ETH Holders Prefer Layer 2 Solutions Over Traditional Chains in 2024, claims Nansen
In Brief
Nansen’s recent Ethereum research report reveals that ETH holders are preferably shifting to L2 solutions for its scalability and efficiency.
Blockchain Analytics platform Nansen recently published its report titled “ETH: A Cross Chain Cohort Analysis” provides an analysis of ETH holders categorized into various cohorts based on their holdings from 2023 onwards.
The report, spearheaded by senior research analyst Jake Kennis, delves into the intricacies of ETH holder activities, providing invaluable insights for stakeholders in the cryptocurrency space. It aims to answer questions related to whale accumulation of ETH, trends in chain preferences among different ETH cohorts, and the top entities used by these cohorts.
“The cross-chain analysis involved looking at ETH balances of everyday blockchain users, otherwise known as Externally Owned Accounts (EOAs). We used Nansen’s attribution and labels to filter out contracts, MEV bots, entities such as CEXs/DEXs and much more as noted in the report; thus, we were left with a list of addresses that may be considered EOAs,” Jake Kennis, senior research analyst at Nansen told MPost.
According to the report, the majority (69%) of daily activities of users on Ethereum and Layer 2 solutions consist of interactions related to decentralized finance (DeFi) protocols. This indicates that DeFi continues to be the primary area of interest and engagement for users, serving as a key entry point for new participants in the ecosystem.
Nansen’s Jake Kennis stated that one of the distinguishing features of Nansen’s methodology is its cross-chain approach, which allowed for a comprehensive assessment of ETH holdings across multiple chains including Ethereum, Arbitrum, Optimism, Polygon, Base, and Linea.
This approach, combined with EOA filtering and counterparty analysis, provided more actionable data, eliminating noise from non-user entities and offering insights into the behaviors of different ETH holder segments.
“The main key takeaway is that small ETH holders and whales alike are considerably moving activity over to L2s vs Ethereum mainnet. In particular, addresses with less than 1,000 ETH have shown the largest growth in L2 activity. Although the 1,000+ ETH segment also saw an increase in L2 activity, Ethereum mainnet remains home for most of their activity as measured by daily outgoing transactions,” Kennis added.
Nansen Research Reveals Growing Preference for Scalability
The shift in chain preference among ETH holders towards Layer 2 solutions (L2s) has emerged as a prominent trend. “Chain preference, measured by daily activity on each chain, is increasingly shifting to L2s, despite ETH holdings. This trend picked up in 2023 and has only increased into 2024,” Nansen’s Jake Kennis told MPost.
Furthermore, the report identifies Uniswap, Tether and USDC as the top entities used by ETH cohorts, underscoring their significance within the ETH ecosystem. This insight into the key players within the ecosystem can inform investment strategies and market dynamics for cryptocurrency investors and stakeholders.
Nansen’s Jake Kennis asserts that the implications of Nansen’s findings are far-reaching for ETH holders, cryptocurrency investors, and the broader blockchain industry. By offering a refreshed analysis of wallets across various data points, the report enables stakeholders to gain insights into real user behaviors, track the evolution of chain preferences, and make informed decisions in a rapidly evolving cryptocurrency landscape.
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Kumar is an experienced Tech Journalist with a specialization in the dynamic intersections of AI/ML, marketing technology, and emerging fields such as crypto, blockchain, and NFTs. With over 3 years of experience in the industry, Kumar has established a proven track record in crafting compelling narratives, conducting insightful interviews, and delivering comprehensive insights. Kumar's expertise lies in producing high-impact content, including articles, reports, and research publications for prominent industry platforms. With a unique skill set that combines technical knowledge and storytelling, Kumar excels at communicating complex technological concepts to diverse audiences in a clear and engaging manner.
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Kumar is an experienced Tech Journalist with a specialization in the dynamic intersections of AI/ML, marketing technology, and emerging fields such as crypto, blockchain, and NFTs. With over 3 years of experience in the industry, Kumar has established a proven track record in crafting compelling narratives, conducting insightful interviews, and delivering comprehensive insights. Kumar's expertise lies in producing high-impact content, including articles, reports, and research publications for prominent industry platforms. With a unique skill set that combines technical knowledge and storytelling, Kumar excels at communicating complex technological concepts to diverse audiences in a clear and engaging manner.
