The second quarter of 2023 brought significant challenges for the Ethereum network as its revenue experienced a sharp decline. Ethereum network revenue plummeted from $1.27 billion to $847 million during Q2, representing a staggering 33.3% drop.
The network revenue for Ethereum encompasses all transaction fees paid by users to Ether validators, as well as the portion of charges that are removed from circulation through burning.
Given this, the decline in revenue reflects the decrease in overall activity on the platform, especially in the Decentralized Finance (DeFi) market, where developments have been far from welcoming.
During Q2 2023, the DeFi market faced a lean period, characterized by a lack of significant growth and unfavorable events. Notably, hack incidents in the DeFi sector increased by a staggering 63% during the quarter, resulting in losses of $228 million across 79 hacks. This was confirmed by Arltduv, a Crypto Directory in a Twitter Post on July 20, 2023.
These incidents have had a negative impact on user confidence and contributed to the decline in the overall value locked (TVL) in DeFi protocols, with Ether-based protocols accounting for more than 90% of the total TVL.
Ethereum’s Daily Active Addresses Decline
In addition to the revenue decline, Ethereum’s daily active addresses experienced a notable drop of 6% during Q2 2023. The metric measures the number of unique wallet addresses that have conducted transactions on the Ether blockchain per day during the quarter. Despite the ongoing bear market, the decline in daily active addresses hasn’t worsened significantly, indicating a level of resilience in user activity.
ETH price resting at $1,891 | Source: ETHUSD on Tradingview.com
Ethereum’s performance during the second quarter suggests that while it faced challenges in network revenue and daily user engagement, the platform remains a key player in the DeFi space. The continuous efforts to improve the network’s usability and scalability are crucial in attracting a broader user base, as demonstrated by Ethereum co-founder Vitalik Buterin’s recent proposal.
ETH Still King Of DeFi
Despite the decline in daily users and network revenue, Ethereum has managed to maintain its spot as the leading blockchain when it comes to DeFi activity. The network currently accounts for more than 50% of Total Value Locked (TVL) across all blockchains, establishing it as the leader in this regard.
Layer 2 blockchains such as Arbitrum and Polyon built atop the Ethereum network are also doing incredibly well. Arbitrum is currently sitting at $2.649 billion in TVL, with Polygon trailing behind at $1.044 billion in TVL.
In terms of price, ETH is still closely following the performance of Bitcoin. The altcoin is trading at $1,892 at the time of this writing, with meager gains of 0.07% in the last day.