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William Mougayar
@wmougayar
Understanding the Velocity of ETH and how the speed and flow of Ether's movement reveals the network's economic health. Core Idea: The Velocity of ETH measures how frequently ETH moves within the Ethereum ecosystem, whether it’s being transferred, used in smart contracts, paid as gas, staked, or exchanged across layers. It reflects not just how much ETH exists, but how alive it is within the network’s economic circulatory system. Just like in traditional economics where currency velocity measures how often money changes hands, ETH velocity captures Ethereum’s real economic activity. It’s a crucial metric for understanding the health and dynamism of the network.
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William Mougayar pfp
William Mougayar
@wmougayar
Ethereum-specific Interpretations: 1. L1 & L2 Activity • ETH flows from Ethereum Layer 1 to Layer 2s (like Arbitrum, Optimism, Base) to benefit from lower fees and faster speeds. • These L2s pay ETH back to L1 to settle transactions and maintain security—fueling Ethereum’s economic gravity. • Users bridge ETH across rollups or chains to participate in apps, liquidity pools, or yield strategies—each move reinforcing ETH’s utility across layers. 2. Usage Across Sectors ETH is the common denominator across Ethereum’s economic verticals: • DeFi: Used as collateral, traded in liquidity pools, or lent and borrowed in protocols like Aave and Maker. • Stablecoins: Many are minted or redeemed using ETH, and ETH often serves as a trading or collateral pair. • NFTs: ETH is used to buy, sell, and pay royalties for NFTs—creating cultural and financial flows. • RWAs: Tokenized assets like real estate or T-bills settle in ETH, embedding it into real-world financial rails.
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