Ethereum's Burn Rate Plummets to Record Low as On-Chain Activity Declines

Ethereum has recently experienced a significant drop in its daily burn rate, reaching an all-time low. This decline reflects a broader trend of reduced on-chain activity, including fewer active addresses and lower transaction volumes, raising concerns about the network's demand and future growth.

Key Takeaways

• Daily ETH burn rate hit an all-time low of 53.07 ETH, valued at approximately $106,000.

• Active addresses and transaction counts have also decreased, indicating a slowdown in network activity.

• Standard Chartered has revised its 2025 price target for Ethereum from $10,000 to $4,000, citing the rise of Layer 2 solutions.

Ethereum's Burn Mechanism

The Ethereum network employs a unique burn mechanism introduced with the EIP-1559 upgrade. This mechanism mandates that all ETH used to pay the base transaction fee is burned, which was intended to reduce inflationary pressures and potentially make ETH a deflationary asset during periods of high activity. However, the current low demand for blockspace has led to a minimal burn rate.

Current Burn Rate Statistics

• Burned ETH: 53.07 ETH

• Value of Burned ETH: Approximately $106,000

• Projected Annual Supply Growth: 0.76% based on the recent burn rate

Declining On-Chain Activity

The recent drop in Ethereum's burn rate coincides with a notable decline in various metrics of on-chain activity:

• Active Addresses: The seven-day moving average of active addresses has fallen to its lowest level since October 2024.

• New Address Creations: There has been a decrease in the number of new addresses being created.

• Transaction Counts: The total number of transactions has also seen a downward trend.

• Daily Volume: Overall daily transaction volume has diminished, indicating reduced user engagement with the network.

Market Implications

The decline in Ethereum's burn rate and on-chain activity has prompted analysts to reassess the network's future. Standard Chartered's recent downgrade of Ethereum's price target reflects concerns over the increasing competition from Layer 2 solutions, which are becoming more prevalent and efficient. Geoffrey Kendrick, the bank's global head of digital assets research, noted that these Layer 2 solutions, particularly Base, are extracting significant profits from the Ethereum ecosystem, potentially impacting the main chain's growth.

Conclusion

The current state of Ethereum, marked by a record low burn rate and declining on-chain activity, raises questions about the network's demand and future viability. As competition from Layer 2 solutions intensifies, stakeholders will be closely monitoring these trends to gauge Ethereum's position in the evolving landscape of blockchain technology.

Sources

• Daily ETH burn hits all-time low as Ethereum's on-chain activity dips, The Block.