Ethereum transaction count hits five-month low as Layer 2 solutions surge

Ethereum has been experiencing a lull in activity. The network's transaction count has dipped to a five-month low, with the seven-day moving average settling at 1.12 million transactions per day, a level not seen since February.

This slowdown isn't isolated to transaction count. Active wallet addresses have also taken a nosedive, dropping to around 400,000.

At first glance, it might seem like Ethereum's bustling metropolis has suddenly become a quiet suburb. However, this decrease in Layer 1 activity doesn't necessarily spell doom for the Ethereum ecosystem.

While the main chain seems to be taking a breather, Layer 2 solutions are picking up the slack and then some.

Base, Coinbase's Layer 2 offering, has emerged as a clear frontrunner, boasting a whopping 3.83 million transactions. This explosion in activity suggests users are increasingly comfortable with and preferring Layer 2 solutions for their day-to-day transactions. These platforms offer faster and cheaper transactions while still benefiting from Ethereum's robust security.

This shift in user behavior has significant implications for the Ethereum ecosystem. As more activity moves to Layer 2s, the main Ethereum chain could increasingly become a settlement layer for these solutions, rather than handling individual user transactions directly.

This transition could lead to more sustainable gas fees on the main chain:

• Potentially making it more accessible for larger transactions or critical smart contract interactions.
• This also allows for a more efficient use of Ethereum's base layer resources.

However, it also raises questions about the long-term value proposition of ETH:

• If most user activity is happening on Layer 2s with their own token ecosystems, how will this affect ETH's utility and demand?
• Will Ethereum's role as the backbone of this expanding ecosystem be enough to drive continued growth and adoption?

We’ll be keeping an eye out to see if the stagnation in Layer 1 activity will be paired with increased Layer 2 activity or if the relationship will evolve further.

This is an excerpt from The Block's Data & Insights newsletter. Dig into the numbers making up the industry’s most thought-provoking trends.