Written by: Alex Gedevani, analyst at Delphi Digital, a crypto asset research organization
Compiler: Zhang Gaijuan
The Ethereum network is full of flowers, and the bottleneck is obvious, which makes people love and hate deeply. On the one hand, concepts such as the DeFi boom and liquidity mining have pushed activities on the Ethereum network to an unprecedented level. But at the same time, high gas costs also discourage small-fund users. New projects need to pay up to $ 15,000 in DAO deployment costs at the beginning of development, which is hindering the further development of DeFi and other Ethereum activities. Not to mention, although Layer 2 is on the rise, the speed of adoption is not satisfactory.
The good news is that from the number of queries of the blockchain data indexing project The Graph hosting service, you can see the popularity of DeFi: The number of daily queries of The Graph surged from 45 million daily in August to 220 million daily in September. Times or so.
Not to mention that new concepts, new experiments and new ideas continue to emerge in the Ethereum ecosystem. After the year.finance , the concept of ” fair start ” became popular , and governance tokens played a more important role in project incentive plans. The continuous fermentation of DeFi hotspots has led to a DeFi fork frenzy. As a result, more and more fork projects and imitation projects have entered the game, and the ” uncle ” and ” vegetable ” series of related projects are emerging in an endless stream or promote the Uniswap token issuance process.
What’s interesting is that with the booming DeFi wave, centralized exchanges are doing their best to integrate and compete with decentralized exchanges . For example, competing to launch DeFi tokens to compete for traffic, to cater to small capital users to launch DeFi mining , new currency mining and other products.
How can we better observe the development of the Ethereum ecosystem and understand the current trend and pulse of the magnificent Ethereum ecosystem development? Thanks to the research institution Delphi Digital recently released an in-depth report called ” Ethereum Ecological Sharing “, which can help us find out.
In this report, Delphi Digital analyst Alex Gedevani analyzes the development status of Ethereum ‘s network activities, DEX, stablecoins , lending, and derivative products to help readers have a deeper understanding of Ethereum ‘s ecosystem construction. In addition, as the launch of Phase 0 of Ethereum 2.0 is getting closer, the report also summarizes the latest developments of Ethereum 2.0 and the EIP 1559 proposal.
What to do if the gas fee is too high: Can EIP 1559 play a role in deflation?
Ethereum’s transaction fees are continuing to soar. In the first half of September alone, Ethereum’s total transaction fees exceeded 100 million U.S. dollars and reached 103 million U.S. dollars , which will easily exceed the total transaction fees of the entire month of August. This also means that recent Ethereum miners have also made a lot of money, which is more than 530% higher than Bitcoin miners’ earnings of $16.3 million in the first half of September.
Can the cost burning in the Ethereum improvement proposal EIP 1559 proposed by the co-founder of Ethereum Vitalik Buterin and others play a role in deflation from the supply of coins? We can first assume the supply impact of EIP 1559 by tracing historical cost data.
It can be seen that if EIP 1559 is implemented, even if it is destroyed at a cost of 75%, the destruction will only account for 0.83% of the supply.
Let the data speak: data analysis of the development of the Ethereum network
According to Etherscan data, in September, an average of about 209 smart contracts were verified daily, exceeding the average high in July 2018.
In terms of the number of active addresses on the Ethereum network, the value was 332,000 in September, while it was 205,000 in January this year. It can be seen that compared to 2017, the current Ethereum network is healthier.
At the same time, the Ethereum network continues to be highly congested . The number of transactions in August reached 35.2 million , exceeding the historical high in 2018.
In September, the 7-day average adjusted transfer value on the Ethereum chain exceeded Bitcoin for the first time since 2018.
In addition, the rapid development of DeFi has led to a substantial increase in Ethereum locked in smart contracts. Currently, about 15% of Ethereum’s supply is locked in smart contracts, while at the beginning of the year, the value was only 12.8%.
The amount of ETH locked up is expected to continue to grow
The endless stream of DApps also brings new opportunities to Ethereum. Yearn.finance’s yETH machine gun pool locked up 430,000 ETH within a few days of its launch. The yETH machine gun pool writes financial management strategies into smart contracts, which can be automatically operated by smart contracts.
Most importantly, we are about to usher in the ” Phase 0 ” of Ethereum 2.0, and we are expected to lock up millions of ETH in the first few months. This means that the network utility of Ethereum is growing day by day, and it will continue to drive the increase in demand for ETH . Signs of declining supply and strong demand are also gradually improving the prospects of Ethereum.
Obviously, the ETH lock-up value will continue to maintain strong growth, but it remains to be seen whether it is necessary to increase the supply and issuance of ETH to motivate verifiers .
