2 - 3 minute read
Ethereum, the second-largest cryptocurrency by market capitalization, hit a new record high on Monday with 92.5 million addresses holding a non-zero balance. This growth in the number of non-zero balance addresses is seen by some analysts as a proxy for the cryptocurrency’s broader “adoption” and is a long-term bullish sign for the ETH cryptocurrency.
With only around 7.5 million addresses left to go, the 100 million address mark is expected to be hit sometime in Q2 2023. This milestone is likely to attract a lot of positive press and hype, which could result in a boost in the ETH price.
However, growth in the number of non-zero balance Ethereum addresses is viewed by some as an overly crude metric. Each new non-zero address doesn’t necessarily mean a new Ethereum user. Luckily, there are other metrics that also point to strong continued network growth.
A recently released report from blockchain software development company Alchemy revealed that the number of smart contracts deployed on the Ethereum mainnet grew by nearly 300% in 2022. This means that smart contract deployment growth matched its rate of increase seen in 2021, despite 2022’s bear market.
Additionally, the number of Ethereum network validators recently surpassed 500,000. This is an increase from 400,000 last July. A higher number of validators is seen as a sign of network strength and makes it more difficult for a malicious group of validators to gain control of the network and corrupt the blockchain.
The bear market in cryptocurrency markets that began over a year ago has resulted in Ethereum’s price decline of 67.5% from its record highs printed in November 2021. However, a key change was made in September 2022 to the Ethereum protocol that is likely to give the cryptocurrency a major long-term boost. Ethereum transitioned from using a proof-of-work consensus mechanism to using the much less energy-intensive proof-of-stake consensus mechanism.
Not only does this reduce concerns about the cryptocurrency’s environmental impact, which might help it attract institutional capital flows in the coming years, but Ethereum’s inflation rate has also dropped sharply. This is likely to be a narrative that will gain ground in 2023, as Ethereum’s deflationary characteristics are likely to appeal to investors seeking a store of value.
The continued rise in the number of non-zero balance Ethereum addresses, along with other metrics such as the number of smart contracts deployed and network validators, signals continued strong network growth. The transition to a proof-of-stake consensus mechanism also has the potential to give Ethereum a major long-term boost by reducing concerns about its environmental impact and reducing its inflation rate. As we approach the milestone of 100 million non-zero addresses, Ethereum’s fundamentals remain strong, and investors should keep a close eye on this cryptocurrency in the coming months.
