Cabin Report: Ethereum Ecological Development Report in the first quarter of 2022

In March 2022, the Fed’s interest rate hike boots landed, in line with market expectations, the macro situation of the crypto market improved, and the market stabilized. At the end of March, the total market value of the encrypted market returned to $2 trillion, and ETH returned to above $3,500, accounting for 17.9% of the market value.

Ethereum is currently in a critical period before PoW merges with PoS. Ethereum ranks second in terms of market value in the encryption market, with a long-term market value of 17% – 22%, which is of great significance to the entire encryption market. This report comprehensively sorts out the Ethereum Q1 data, application layer overview and historical development cycle, and observes the Ethereum ecological overview, application layer development and trends for reference.

1. Ethereum: Before The Merge

1. Ethereum Q1 data overview

In the first quarter of 2022, the return of Ethereum’s revenue fell by about -10.8%, and the three-month changes were -27%, +8.4%, and +12.4%. ETH stabilized and rebounded in late March, returning to above $3,000. . In this quarter, BTC’s market share was 40%, and ETH’s market share was 20.1%, which remained unchanged from the previous quarter. The ETH/BTC exchange rate has fallen back from 0.0835 to 0.072 this quarter after hitting a 3-year high in the previous quarter. ETH showed a certain hedging effect when BTC fell rapidly.

Cabin Report: Ethereum Ecological Development Report in the First Quarter of 2022

(https://cryptorank.io/price/ethereum)

This quarter, the ecological development of Ethereum proceeded smoothly. According to cryptomiso, more than 100 contributors submitted 115 code updates this quarter, ranking 40th among code updates, active developers. According to stateofthedapps, there are 4,011 DApps running stably in the Ethereum ecosystem and more than 7,220 smart contracts. About 46 new DApps were added this quarter, which was the same as the previous quarter.

Cabin Report: Ethereum Ecological Development Report in the First Quarter of 2022

(https://www.stateofthedapps.com/stats/platform/ethereum#new)

Cabin Report: Ethereum Ecological Development Report in the First Quarter of 2022

Cabin Report: Ethereum Ecological Development Report in the First Quarter of 2022

(Development activity shown on Santiment)

From the perspective of TVL market share, Ethereum accounts for 60.98% of the major public chains, and the TVL quarterly growth rate is 27.18%, which is much higher than the share of other public chains, but the proportion of Terra, BSC, Avalanche and other public chains has increased. faster. In early March, the Ethereum network TVL hit a record low of 55%, and the multi-chain trend was obvious.

Cabin Report: Ethereum Ecological Development Report in the First Quarter of 2022

The average number of Ethereum active addresses this quarter was about 578,732, a slight decrease of 3.92% compared to the average number of 602,388 in the previous quarter. In late March, the number of Ethereum active addresses reached a high of 875,201 (within 24 hours), and the user activity level rebounded.

Cabin Report: Ethereum Ecological Development Report in the First Quarter of 2022

2. Ethereum 2.0 progress

Ethereum is currently at a critical juncture in the progress of Ethereum 2.0. In order to realize its vision of a world computer, Ethereum has planned four development stages: Frontier (frontier), Homestead (homeland), Metropolis (metropolis), and Serenity (serenity). The fourth stage is regarded as “Ethereum 2.0” ( Consensus layer), designed to solve the scalability problem. In this stage, the transition from PoW to PoS consensus mechanism is crucial.

Cabin Report: Ethereum Ecological Development Report in the First Quarter of 2022

Cabin Report: Ethereum Ecological Development Report in the First Quarter of 2022

(Ethereum circuit diagram: the red stage is the Ethereum 1.0 network, and the green part is the Ethereum 2.0 beacon chain)

In the Ethereum roadmap, Ethereum 2.0 will be achieved in three phases. The first phase of “Beacon Chain” was completed in December 2020: Beacon Chain introduced native pledge into the Ethereum blockchain, and Ethereum entered the Serenity stage; the second stage is “The Merge”, the third stage A “shard chain” that focuses on sharding technology.