How ETH flows: look at the net outflow and distribution of ETH exchanges
Understanding the inflow and outflow and distribution of ETH exchanges will help us better understand the future development trend at the price level .
More than 60% of the ETH supply has not been transferred for more than a year, which means that most investors are optimistic about the development and future of Ethereum.
In terms of exchange balances, according to Nansen data, 26% of the ETH supply is held by exchanges. Among them, Coinbase holds 8.9 million ETH, ranking first. However, as we know, as the DeFi field continues to prosper, this value shows a downward trend, which will effectively reduce the third-party risk of the exchange. With the arrival of Ethereum 2.0 Phase 0, the centralization of Ethereum on exchanges will cause investors’ concerns. This is because if a third party is responsible for collateralizing most ETH, there may be certain risks.
In addition, data from Santiment shows that this month, the largest non-exchange ETH giant whale increased its positions by nearly 84%, increasing its holdings from 3.16 million to 5.8 million .
Understand the latest developments of Ethereum 2.0 and EIP 1559 proposals
Summary of Ethereum 2.0 progress
- On September 15, the core developers of Ethereum 2.0 submitted a ” phase 0 ” upgrade proposal. “Phase 0” is expected to be launched in the fourth quarter of this year .
- A new three-day testnet, Spadina, will run in parallel with Medalla later this month.
- The issue of ” clock synchronization ” on the Ethereum 2.0 testnet Medalla in August revealed the importance of client diversity. Currently, the Medalla testnet is progressing smoothly.
The latest progress of the EIP 1559 proposal
- Can it transition correctly? This is one of the biggest risks faced by EIP 1559 .
- What if most exchanges or wallets do not upgrade to support 1559?
- Columbia University professor Tim Roughgarden received funding to study the Ethereum EIP-1559 proposal, which will specifically analyze the proposed changes to the transaction fee mechanism in the Ethereum protocol.
It can be seen that the current ” Phase 0 ” preparations for Ethereum 2.0 are progressing smoothly, and client developers are also very active. While the competition on the first layer is becoming increasingly fierce, developers have also realized the need to use Ethereum as a bridge to obtain liquidity .
DeFi is exploding, what about DeFi?
The DeFi boom has prompted more and more imitating projects or fork projects to enter the game. To some extent, it is a waste of time if products that are compatible with other projects in the DeFi ecosystem cannot be developed. In addition, governance also plays an indispensable role in DeFi.
Obviously, in the near future, projects with incentive mechanisms will continue to attract a large number of users to participate. Specifically, we can see one or two from the transaction costs: in the past 30 days, the transaction costs of Uniswap and Balancer have reached a large proportion.
In addition, users can quickly measure the valuation of a project based on the market-sales rate . In addition, the growth of the number of users of a project is also an indispensable evaluation indicator.
In view of the nuances behind each agreement and fee structure, users can try to integrate multiple indicators to evaluate a project.
From the perspective of the total annual transaction volume of the agreement , Uniswap ranked first, reaching 124.48 billion US dollars, far exceeding the second ranked Curve. For the loan agreement, GMV is the total loan amount , and for the DEX agreement, it is the total transaction volume .
From the perspective of market sales ratio, the three DeFi agreements with the lowest market sales ratios are Bancor , Compound and Kyber , and the highest market sales ratios are MakerDAO and Curve . In traditional finance, the market-sales ratio is a valuation indicator of stocks, calculated by dividing the company’s market value by the operating income of the previous fiscal year. The lower the market-sales ratio, the greater the investment value of the company’s stock. For the DeFi agreement, P/S = token market value / agreement annualized income .
In terms of the number of users, Yearn Finance ’s users have the highest 30-day rolling growth rate , reaching 202%, followed by Balancer and Uniswap . In addition, although Uniswap’s user growth rate ranks third, its number of users is the highest, exceeding 290,000 .
DEX overview
DEXs are coming fiercely, and DEXs led by Uniswap have attracted a large number of users and generated very considerable trading volume. In the past week, there were 76,000 independent traders on Uniswap, accounting for 92% of the total DEX users.
In terms of transaction volume, in August, Uniswap had the highest transaction volume at US$ 6.729 billion , followed by Curve and Balancer, at US$1.867 billion and US$1.154 billion , respectively.
Looking at all DEXs together, in the first half of September, except for fork projects such as Swerve and Sushiswap, the trading volume of DEX has exceeded the value in August .
In addition to the number of users and transaction volume, Uniswap’s market share has also surged from 23% in January this year to nearly 70% this month.
