Starting from Gas analysis, in-depth exploration of the history of the development of Ethereum and DeFi protocols


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Nansen analyzed the change trend of the total gas cost spent on the Ethereum chain from 2018 to the present, and summarized the evolution of the Ethereum ecological protocol.

Written by: Ling Young Loon, Nansen Analyst Translator: Lu Jiangfei

In July 2015, Ethereum was officially launched. In the past few years, the Ethereum-based decentralized application (dApps) ecosystem has achieved amazing development, such as:

  1. 0x’s first OTC market was launched in 2017;
  2. Uniswap was launched for the first time in November 2018 to complete the deployment;
  3. Yearn Finance meticulously planned an airdrop event that has attracted the attention of the industry in 2020.

Decentralized finance (DeFi) has become a continuously growing industry, and now in retrospect, its growth seems inevitable.

Like other economies with competing products, many decentralized financial agreements have experienced ups and downs. Some agreements reached their peak in a short period of time, while others fell quickly. However, in this process, the DeFi protocol has never given up on innovation, and it is precisely because of this that the DeFi market structure we see today has been formed. The development history of DeFi may be subjective, but the Ethereum blockchain is not. In this research article, we will use data to tell the story of Ethereum and analyze the development of such protocols. The figure below is the trend of the total gas cost spent on the Ethereum blockchain drawn by us. The time range is from 2018 to the present. The data is summarized in a time span of four weeks. The data is sourced from Metabase.

Starting from Gas analysis, in-depth exploration of the history of the development of Ethereum and DeFi protocols

As can be seen from the above figure, from 2018 to 2019, the Ethereum blockchain activity was quite calm, and the total amount of gas spent every month hardly exceeded 40,000 ETH. However, starting in 2020, the Ethereum blockchain activity began to rise, and gas expenditures increased in a parabolic shape. In September 2020, the total four-week gas expenditure of Ethereum reached a peak of 650,000 ETH, while the price of ETH was only 400 per month. Dollars-time really flies!

By analyzing the proportion of total gas expenses spent by various DeFi protocol entities, perhaps we can have a closer understanding of relevant data. In this article, we want to view the proportion of the top 30 agreement entities in gas cost expenditures in the aggregate historical data according to the passage of time.

Frankly speaking, the gas cost of the DeFi protocol depends on many factors, such as:

  1. How many users interact with smart contracts;
  2. The computational intensity required to execute the function;
  3. The overall price of gas on the Ethereum blockchain at that time.

Before we go deeper, we must note one thing: The Ethereum market pattern in 2018-2019 was very different. Many very active smart contracts at that time are no longer in use. We can see the ranking during 2018-2019 from the figure below. The top 30 gas consumption entities, data source Metabase.

Starting from Gas analysis, in-depth exploration of the history of the development of Ethereum and DeFi protocols

In addition to entities, we also summarized the total gas cost of token contracts, which account for about 10% of Ethereum activities. In 2018, many token contracts were Ponzi schemes and gambling games, and a considerable part of them came from China. For example, LastWinner is a typical example. The agreement is based on a very simple mechanism: the user deposits ETH into the contract until a certain ETH limit is reached. Once touched, the last person to deposit ETH will win all ETH. You can see The activity of this agreement on Ethereum reached its peak in mid-2018.

The following picture is more interesting, which shows the relative proportion of gas spent by the top 30 entities since 2018, data source Metabase.

Starting from Gas analysis, in-depth exploration of the history of the development of Ethereum and DeFi protocols

These data tell an interesting story year after year, so let’s start in 2018.

2018: the seed of decentralization

0x Remove the “middleman” role. Many people think that Uniswap is the first decentralized exchange, but it is not. The history of using smart contracts to exchange trustless tokens can be traced back to more distant times. The earliest DEX model was born in 2017. At first, they wanted to imitate the order book model of a centralized cryptocurrency exchange, but the result was too large and slow to actually use it. However, in July 2017, 0x deployed a solution based on on-chain transaction settlement-0x OTC. When people trade in the over-the-counter market, there are usually two problems:

  1. Price discovery only occurs between two parties;
  2. No guaranteed offer negotiation takes place (a party can withdraw at any time, but in the open market, an order placed by a party can be accepted immediately).

Users can post orders on off-chain platforms such as Twitter and other social media, and then settle on-chain through 0x-in 2018, 0x’s average daily transaction volume has reached 4 million U.S. dollars.

Next is Bancor. In August 2018, Bancor mentioned the idea of ​​building an automated market maker in a blog post, aiming to completely subvert the order book-based trading market. They paired all tokens with BNT. This practice continues to this day . In contrast, we can see various matching trading pairs on the Uniswap platform.

In addition, Kyber has also left its mark in the history of the development of decentralized exchanges. In essence, Kyber hopes to promote all parties to obtain and contribute liquidity in a decentralized manner, but it is not a decentralized exchange itself, but focuses on aggregating liquidity from various funding pool sources-including decentralization Chemical exchanges and centralized market makers. We can think of Kyber as a universal Uniswap router, and the liquidity from all parties can be used by entities such as the payment network, which was extremely groundbreaking at the time.

