DeFi has exploded, what is the ecological development of Ethereum behind it?
Editor's Note: This article comes fromChain News ChainNews (ID: chainnewscom)Editor's Note: This article comes from
Chain News ChainNews (ID: chainnewscom)
Chain News ChainNews (ID: chainnewscom)
, Author: Alex Gedevani, analyst at Delphi Digital, an encrypted asset research institution, Compiler: Zhang Gaijuan, published with authorization.
The Ethereum network is full of flowers and flowers, but there are also obvious bottlenecks, which makes people love it deeply and hate it. On the one hand, concepts such as the DeFi boom and liquidity mining have pushed activity on the Ethereum network to unprecedented levels. But at the same time, high gas fees also deter users with small funds. New projects need to pay up to $15,000 in DAO deployment fees in the early stages of development, which is hindering the further development of DeFi and other Ethereum activities. Not to mention, although Layer 2 (two-layer network) is on the rise, the adoption rate is not satisfactory.
The good news is that the popularity of DeFi can be seen from the number of queries of the blockchain data index project The Graph hosting service: The number of daily queries of The Graph surged from 45 million in August to 220 million in September times or so.
Interestingly, with the booming DeFi wave, centralized exchanges (CEX) are also doing their best to integrate and compete with decentralized exchanges (DEX). For example, DeFi tokens are competing for traffic, and products such as DeFi mining and new coin mining are launched to cater to users with small funds.
How can we better observe the development of the Ethereum ecology and understand the current trend and pulse of the current magnificent wave of Ethereum ecological development? Thanks to the research organization Delphi Digital recently released an in-depth report called "Ethereum Ecosystem Sharing", which can help us find out.
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What to do if the gas fee is too high: Can EIP 1559 play a deflationary role?
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Profitability of Ethereum and Bitcoin miners, source: Delphi Digital
Can the fee burning in the Ethereum improvement proposal EIP 1559 previously proposed by Ethereum co-founder Vitalik Buterin and others play a role in deflation from the supply of coins? We can first hypothesize the supply impact of EIP 1559 by tracing historical fee data.
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EIP 1559 Burned Fee Statistics
It can be seen that if EIP 1559 is implemented, even with a 75% fee burn, the amount burned would only account for 0.83% of the supply.
According to Etherscan data, in September, an average of about 209 smart contracts were verified per day, surpassing the average high of 167 in July 2018.
In terms of the number of active addresses on the Ethereum network, the figure stood at 332,000 in September, compared to 205,000 in January this year. It can be seen that compared to 2017, the current Ethereum network is healthier.
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Ethereum network active addresses and transaction count statistics
In September, the seven-day average adjusted value transferred on Ethereum surpassed that of Bitcoin for the first time since 2018.
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7-day average adjusted transfer value on-chain for Bitcoin and Ethereum
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, up from 12.8% at the beginning of the year.
The endless stream of DApps has also brought new opportunities to Ethereum. Yearn.finance’s yETH smart pool locked 430,000 ETH within a few days of its launch. The yETH smart pool writes the financial management strategy into the smart contract, which can be automatically operated by the smart contract.
Most importantly, we are approaching "Phase 0" of Ethereum 2.0 and are expected to lock up millions more ETH in the first few months. This means that Ethereum's growing network utility will continue to drive increased demand for ETH. Signs such as declining supply and strong demand are gradually improving the outlook for Ethereum.
It is clear that ETH lock value will continue to grow strongly, but it remains to be seen whether there is a need to increase the supply issuance of ETH to incentivize validators.
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Changes in the amount of ETH locked on DeFi
Understanding the exchange inflow and outflow and distribution of ETH will help us better understand future development trends at the price level.
More than 60% of ETH supply has not been transferred for more than 1 year, which means that most investors are optimistic about the development and future of Ethereum.
In terms of exchange balance, according to Nansen data, 26% of ETH supply is held by exchanges, among which Coinbase holds as much as 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 exchanges. 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 mortgaging the majority of ETH, there may be certain risks.
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The amount of ETH held by major exchanges
In addition, data from Santiment shows that this month, the largest non-exchange ETH whale increased its position by nearly 84%, and its holdings increased from 3.16 million to 5.8 million.
Understand the latest progress of Ethereum 2.0 and EIP 1559 proposal
On September 15th, Ethereum 2.0 core developers 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 "clock synchronization" problem of the Ethereum 2.0 testnet Medalla in August revealed the importance of client diversity. Currently, the Medalla testnet is progressing smoothly.
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Comparison of Ethereum 2.0 client developers
EIP 1559 Proposal Latest Discussion Progress
What if most exchanges or wallets do not upgrade to support 1559?
Columbia University professor Tim Roughgarden has received funding to conduct research on the Ethereum EIP-1559 proposal, specifically analyzing proposed changes to the transaction fee mechanism in the Ethereum protocol.
