Despite a series of high-profile network upgrades, Ethereum has not seen meaningful increases in network activity, according to a recent report by JPMorgan. The bank highlighted that neither daily transactions nor active wallet addresses have significantly risen in the aftermath of the Dencun upgrade in March 2024 or the more recent Pectra activation in May.
“Neither the number of daily transactions nor the number of active addresses saw a material increase post recent upgrades,” .
Upgrades Improve Functionality, Not Adoption
The Pectra upgrade, launched on May 7, aimed to improve staking mechanics, enhance wallet usability, and streamline efficiency. While these changes are considered beneficial, they have yet to translate into broader user engagement or transactional growth on the Ethereum mainnet.
Dencun, which preceded Pectra, was intended to boost scalability and lower fees. Although average and total transaction fees have indeed dropped, this seems to have had little impact on activity levels. The reduction in fees has largely been attributed to a shift toward Layer 2 solutions, which offload activity from the main Ethereum chain.
Institutional Optimism vs. On-Chain Reality
JPMorgan pointed out that the recent price rally in Ether (ETH) appears to be driven more by institutional positioning in the futures markets than by actual increases in on-chain demand. The total value locked (TVL) in Ethereum-based applications has seen some growth, but primarily due to increased lending and borrowing on decentralized platforms, rather than new user inflows.
“The increase looks lower in dollar terms than in ether (ETH),” the report said, suggesting much of the rise is due to price gains rather than a surge in utilization.
Inflation Concerns Resurface
Adding to concerns, Ethereum’s circulating supply has grown following the Dencun upgrade. JPMorgan analysts warn that Ether may be trending back toward inflationary status, particularly in the context of low transaction volume. This contrasts with the deflationary narrative that took hold following Ethereum’s transition to proof-of-stake and the EIP-1559 fee burn mechanism.
Ethereum’s Next Challenge Is Adoption
While Ethereum continues to make strides in infrastructure and efficiency, the core challenge remains driving real-world usage and transaction growth. Institutional interest is rising, but without broader user activity and application engagement, network fundamentals may remain underwhelming in the short term.