(The Ethereum Foundation is phasing out the terms “ETH 1.0” and “ETH 2.0” to illustrate with an Execution layer and a Consensus layer, that is, Ethereum will eventually consist of an Execution and Consensus layer.)

In the second half of 2021, the “EIP-1559” upgrade of Ethereum 1.0 and the Altair upgrade of the Ethereum 2.0 beacon chain are all preparing for the second phase of The Merge (merge).

This quarter, the market’s expectations for the merger of the Ethereum 2.0 beacon chain with the Ethereum 1.0 network (The Merge) strengthened, and the market reacted in advance to the deflation that Ethereum will bring after The Merge.

The official initial reference time for The Merge is June-July, and the specific date for the merger has not yet been determined. After the merger, the two mechanisms are parallel and eventually move to PoS. The opening of The Merge means that the PoW mechanism is gradually discarded, and the original miner group in the Ethereum ecosystem has withdrawn, reshaping the deflationary currency, decentralized pledge, graphics card mining and other tracks.

Whether Ethereum 2.0 can happen smoothly in Q2 depends on the operation of The Merge on the Kiln testnet. The existing ETH 2.0 progress is in line with community expectations. On March 15, the Ethereum merged public testnet Kiln was launched, indicating that it has successfully transitioned and upgraded to a complete Proof of Stake (PoS) consensus mechanism. The next step for developers is to merge the existing PoW testnet, and the next step is the mainnet. According to official data, as of late March, there are more than 106,000 validators and 3.4 million testnet ETHs on the Ethereum testnet that has transitioned to the POS consensus mechanism.

The technical discussion focus of Ethereum core developers has shifted to the “The Verge” stage after The Merge. It is expected that The Merge will be less difficult to implement and will be delivered relatively smoothly.

In the Ethereum white paper, the supply of ETH will increase according to a certain proportion every year. As the total amount increases, the proportion of new issuance to the total supply will become lower and lower. The annual issuance rate of ETH based on the PoW consensus mechanism is about 4.2% – 4.3 %, the daily circulation is about 12,000-13,000 pieces. After switching to the PoS mechanism, with reference to the current annual issuance rate of the PoS beacon chain of 0.6%, the daily output of ETH will be around 1280-1500, a drop of 90%. After the successful merger of The Merge, the annual issuance rate of ETH will drop to 0.3% to 0.4%. In the pledge behavior, the pledger obtains ETH without electricity costs, which theoretically reduces the selling pressure.

Cabin Report: Ethereum Ecological Development Report in the First Quarter of 2022

Cabin Report: Ethereum Ecological Development Report in the First Quarter of 2022

(https://ultrasound.money/)

The current ETH is in a state of inflation, the inflation rate is about 3%, the annual burning volume of ETH is about 1 million ETH, and the annual issuance of the combined ETH will be about 500,000. As of March, the total supply of ETH was about 118.5 million, of which the number of staking (Staking) reached 14.5 M, accounting for 12.2%, and the supply of ETH in the contract was 21.6 M, accounting for 18.22%. After the merger, deflationary expectations for ETH increased.Compared to Bitcoin’s current inflation rate of 1.73%, the inflation rate of the merged ETH will be 4 times lower than that of Bitcoin.

Ultrasound simulates the changes in ETH burning, supply, and issuance after The Merge:

Cabin Report: Ethereum Ecological Development Report in the First Quarter of 2022

Cabin Report: Ethereum Ecological Development Report in the First Quarter of 2022

(ETH burn, supply, and issuance before The Merge; data source: https://ultrasound.money/ )

Cabin Report: Ethereum Ecological Development Report in the First Quarter of 2022

Cabin Report: Ethereum Ecological Development Report in the First Quarter of 2022

(ETH burning, supply, and issuance after The Merge; data source: https://ultrasound.money/)

In Q3 last year, the EIP-1559 proposal in the Ethereum London upgrade adjusted the handling fee mechanism, increased the destruction of the basic ETH fee, and reduced the circulation of ETH, which objectively added a deflationary effect to ETH.