It can be seen that the preparations for "Phase 0" of Ethereum 2.0 are progressing smoothly, and client developers are also very active. While the competition in Layer 1 is becoming increasingly fierce, developers also realize that it is necessary to use Ethereum as a bridge to obtain liquidity.
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Tier 1 project developer activity
DeFi is exploding, what about DeFi?
The DeFi boom has prompted more and more imitation projects or fork projects to enter the game. To some extent, it is a waste of time not to develop a product that is compatible with other projects in the DeFi ecosystem. In addition, governance also plays an integral role in DeFi.
In addition, users can also quickly measure the valuation of a project based on the Price to Sales Ratio (P/S). In addition, the growth of the number of users of a project is also an indispensable evaluation indicator.
Given the nuances behind each protocol and fee structure, users can try to evaluate a project by combining multiple indicators.
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The total annual trading volume of the agreement (30-day moving average * 365)
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Price-to-sales ratio comparison of various DeFi protocols
In terms of the number of users, Yearn Finance has the highest 30-day rolling growth rate of 202%, followed by Balancer (115%) and Uniswap (60%). In addition, although Uniswap's user growth rate ranks third, it has the highest number of users, exceeding 290,000.
30-day rolling growth rate of DeFi project users
DEX overview
DEXs are on the rise, and DEXs led by Uniswap have attracted a large number of users and generated a very considerable transaction volume. In the past week, there were 76,000 independent traders on Uniswap, accounting for 92% of the total DEX users.
Comparison of DEX trading users in the past 7 days
In terms of trading volume, in August, Uniswap had the highest trading volume of US$6.729 billion, followed by Curve and Balancer, which were US$1.867 billion and US$1.154 billion respectively.
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Comparison of trading volume of each DEX
In addition to the number of users and the performance of transaction volume, Uniswap's market share has also surged from 23% in January this year to nearly 70% this month.
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Comparison of DEX market share
Facing 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, catering to users with small funds to launch DeFi mining, new currency mining, and integrating some DeFi protocols.
Demand for stablecoins continues to soar. The total supply of stablecoins has grown from 6 billion at the beginning of the year to $18 billion currently, 70% of which is based on the Ethereum blockchain.
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Changes in the total supply of stablecoins
The market value of the top ten stablecoins on the Ethereum chain
loan agreement
The surge in demand for stablecoins is mainly due to the following reasons: one is that more and more stablecoins are used as currencies; the other is that stablecoins are entering the DeFi field at an unprecedented speed.
Tether remains the most popular stablecoin in terms of liquidity and convenience. However, high gas fees caused Tether to start moving some of its USDT off the Ethereum blockchain to other layer networks.
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Compound was the first to start liquidity mining and loan mining, and since then other protocols have followed suit and completely ignited liquidity mining.
The loan volume and user growth of each lending agreement in the past month
Derivatives
Given that DeFi lacks liquidity stickiness, the incentives of the lending platform will largely affect the user's choice.
Derivatives
Since the beginning of the year, the open interest of ETH options has continued to break out. The market sees a 42% chance of ETH hitting $400 or more by the end of the year.
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Year-to-date changes in Ethereum options as a platform position, source: Skew
On the other hand, the DeFi derivatives market is also 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. If the synthetic asset transaction is integrated, a certain percentage of rebates will be provided.
Nexus Mutual: Nexus Mutual's effective total insurance coverage is growing at a rate of 10 times per month. It currently has an effective total insurance coverage of US$246 million, and the ratio of value locked to DeFi has reached 2.7%. Currently, Nexus Mutual is researching solutions such as expanding insurance coverage and incentives for project cold start shield mining (shield mining).
MCDEX: MCDEX has added a perpetual contract market for the three assets of SNX, LEND and COMP.
UMA Protocol: In the latest product development, it is possible to mint renBTC and lock renBTC into UMA to mint USD products, which in turn can be used to buy more renBTC and trade with leverage. Its locked Ethereum and synthetic liquidity peaked at $20 million.
Ethereum App
The DeFi community has set off a wave of forks. After Sushiswap "captured" a large amount of Uniswap's liquidity funds, due to the reduction in the release of rewards and the issuance of UNI tokens, the funds flowed back to Uniswap. In the past 24 hours, Uniswap had a trading volume of $520 million and a liquidity provider’s transaction fee of 0.3%, while Sushiswap’s trading volume was only $113 million and a transaction fee of 0.25%.
It can be seen that the moat of the agreement is very important. Fair Launch highlights the pressing pressure for full decentralization. More and more forked projects will appear in the future.
The number of tokens pegged to Bitcoin on the Ethereum chain has also achieved amazing growth, and the driving factor is inextricably linked to liquidity mining. RenBTC, WBTC, etc. have benefited a lot from liquidity mining.
