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According to Token Terminal data, Ethereum protocol revenues are down a whopping 86% in the third quarter, alongside the falling price of the token itself.
Declining Ethereum network revenues
At its peak last year, revenues generated in November were as high as $1.6 billion. However, the amounts have dropped significantly in previous months. They stood at $82.1, $65.6 and $52.4 million in July, June, and September this year respectively. These sums cannot be considered as revenue for Ethereum's founders and administrators, as there is no centralized company as such. Instead, these revenues were mainly due to the miners and validators of the network, who were de facto responsible for its operation.
Will this have an impact on the price of ETH?
Revenue from the Ethereum protocol comes primarily from fees charged by the ETH protocol (gas fees). These depend on the demand for Ethereum, which ultimately translates into the token price and fees. Therefore, a strong correlation between the ETH price and revenue is apparent. When the price of the coin fell this year, so did revenues.
Ethereum's protocol revenue may remain low for a long time because the move to Proof-of-Stake (PoS) blockchain has reduced the energy consumption and thus the cost, which for the other side of the transaction is the protocol revenue.
After the Merge, the token may no longer generate as much revenue as it once did through the current lack of cryptocurrency digging, which absorbed a large part of the cost. In theory, increased demand even with PoS blockchain could translate into increased commissions and network revenue, but it would have to require a gigantic influx of buyers.
Author Bio
Daniel Kostecki is an award-winning senior market analyst and a Director of the Polish branch of Conotoxia Ltd. He is a victor of the FxCuffs statuette for “Blog of the Year” and “Personality of the Year”. He has 15 years of experience on the financial markets and a diploma in Economics from the University of Szczecin in Poland. Daniel isprivatelyconnected to the financial markets since 2007 and professionally - since 2010. Author of numerous commentaries and analyses of the situation on the financial markets and a guest on Polish TV, press and radio.
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