During the same period, the amount of pledged ETH 2.0 deposit contracts continued to increase steadily, and there are now more than 10,000,000 ETH staked (about 27 billion US dollars), accounting for about 9% of Ethereum’s current circulation. Among them, 66% of the funds are deposited by exchanges and pledge service agencies, and the largest deposits are from Lido (22%) and Coinbase (15%), which exceeds the pledge share of centralized exchanges such as Kraken and Binance, and the trend of institutionalization obvious.

Since under the PoS mechanism, the ETH pledge rate of return in Ethereum is based on the amount of pledged ETH, it is expected that the scale of pledged ETH will expand again after The Merge is opened and stabilized. This part of ETH will be locked and cannot be circulated (except for pledged derivatives).

Considering the technical improvement and performance improvement after the Ethereum PoS mechanism, the demand for developers has increased, and the scarcity of ETH as a consumer product has increased. Both the pledged ETH and the burned ETH are increasing the scarcity of ETH, and the arrival of The Merge will show this more intuitively through data.

3. Before The Merge: Deflation expectations intensify, staking agreements are under the spotlight

After The Merge, the expectation of deflation in ETH is intensifying. This expectation is an important logic for the recovery of the market value of Ethereum in the first quarter. The data related to the supply and demand of ETH in the first quarter of 2022 are arranged as follows:

Cabin Report: Ethereum Ecological Development Report in the First Quarter of 2022

Cabin Report: Ethereum Ecological Development Report in the First Quarter of 2022

Cabin Report: Ethereum Ecological Development Report in the First Quarter of 2022

(Organization: Cabin Investment Research)

In the current crypto market, the asset properties of ETH are more complex. ETH’s early white paper described its main value as:

  • The properties of money in the crypto market;
  • Gas consumption;
  • interest-bearing assets;

The staking introduced by Ethereum 2.0 makes ETH the “means of production” in the ecology (ETH holders have the right to obtain income). This attribute first increases the scarcity of ETH. In The Merge, with the deepening participation of exchanges, DeFi protocols, wallets and ETH staking services, the market and the community have already expected an increase in the staking returns after the merger. It is generally believed that “20-25% of the ETH circulation ” is a reasonable range for ETH stake size. Considering that more ETH will be locked, and the circulation of newly generated blocks will be limited in the short term, there will be further supply constraints.

On the other hand, the prosperity of the DeFi ecosystem, the entry of mainstream institutions, and the outbreak of the public chain market are all emphasizing the “asset” attribute of ETH. ETH is used as trustless collateral in DeFi transactions, providing liquidity to the market. During the peak period, nearly 10 million ETHs were locked in DeFi, and the data in Q1 was about 4.907 million. These collateral assets are indispensable in the DeFi ecosystem.

Cabin Report: Ethereum Ecological Development Report in the First Quarter of 2022

Cabin Report: Ethereum Ecological Development Report in the First Quarter of 2022

Cabin Report: Ethereum Ecological Development Report in the First Quarter of 2022

Institutional investors use ETH as a store of value. Grayscale’s ETH holdings can well reflect the optimism of institutions:

Cabin Report: Ethereum Ecological Development Report in the First Quarter of 2022

Cabin Report: Ethereum Ecological Development Report in the First Quarter of 2022

Cabin Report: Ethereum Ecological Development Report in the First Quarter of 2022

A variety of factors have promoted the increase in the scarcity of ETH. Under the situation that the macro market of the encryption market has stabilized, but the hot spots such as NFT and DeFi are obviously insufficient in relay, The Merge, as an important step in the upcoming consensus mechanism transformation, makes Ethereum deflation expected in the short term. pushed to the climax. After the original ETH ecological relationship was reconstructed and the miner group gradually withdrawn, this change gave birth to a new track, which is expected to relay market hot spots:

(1) Pledged derivatives

Pledged derivatives means staking ETH and obtaining ERC20 Tokens for normal transactions, providing liquidity for ETH, usually with a certain premium.