But it is worth noting that Uniswap’s transaction failure rate in the past 30 days is as high as about 22% . Common reasons for DEX transaction failure include transaction slippage exceeding expectations , and Gas Limit setting is too low. This means that the unfriendly user experience of DEX is becoming a major obstacle to its development and growth.
Faced with the rise of DEX, centralized exchanges are also doing their best to integrate and compete with DEX. For example, competing to launch DeFi tokens to compete for traffic, launch DeFi mining, new currency mining, and integrate some DeFi protocols to cater to small capital users.
Stablecoin overview
The market demand for stablecoins continues to soar. The total supply of stablecoins has increased from 6 billion USD at the beginning of the year to 18 billion USD at present , 70% of which are based on the Ethereum blockchain .
Stable money demand increase was mainly due to the following reasons: One is that more and more stable currency is used as a currency; the second is the stable currency at an unprecedented speed into DeFi field.
In terms of liquidity and convenience, Tether is still the most popular stablecoin . However, the high gas cost caused Tether to start transferring part of its USDT from the Ethereum blockchain to the other layer of the network .
Loan agreement
Compound first started liquid mining and loan mining . Since then, other protocols have followed suit and completely ignited liquid mining.
Among the following five major lending agreements, Compound has the largest number of users, exceeding 50,000 , followed by Aave . In terms of total loan volume, Compound’s total outstanding loan value reached US$727 million , ranking first, followed by Maker and Aave.
In the past month, Aave’s user base has grown the fastest, and its borrowing volume has also grown very strongly. Aave more than 65% of total borrowings from stable currency. It is worth noting that Cream Finance , ranked fourth, has experienced a growth rate of 640% in its borrowing volume in the past month.
In view of the lack of liquidity and stickiness of DeFi, the incentives of lending platforms will greatly affect users’ choices.
Derivatives
Since the beginning of the year, the open positions of ETH options have continuously made breakthroughs. The market believes that the probability of ETH reaching $400 or higher by the end of this year is 42%.
On the other hand, the DeFi derivatives market is constantly seeking development and innovation.
- Synthetix : In order to promote the integration of Synthetix on the DeFi platform, the project is introducing a transaction volume incentive plan, which will provide a certain percentage of rebates if integrated synthetic asset transactions .
- Nexus Mutual : Nexus Mutual’s effective total insured amount is growing at a rate of 10 times per month , and currently has an effective total insured amount of US$246 million, locked in to a DeFi value ratio of 2.7% . Currently, Nexus Mutual is studying solutions to expand insurance coverage and incentives for cold start of the project and shield mining.
- MCDEX : MCDEX has added a perpetual contract market for SNX, LEND and COMP.
- UMA Protocol : In the latest product development, renBTC can be minted and locked into UMA to mint USD products, which in turn can be used to buy more renBTC and conduct leveraged transactions. The liquidity of its locked Ethereum and synthetic assets reached a peak of US$20 million.
Ethereum App
The DeFi community started a wave of forks. After Sushiswap “captured” Uniswap’s large amount of liquid funds, due to the reduction in the amount of rewards released and the issuance of UNI tokens , the funds returned to Uniswap. In the past 24 hours, Uniswap’s transaction volume was US$520 million, and the liquidity provider’s transaction fee was 0.3%. At the same time, Sushiswap’s transaction volume was only US$113 million and transaction fees were 0.25%.
This shows that the moat of the agreement is crucial. The fair launch highlights the pressing pressure for complete decentralization. More and more fork projects will appear in the future.
The number of tokens anchored to Bitcoin on the Ethereum chain has also achieved amazing growth, and the driving factors are inextricably linked to mobile mining. RenBTC , WBTC , etc. all benefit a lot from liquidity mining.
Alameda Research, a crypto market maker platform, previously minted as many as 65% of the Bitcoin anchor WBTC in August and September. On the other hand, the liquidity mining of Uniswap governance token UNI also includes the ETH/WBTC fund pool. The liquidity of the ETH/WBTC fund pool reached 240 million U.S. dollars within a few hours after its launch.
In just a few months, yearn.finance has gradually developed into an ecosystem that uses multiple products such as insurance and oracles. Its founder, Andre Cronje, is currently developing a decentralized credit protocol, StableCredit , which combines the risks of tokenized debt stablecoins , lending, AMM, and one-sided AMM to create a fully decentralized loan protocol that allows creation based on any asset Tokenized credit assets.
In summary, in addition to soaring gas costs and network congestion, the ecosystem on Ethereum is developing healthily . With the countdown to Phase 0 of Ethereum 2.0 and the continuation of the DeFi boom, Ethereum network activities and ecosystem are expected to further accelerate the development.