2019: a new financial economy

In 2019, Chainlink has grown into a key part of the DeFi field. In 2017, Chainlink launched the Oracle for the first time, which securely connects external off-chain data to Ethereum smart contracts. People do not realize the importance of oracles for synthetic assets and margin products-BZx uses Chainlink oracles for its margin trading platform, and Synthetix also integrates with Chainlink to provide real-world assets with price feed information. In May 2019, the blockchain media Decrypt even released a list of DeFi protocols that have been integrated with Chainlink.

Another oracle service worthy of attention is Tellor, which experienced a brief surge in usage in October 2019.

Until 2021, Chainlink’s share of Ethereum gas fees has remained above 4%, which is considered a real big winner.

After the oracle, some advanced DeFi trading functions began to take root. For example, the custodial lending trading platform Dydx launched the margin trading function in 2019. This function has a stylish user interface and can achieve up to 4 times leverage, which can almost be achieved with CEX. Similar experience.

In addition, Synthetix also found its own niche market in 2019. Now few people know that Synthetix was originally called Havven. In fact, this synthetic asset protocol was originally designed as a stablecoin protocol similar to Maker. From the gas consumption trend chart, we can see that Maker has been dominant for many years. Synthetix is ​​committed to creating a market for synthetic encryption and inverse value assets. In July 2019, Synthetix’s transaction volume has reached 60 million U.S. dollars.

The market’s interest in Compound has also begun to increase-in May 2019, Compound V2 was launched with a new look. Over the years, Compound’s currency market has hardly changed, but its stable gas fee throughput (1.5-5%) has proven that Compound’s design is very successful. Not surprisingly, for many years, the gas cost of borrowing DeFi agreements has always been lower than that of DEX

2020: More “champions” emerge

In 2020, Uniswap will begin to dominate the automated market maker (AMM) market. Uniswap was actually launched as early as November 2018, but I know that in February 2019, its transaction volume officially surpassed Bancor. Although both DEXs are based on the 50/50 reserve model, the design of Uniswap is more efficient and user-friendly. Not only that, the design of Uniswap also supports the listing of license-free crypto assets, making it highly composable with the larger DeFi ecosystem. In 2019, a blog post widely circulated in the industry analyzed Uniswap like this-

Before we switched to Uniswap, our tokens had been listed on Bancor for several months. The process of listing tokens on Bancor requires us to contact the Bancor team and work with them, and then we must transfer ETH and the equivalent amount of tokens to the address provided by the Bancor team. The Bancor team also asked us to transfer no less than $60,000 worth of ETH to provide liquidity during the setup process. From when we decided to list the token to when our token appeared on the Bancor website, the whole process took one or two days, and we had to communicate with the Bancor team over and over again. In contrast, the process of creating a Uniswap contract is like filling out a short form that you can do easily with the click of a button. The process of adding liquidity to the contract on Uniswap is equally simple. This process only takes one or two minutes. We don’t need to contact the Uniswap team at all, and they will not require any liquidity to be added to the contract.

In 2020, 1inch’s entry into the decentralized market feels like a thunder. It may be the fastest-growing DeFi agreement last year, but it did not complete the early seed round of financing until August 2020, and then it only took a short period of time. It occupied 6% of the gas market in 3 months. 1inch mainly provides decentralized exchange aggregation services to find the most cost-effective transactions by analyzing various liquidity pools to split and route orders. 1inch airdropped to users at the end of 2020 and accounted for 10% of the gas cost in December.

Last year, Forsage activities surged and became popular quickly. This is really a strange phenomenon, because if you want to use Forsage, users must pay ETH to the platform. In addition, if users recommend the Forsage platform to others, they can get ETH token incentives. From this perspective, the project seems a bit like a pyramid scheme scam, but they are still running to this day.

In 2020, almost no DeFi user has never heard of Yearn. Without Year Finance’s YFI airdrop, the history of Ethereum would not be complete-the price of this “valueless governance token” increased by 35 times in just seven days. Yearn has been at the forefront of DeFi since 2020, and its growth structure and form have also pointed out the direction for other newly created DeFi protocols today.

2021 and beyond

Tether and Center account for a large proportion of the Ethereum blockchain activity-they account for almost 12% of the current total gas cost. Tether and Center are like the best “agents” that can be used to transfer the amount of assets in and out of Ethereum, because gas is used to mint and destroy USDT and USDC stablecoins.

On the other hand, the Wrapped Ether contract is still widely used and has gradually become the backbone of Ethereum DeFi. For now, WETH is a very revolutionary idea. This tokenized ETH can be used as collateral, a means of trading, and a pricing benchmark for other tokens. WETH is a typical strength of DeFi Lego bricks. It satisfies the needs of the broad market. It has been widely used and the price is quite stable. No, they are not governance tokens!

In fact, a living Ethereum product ecosystem has been formed: on the Ethereum blockchain, a series of token exchange agreements now also have their fair share-although Uniswap is still dominant. Today, Nansen alone tracks at least 94 DEX agreements-each with its own “quirks” and value propositions. Since the beginning of 2021, these agreements have deployed more than 2.8 million contracts. In addition, as far as ERC-2 contracts are concerned, about 198,000 copies have been deployed so far.

Each of us is “contributing” to Ethereum. Every token exchange, pledge, deposit, withdrawal, and coinage you make is recorded on the Ethereum blockchain. Each of us is a participant in the Ethereum Forest, helping this forest to continue to survive, grow, adapt and prosper. So, where do you think Ethereum should go next?

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