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Ethereum throughput hits record highs


According to on-chain analytics provider Glassnode, throughput on the Ethereum network has increased after an adjustment that increased the gas limit for a block to 15 million. According to the latest data, the transaction processing speed reached 16.5 transactions per second last week. This is a record high. Ethereum is still far behind many of its younger competitors in this regard. Nevertheless, none of them has yet managed to become a “ether killer”.

What is block gas limit

The Ethereum yellow paper says it says 21,000 gas is required for a regular transaction. However, if the transaction is complex, for example, an operation in a smart contract, more gas may be needed. When generating a block, the miner will receive a commission. This is the payment for his services.

However, miners cannot include an infinite number of transactions in a block, their number is limited by the gas limit that can be spent on all transactions in this block. This limitation helps to control the growth of the blockchain and regulate the cost of running a miner or node. When the load on the network grows, miners raise the limit. This helps to reduce pressure and average transaction costs.

According to Bitinfocharts, the adjustment produced the desired result: the average transaction cost dropped from $ 30 (April 20) to $ 8 (May 2).

Smart contracts accumulate coins

The Glassnode study also showed a relationship between the outflow of ETH from cryptocurrency exchanges and the amount of funds locked in smart contracts of DeFi protocols.

Currently, only 12% of the total amount of ETH in circulation is on the exchanges. This is the minimum for the last 12 months. Meanwhile, there are almost twice as many coins on smart contracts – 22.8%. This is almost a historic record.

“These curves are almost identical, only moving in opposite directions, reflecting the demand for DeFi products among ETH holders.”

Ethereum NVT Ratio Falls

Glassnode analysts have also studied the NVT ratio for Ethereum. This is a metric that compares the market capitalization of a network to the dollar value that has passed through the blockchain, also called the “network value”. Conventionally, this metric can be compared with the price-earnings ratio (P / E), where price is the market capitalization, and profit is the value of the network.

If this indicator grows, then the transaction flow dries up, becomes less in comparison with the market capitalization. This means that the network may be overvalued, and the asset is overheated and ready for correction. A growing NVT, on the other hand, indicates an increase in the flow of transactions on the network relative to market capitalization. This is a good sign: the network is undervalued and there is potential for growth.

The NVT for Ethereum has been steadily declining since January 2020, especially after a big selloff in March 2020 that saw ETH plummet to $ 110.

“The increase in network bandwidth has also contributed to the decline in NVT over the past few weeks, which speaks in favor of further price increases.”

As of this writing, ETH is down from all-time highs and is trading at $ 3,446, up 9% daily.

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