Only 7% of users interacting with ethereum for the first time will continue to do so even after a year, according to Token Terminal data on October 9 shows. This statistic means that approximately 93% of users will stop using the platform to transfer tokens or deploy smart contracts within a year. This suggests that the platform (or its underlying technology) is still perceived as complex, or that users might not be too eager to participate and interact.
ethereum is struggling with user retention
Despite its clear leadership and popularity, it is not immediately clear what could discourage users from using ethereum. Token Terminal, an analytics platform, published a chart showing the rapid decline in interest over time based on data collected between August 2015 and October 2023.
ethereum was first launched in July 2015. However, its developers have continually improved the platform, making it more efficient, specifically emphasizing improving scalability.
The ledger is the first to allow users to launch decentralized applications (dapps). These protocols are immutable and powered by smart contracts in a generally secure environment guided by globally distributed validators.
The distribution and decentralization of validators means that protocols launching on ethereum, such as Uniswap, are censorship-resistant. ethereum is popular because of Ether (eth), its native currency, now the second most valuable currency after bitcoin. Beyond this, the chain anchors decentralized finance (DeFi), non-fungible tokens (nft), and other activities.
Scalability, security, and complex user interfaces can discourage interaction
While ethereum‘s prominence is evident and billions of transactions move through the platform each year, the network struggles with on-chain scalability. At its peak, the blockchain can only process 15 transactions per second.
Subsequently, transaction fees are relatively higher as the demand for block space is also high. As of October 10, the network utilization rate. remained above 50%, meaning more users are demanding a slot in each block space added to the ethereum blockchain. High demand translates into higher rates than those seen on competing networks like Solana or TRON, which are more scalable.
The possibility that high gas rates will reduce commitment may be a factor. At a deeper level, challenges related to user interfaces, protocol hacks being implemented on ethereum, and increasing competition even from traditional applications could explain why users are giving up or considering alternatives.
Users rely on non-custodial wallets like MetaMask to directly interact with the network. The need to download and install a third-party app before posting trades or trades may deter some from continuing.
Featured image from Canva, TradingView chart
