Bankless: 2021 Q3 Ethereum Protocol and Ecological Report

This article was inspired by James Wang’s “Ethereum Announces First Quarter 2021 Results”

Below is the third quarter report of Ethereum, the world’s largest smart contract platform, as of September 30, 2021.

Let’s take a look at the year-on-year change of Ethereum this year compared to the third quarter of last year.

Agreement results

  • Network revenue increased by 511% .

    The total transaction fees paid by users to miners increased by 511% year-on-year, from US$322.1 million in the third quarter of 2020 to US$1.96 billion in the third quarter of 2021.

    Among them, $1.34 billion (68.2%) was burned through the implementation of EIP 1559 in early August.

  • The settlement value increased by 398% .

    This represents the value of transactions settled on the Internet, from US$107.75 billion in the third quarter of 2020 to US$536.48 billion in the third quarter of 2021, an increase of 398%.

  • Daily active addresses increased by 24.1% .

    This is an estimate of the number of daily users on the network, from 368,467 addresses in the third quarter of 2020 to 457,402 in the third quarter of 2021, a year-on-year increase of 24.1%.

  • The hash rate increased by 181% .

    It is specifically used to ensure that the computing power of the Ethereum network through proof of work increased from 250,888 GH/S in the third quarter of 2020 to 705,663 GH/S in the third quarter of 2021, an increase of 181% year-on-year.

  • The ETH issuance rate dropped by 29% .

    The inflation rate of ETH supply this quarter dropped from 1.11% in the third quarter of 2020 to 0.79% in the third quarter of 2021, a year-on-year decrease of 29%.

Ecological achievements

  • The total value locked in DeFi increased by 1242% .

    The cumulative value of all assets deposited in decentralized financial agreements increased from US$9.23 billion in the third quarter of 2020 to US$123.90 billion in the third quarter of 2021, a year-on-year increase of 1242%.

  • The total trading volume of DEX increased by 242% .

    This includes all trading volumes on decentralized exchanges.

    It rose from USD 48.27 billion in the third quarter of 2020 to USD 189.16 billion in the fourth quarter of 2021, a year-on-year increase of 242%.

  • The total outstanding debt increased by 1158% .

    This highlights the amount of borrowed assets in the decentralized lending market like Compound and Aave, which has grown from US$1.27 billion in the third quarter of 2020 to US$16.09 billion in the third quarter of 2021, a year-on-year increase of 1158%.

  • The issuance of stablecoins increased by 405% .

    The number of “three big” stablecoins (USDT, USDC, and DAI) issued on the network this quarter increased by 405% from 13.62 billion U.S. dollars in the third quarter of 2020 to 68.77 billion U.S. dollars.

  • BTC on Ethereum climbed 133% .

    This represents the total number of Bitcoin tokens on Ethereum, from 123,500 in the third quarter of 2020 to 288,234 in the third quarter of 2021, an increase of 133%.

  • OpenSea sales jumped by 141,847% .

    This measures the transaction volume on the leading NFT market, which increased from US$4.76 million in the third quarter of 2020 to US$6.57 billion in the third quarter of 2021, an increase of 141,847%.

  • The TVL of L2 increased by 29,786% .

    This represents the amount of value locked in the second-tier scaling solution, from $8.41 million in the third quarter of 2020 to $2.51 billion in the third quarter of 2021, a year-on-year increase of 29,786%.

Main highlights

EIP-1559

EIP-1559 marks one of the most important changes in the history of Ethereum and was implemented as part of the London network upgrade on August 5, 2021.

In short, this upgrade reorganized Ethereum’s fee market, changing from the first-price auction model to users paying fixed fees (called basic fees) and priority fees (called tips). In this way, the most anticipated change brought about by EIP 1559 is the introduction of cost burning.

This mechanism is not to pay fees directly to miners or verifiers, but to burn basic fees and permanently remove ETH from the circulating supply. As mentioned above, since the implementation of the third quarter for a month, this measure has destroyed $1.33 billion worth of ETH.

NFT Mania

One of the defining moments of the quarter was the explosion of NFT market activity.

Catalyzed by the initial increase in the price of Cryptopunks (the most valuable collectibles by floor price), its cumulative sales exceeded $1 billion, and the entire NFT market experienced parabolic growth.

Bankless: 2021 Q3 Ethereum Protocol and Ecological Report

As mentioned above, OpenSea’s transaction volume in the third quarter increased by 141,847% year-on-year to more than US$6.75 billion, bringing in revenue of US$162.7 million for the platform.

