A reader noted that for the first time since Ethereum switched to proof-of-stake (The Merge), the network's blockspace is on track to post a financial loss.
We're talking about $15.9 million in the red this month!
Why Does It Matter?
Blockspace profitability is a big deal—it shows the economic health of a blockchain.
When the Ethereum blockspace isn't making money, it's a red flag that things like user activity and transaction volumes are slumping.
Blockspace is the commodity that powers the heartbeats of all cryptocurrency networks. Blockspace is the closest thing in crypto to “digital real estate”.
In the blockspace market, miners are the producers, mining pools are the auctioneers, and users are the bidders.
What's Being Done?
Ethereum switched to proof-of-stake in September 2022. Since then, this has been the first major dip in profitability. Until now, it had raked in gains of $414 million in 2023.
While Ethereum's base layer is struggling, some layer-2 networks like Arbitrum and Optimism are holding strong. They're still profitable and have active user bases.
The drop in profitability is linked to drops in stablecoin and NFT transactions. Specifically, trading volumes for popular stablecoins like USDT and USDC are down a staggering 90% from their March 2023 highs.
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