As the second-largest blockchain by market capitalization, Ethereum is a crucial player in the cryptocurrency landscape. When evaluating Ethereum, it’s essential to consider a range of fundamental metrics that provide insights into its health, growth, and potential. Here are five key metrics to monitor:

1. Revenue

Ethereum’s revenue is a critical indicator of its overall health. The network generates revenue through transaction fees, which are paid by users to settle transactions on the blockchain. As the demand for transactions increases, so does the revenue. In the past, Ethereum’s revenue has charted a volatile course, peaking at $1.8 billion in November 2021. While revenue has declined during the current bear market, it’s essential to monitor this metric to gauge the network’s overall activity and potential for growth.

2. Profit Margin

Ethereum’s profit margin is another crucial metric to evaluate. Historically, the network has maintained a high profit margin, with 80-95% of its revenues consisting of “profits” that directly benefit ETH investors. This is due to the burning of base fees, which permanently removes ETH from circulation, increasing the value of the remaining tokens.

3. Active Addresses

The number of active addresses on the Ethereum network is a vital indicator of adoption and user engagement. Despite the ups and downs in the crypto market, the number of active addresses has consistently remained above 500,000 per day, reaching an all-time high of over 1.1 million in July 2022. This metric provides a snapshot of the network’s traction and user activity.

4. Layer 2 Adoption

Ethereum’s Layer 2 solutions, such as Polygon, provide a more complete view of the network’s traction. The number of users interacting with these solutions has increased significantly, with Polygon’s daily active users growing by almost 2x since October 2021. This metric highlights the network’s ability to scale and accommodate growing user demand.

5. SDK Installs

The number of weekly SDK installs, which tracks the number of downloads of open-source JavaScript libraries that help developers interact with the Ethereum nodes, is a precursor to new application development. This metric has seen a significant increase, with over 175% growth compared to 2021 and over 950% since 2018. This indicates a bullish trend in new developer interest and potential for future application development.

These five fundamental metrics provide a comprehensive view of Ethereum’s health, growth, and potential. By monitoring revenue, profit margin, active addresses, Layer 2 adoption, and SDK installs, investors and traders can gain valuable insights into the network’s trajectory and make informed decisions.