In addition, the valuation of other NFT collectibles has also seen substantial growth. A typical example is Art Blocks’ Fidenza, a generation art collection that is now on the open market for more than $3.3 million. The explosive growth of NFT casting proved to be the main reason for Gas’s rise. During the launch of The Sevens series, its peak was as high as 7,300 gwei.

With explosive sales indicators, the cultural relevance of NFT in society is also increasing. For example, Jay-Z, Odell Beckham Jr. and Stephen Curry all changed their own profile pictures to these NFT collections. Other large companies have also begun to adopt this technology. TikTok and others announced the launch of the NFT series on the Immutable X network, and Visa announced the purchase of Cryptopunk.

Adoption of Layer 2

The last major highlight of the third quarter was the significant progress made in the second layer (L2) area. The most common is to take the form of Optimistic or Zero Knowledge (ZK) Rollup. L2 helps expand Ethereum by increasing transaction throughput and reducing fees, while inheriting the security of L1.

The two major milestones in this regard are with the Alpha release of Optimistic Ethereum in July and the mainnet alpha release of Arbitrum One in August. Both networks are built on Optimistic’s Rollup technology and have experienced significant growth. For reference, Optimistic’s TVL is currently $271 million, while Arbitrum holds assets worth $2.41 billion.

It is worth noting that although both of these networks have deployments from major DeFi protocols, Arbitrum does not allow the introduction and establishment of new protocols. In contrast, Optimism’s protocols must be whitelisted. Therefore, the adoption rate of Arbitrum is much higher than its main competitor Optimsim. This was initially catalyzed by the Arbinyan Yield Farm, which went live on September 13. As DeFi degens was eager to enter the agreement, hoping to absorb high returns, the agreement quickly accumulated a value of $1.5 billion within 48 hours.

Bankless: 2021 Q3 Ethereum Protocol and Ecological Report

The growth of dYdX is another important sign of the increasing adoption of L2. This is a decentralized exchange that trades perpetual contracts based on StarkWare’s zk-rollup technology (StarkEx). The agreement has experienced rapid growth after the launch of its governance token, which is characterized by providing users with a series of incentives. People’s incentive plan.

The daily trading volume of the agreement once climbed to 9.7 billion U.S. dollars, surpassing centralized exchanges such as Coinbase.

Future outlook

In the fourth quarter of 2021 and fiscal year 2022, Ethereum’s growth has an important catalyst.

The most important thing is “merger”, that is, the network will change the consensus mechanism from Proof of Work (PoW) to Proof of Stake (PoS). This upgrade will phase out energy-intensive hardware miners and switch to validators. The network is guaranteed by capital in the form of ETH instead of computing power. Therefore, this will allow Ethereum to greatly reduce its energy consumption and eliminate mining work as a stakeholder in the network.

In addition, the merger is expected to result in a significant reduction in the future issuance of ETH. When combined with the amount of burning of EIP-1559, this may lead to ETH deflation, which the community calls “ultra sound money.”

Another catalyst for the upcoming protocol level is the form of sharding, or changes in network architecture, from a single chain to 64 independent shards, each of which can process transactions. Although the timetable for the upgrade is unclear, the combination of sharding and the development of adopting L2 solutions will help Ethereum complete the transition to a modular blockchain.

Read David’s article to learn more about the value of modular blockchains and monolithic blockchains.

At the application level, the catalyst for the continued growth of the Ethereum ecosystem DeFi comes from the rise of “DeFi 2.0”. A new round of agreements emphasizing capital efficiency, liquidity management, and multi-network deployment is at the forefront of Ethereum’s innovation. These new agreements, coupled with the increase in L2 adoption and development, should be combined to help new users stand on the forefront of the Ethereum ecosystem.

There are several non-DeFi catalysts on the horizon of Ethereum. This includes the increasing adoption and financialization of NFTs, such as through the products of companies such as GameStop and through protocols such as fragmented art, and the introduction of new users through cryptocurrency games.

This may be achieved through the continued growth of games such as Axie Infinity and the launch of new games such as Illuvium on the Immutable X network.

Summary of results

Bankless: 2021 Q3 Ethereum Protocol and Ecological Report

Famous quotes of the third quarter

“The biggest and clearest bet is Ethereum.” -Raoul Pal
“The development of Ethereum is reaching a new level of maturity. The gap between Ethereum’s current position and its development direction is rapidly narrowing.”-David Hoffman
“We will change the arc of history Work hard”-@punk6529  
“If you bet on Ethereum DeFi, u ngmi”-Ben Giove

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/bankless-2021-q3-ethereum-protocol-and-ecological-report/
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