Ethereum is still out of the top 5 fee-generating protocols, displaced by Solana traffic

Ethereum (ETH) fell out of the top 5 fee-generating protocols, displaced by Solana-based traffic. Ethereum is still just outside the top 5, but feels the effects of L2 taking up traffic. 

Ethereum (ETH) feels the effect of L2 chains, which take up most DEX trading and retain fees for themselves. As a result, Ethereum moved outside the top 5 of all fee-generating apps. The metric according to DeFi Llama does not even take into account TRON, which is still one of the most active fee producers. Yet even without TRON, Ethereum will still struggle to re-enter the top 5 of fee generators. 

Ethereum was the leader for the past six months, but the loss of traffic to L2 chains is changing the balance of economic activity. While Ethereum locks in more value, its network is not well-suited for small-scale rapid transactions, which are essential for DEX and meme activity.

At the same time, Solana relies on its L1 fast transactions, and is responsible for three of the top 5 fee producers in the entire crypto market. Raydium, Jito, and Solana were the biggest source of fees for the past 24-hour period, only surpassed by stablecoin smart contracts for Tether and USDC. 

Ethereum is still more successful on a monthly basis, but Solana’s ecosystem is increasingly dynamic. Other Solana-based apps like Pump.fun also keep producing fees, to the tune of $759K daily. 

Solana economic activity close to a record

Solana economic value reached an all-time record on October 24, and remained elevated in the days since. Activity on the chain and fees stem from the mix of base fees, priority fees, and Jito validator bribes. 

Economic activity rose for Solana in October, together with the recovery in the meme token market. Fees and launches on Pump.fun, as well as Raydium trading boosted the overall activity. Pump.fun has already produced more than 1,040,000 SOL in total fees, retaining around $37M in USDC and around 19K SOL in staking. 

The recent activity rally also boosted the price of SOL, moving solidly above $170. SOL traded at $173.21, after briefly breaking above $177. The price held even after Pump.fun once again sent 41,000 SOL to Kraken, presumably for selling. 

The recent SOL activity rally may not be sustainable, as Pump.fun activity is showing signs of retreating. After breaking a record with more than 36K daily token launches, the platform is back to around 24K new tokens, which will also decrease traffic on Raydium. 

Ethereum draws lower DEX traffic

Ethereum loses out on direct DEX trading, as its relative share shrinks. In July, Ethereum had a nearly 70% share of all DEX activity, which has now fallen toward 34%. 

Additionally, Ethereum fees for swaps still surpass $13, making the fast-paced DEX activity nearly impossible. Most of the hottest tokens are launched or bridged on Solana. For Ethereum tokens, fast-paced trading is achieved after centralized listings, not requiring on-chain swaps and transfers. 

Ethereum DEX activity has also shifted to Base, where Uniswap is still the busiest protocol. The Uniswap universal router is still the busiest smart contract on Ethereum, producing 95.37 ETH per day, or around 21.55 ETH in three hours during busier periods. There are still whales that don’t mind the DEX fees, if it means trading the most successful meme tokens. 

In the past day, Ethereum also saw a boost due to the Ethercoin smart contract. The simulated mining activity is now the second busiest smart contract, using 14.7% of all gas for the last 24 hours. Even that addition, however, was not enough to boost Ethereum’s position. Ethercoin is still a novelty activity, mostly mined by influencers and aiming for visibility through its smart contract. 

Ethereum fees also fall due to the diminished rent from L2 chains. In the past week, L2 chains saw their fees rise as blob space briefly filled during the Scroll (SCR) airdrop. After that, the chain normalized, once again leaving rents to L1 at their lowest possible range.  

Ethereum burns are also relatively slower, leading to an inflation of 0.53%. The network produces 12,199 ETH per week, based on the difference of new mints and burns.