The Ethereum transaction count is rising amid Ether’s (ETH) push toward the $5,000 milestone. However, increased competition is eating into network revenue and user mindshare.

Ethereum’s daily average transaction count is hovering near all-time highs, at over 1.7 million transactions recorded on Tuesday, according to Nansen.

For comparison, Ethereum layer-2 networks, Arbitrum and Base, recorded over 3.4 million transactions and 8.6 million transactions, respectively, and Aptos, a competing layer-1 blockchain, hosted 3.8 million transactions on Monday, according to The Tie.

Active addresses on Ethereum have also remained fairly flat, fluctuating within a range of 400,000-600,000 active addresses since 2018, with occasional spikes above the 1 million mark.

The data shows that much of Ethereum’s traffic is being siphoned to other blockchain networks, which are eroding its market share, eating into protocol revenues and forcing network stakeholders to reconsider a different strategy for the smart contract network.

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Misaligned incentives and next-generation blockchains erode Ethereum’s market share

The world’s first blockchain smart contract network, once the undisputed champion of general-purpose smart contract platforms, faces growing competition from inside its ecosystem and external players.

Network fees on the Ethereum base layer have plummeted since 2022, partly due to the Dencun upgrade, which went live in March 2024, and significantly reduced network fees for Ethereum layer-2 networks.

The upgrade incentivized users to switch to these cheaper layer-2 solutions to save on hefty network transaction fees, which could be as high as $50 per transaction during times of congestion.

High-throughput layer-1 networks like Solana and Sui are also competing with Ethereum for user mindshare and a piece of the crypto market, forcing the Ethereum Foundation to adapt to the growing changes and reconsider the network’s scaling and execution roadmap. 

However, Polygon Labs CEO Marc Boiron recently told Cointelegraph that attempting to compete with these newer layer-1 networks directly on performance metrics like throughput might prove “dangerous” to Ethereum.

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