Ethereum, Solana, and Avalanche usage is rising as fees fall. So why are ETH, SOL, and AVAX still down, and which metrics matter?
Ethereum, Solana, and Avalanche are processing more transactions than they were a year ago, yet their native tokens—ETH, SOL and AVAX—are down roughly 50% or more over the same period.
In a sense, these tokens are victims of their networks’ success. Cheaper transactions are driving usage higher. At the same time, lower fees are reducing the value accruing to native tokens.
“If demand fails to expand fast enough to offset cheaper transactions, the network ends up busier and less profitable at the same time,” CoinShares analyst Luke Nolan wrote in May.
The question is whether token prices will catch up with network fundamentals or whether this decoupling is the new normal.
More Transactions, Less Revenue
Judged by transaction volumes alone, Ethereum, Solana, and Avalanche are thriving. However, network revenue tells a more complicated story.
Ethereum processed 203.9 million transactions in the second quarter, up 68% from a year earlier, according to Bitwise. The average transaction cost fell 71% to $0.31, while network revenue declined 51% to $64 million.
Ethereum’s daily transaction fees are currently far below 2024 levels. Source: CoinShares
Solana tells a similar story. It processed 9.8 billion non-vote transactions in the second quarter, up 10% from a year earlier. Meanwhile, the network’s average transaction cost fell 83%, while revenue dropped 81% to $51 million.
Avalanche’s C-Chain processed 235.6 million transactions in Q2, more than four times the year-earlier total. The average cost fell nearly 95% to $0.0014, while revenue declined 79% to about $330,000.
According to Bitwise, the main reason for the revenue declines is simple: protocol upgrades are making blockspace cheaper and more abundant.
“What we’re seeing onchain is, first, that blockchains are becoming cheaper, and second, onchain activity is actually increasing,” Bitwise head of on-chain research Kam Benbrik told The Block.
Network Growth Does Not Guarantee Token Demand
The widening economic disconnect has been especially noticeable on Ethereum. The network’s shift toward layer-2 networks weakened the link between activity and ETH demand. Rollups can now process more transactions while paying lower fees to the base layer, reducing revenue and token burning.
Solana faces similar challenges. The network’s application layer generated $342.2 million in first-quarter revenue, according to Messari, but much of that income flowed to developers, trading platforms, and validators rather than SOL holders.
Avalanche C-chain transactions increased roughly fourfold year-over-year, but AVAX continues to bleed. Source: Vortex
Avalanche’s tokenomics are especially complex. Its custom layer-1 networks can use separate tokens for transaction fees. Validators pay AVAX to the primary network, but the resulting revenue has been limited.
In July, the Avalanche Foundation said it was studying fees, Maximal Extractable Value (MEV), and revenue-sharing mechanisms to strengthen AVAX’s tokenomics.
“The connection between ecosystem output and AVAX value accrual is the central problem we are working on,” Matias Antonio, the Avalanche Foundation’s chief investment officer, said in July.
What Metrics Should Traders Watch?
Transaction counts show whether a blockchain is active, but they are a weak standalone price signal.
“Lower transaction costs typically coincide with higher levels of economically irrelevant transactions,” Fidelity Digital Assets researchers wrote.
Despite tokenomics headwinds, ETH has significantly outperformed BTC and SOL this year.
Source: Fidelity Digital Assets
More useful measures include fee revenue in the native token, net issuance after burns, the share of staking rewards funded by user fees, and the amount of ETH, SOL, or AVAX held as collateral.
Staking rewards funded mainly by issuance dilute non-stakers. Rewards funded by fees provide stronger evidence of economic demand.
Can Usage Eventually Lift Prices?
Cheaper blockspace can lift revenue if the lower costs generate enough new demand. CoinShares said Ethereum’s cash-flow bull case depends on that outcome.
Otherwise, applications, layer-2s, and custom networks may retain most of the revenue. Native tokens would then rely on collateral demand, staking, and fee-sharing mechanisms.
For network tokens such as SOL, “price will ultimately reflect not raw network performance, but the quality, durability, and value capture of that performance,” 21Shares analysts wrote.
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