TLDR
- Citi analysts have raised concerns about a surge in Ethereum transactions linked to address poisoning scams.
- The increase in Ethereum network activity is primarily driven by low-value transactions under $1.
- Address poisoning scams aim to mislead users by sending tiny amounts of crypto to look-alike wallet addresses.
- Ethereum’s low transaction fees make it easier for scammers to generate large volumes of deceptive transactions.
- Research indicates that stablecoins like USDT and USDC contribute to most of the unusual growth in Ethereum addresses.
Citi analysts have expressed concerns over a surge in Ethereum transactions that may not reflect genuine network growth. The rise in activity, particularly in daily transactions and active addresses, has been linked to potential scams. Analysts point out that this spike is likely due to “address poisoning” campaigns, which could distort the real usage of the Ethereum network.
Ethereum Network and the Rise of Address Poisoning
Citi’s analysts, Alex Saunders and Vinh Vo, have flagged a concerning trend in Ethereum’s recent transaction data. The activity surge mainly consists of low-value transactions, typically under $1, which is characteristic of address poisoning scams. This type of activity occurs when malicious actors send small amounts of cryptocurrency to addresses that resemble those used by victims, to mislead users into sending funds to incorrect destinations in the future.
Address poisoning scams have become easier to execute due to Ethereum’s low transaction fees. This allows scammers to generate large volumes of deceptive transactions, inflating the network’s metrics without indicating genuine demand. According to Citi’s report, the inflated transaction numbers fail to reflect actual organic growth or healthy network expansion.
Stablecoins Fuel Ethereum’s Unusual Growth
Recent research by on-chain expert Andrey Sergeenkov has highlighted that Ethereum’s recent surge is largely driven by stablecoins, especially USDT and USDC. These stablecoins represent about 80% of the growth in new Ethereum addresses. Sergeenkov’s research found that much of the activity consists of small, under $1 transfers, which are distributed to tens of thousands of addresses.
Smart contracts have been identified as the primary tool behind these large, small-amount transfers. These contracts send tiny amounts of stablecoins to thousands of wallets in a single transaction. The purpose behind these operations is often linked to funding address-poisoning scams, where large batches of fake transactions aim to mislead future users.
Despite this unusual uptick in activity, Ethereum’s market performance has been inconsistent. While Bitcoin has seen steady gains, Ethereum’s price has been relatively flat in recent months. Citi’s analysts stress that the current Ethereum activity is likely a network-specific phenomenon driven by malicious behavior, not genuine growth.
The trend of inflated metrics is not limited to Ethereum alone. Rival Wall Street firm JPMorgan has expressed similar skepticism regarding Ethereum’s long-term growth outlook. In its latest report, JPMorgan questioned whether the network’s performance would remain stable, given the competition from layer-2 solutions and other blockchain networks.
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