance privacy amid increased complexity. This aligns with Ethereum’s global blockchain platform ambitions.
Financial institutions, including BlackRock, have filed for Ethereum Spot ETFs which are expected to be approved by January ’24. This approval will provide regulated access and foster institutional trust in Ethereum as an investable asset class.
Crypto Outlook 2024
2023 was a roller-coaster ride for the crypto sphere, marked by dynamic shifts, innovative advancements, and transformative trends that reshaped the industry’s landscape. Our Crypto Outlook Report for 2024 reflects on the highs, lows, and pivotal moments that defined the past year, while also peering into the horizon to forecast the exciting potential and emerging patterns set to influence the year ahead, with insights from industry leaders at Stepn, Enjin, Hacken, SuperScrypt, and more.
Click here to read the full report!