  • Centralized pledge

Centralized pledge mainly includes ETH 2.0 Staking service providers. Currently, centralized exchanges, mining pools, wallets or custodians all provide ETH 2.0 Staking services. Such platforms already have a large amount of liquid ETH in reserve and can provide this service without increasing user costs. It is expected that such platforms can integrate these services in the future and become an important new business share.

Currently, trading platforms represented by Kraken and Binance charge a commission of more than 15% for custody services; for institutional custody services such as Coinabse, Midas, SwissBorg, and Bitcoin Suisse AG, the service commission for institutional users is also more than 15%. . In the ETH 2.0 staking service, service providers such as Stakefish, P2P Validator, and Stakewise that have not issued tokens yet charge a commission of about 10%.

However, the centralized pledge platform faces the problem of being too centralized, such as the possibility of joint election bribery in the early stage.

  • Decentralized Staking

In a decentralized staking pool, users can deposit ETH into an Ethereum smart contract, receive receipts or proof tokens, and get the distribution of staking rewards due in the contract, and user balances will be adjusted over time . According to incomplete statistics, in this quarter, the amount of ETH in the ETH2.0 decentralized pledge pool increased by 89.52%.

Cabin Report: Ethereum Ecological Development Report in the First Quarter of 2022

Cabin Report: Ethereum Ecological Development Report in the First Quarter of 2022

(Data source: DuneAnalytics)

  • Lido

Lido is currently the largest decentralized staking pool on the market, allowing users to earn staking rewards without locking up assets or maintaining staking infrastructure. Lido currently accounts for more than 80% of the entire ETH2.0 pledge market share. Lido adopts a multi-chain expansion strategy. In addition to ETH, the protocol also provides liquidity staking for LUNA, SOL, KSM and MATIC. Lido has received a total of about 140 million US dollars in previous financing, mainly led by a16z and Paradigm.

  • RocketPool

RocketPool is one of the earliest Ethereum staking protocols and has grown rapidly recently. Rocket Pool’s model aligns the interests of the protocol and node operators by requiring node operators to stake RPL tokens, and minimizes trust assumptions by automating the process of joining the network. The protocol is focused on Ethereum, and currently available investors include ConsenSys Ventures.

  • SSV.network

SSV.network is a fully decentralized and open ETH2.0 staking network based on Secret Shared Validator (SSV), which provides an open foundation for users, staking pools, large institutions, etc. who need to run Ethereum validators facility.SSV has received $188,000 Grants from the Ethereum Foundation. In addition, it also received $10 million in financing from Coinbase, Lukka, and DCG.

(2) GPU graphics card mining

Mining machine vendors and miners in the original ecosystem may be inclined to look for new GPU graphics card mining projects and continue to use GPU graphics cards as mining machines with the core of computing power.

Take the recent GPU graphics card mining project Aleo as an example:

Aleo is a recent GPU graphics card mining project with high popularity. It uses zero-knowledge cryptography to build a private and highly scalable underlying blockchain. Aleo moves smart contract execution off-chain to support a variety of decentralized applications, making applications completely private and scalable. Aleo miners don’t need to rerun every transaction, just verify that it is correct. 

Aleo raised $28 million in Series A financing, led by a16z; and $200 million in Series B financing, led by Kora Management LP and SoftBank Vision Fund 2, with participation from Tiger Global, Sea Capital, Samsung Next, Slow Ventures, and a16z.This became the largest round of financing in the field of zero-knowledge proofs, with a valuation of $1.45 billion. At its most recent testnet event, it had more than 10,000 test nodes.

(3) ETC (Ethereum Classic) ecology

ETC is a forked currency of Ethereum hard forked after 1,920,000 blocks, and its function is very similar to that of Ethereum. It follows the original chain of Ethereum, and insists that the PoW consensus does not change to the PoS consensus. It has modified the Token supply policy with reference to the Bitcoin mining decrease and quantity cap mechanism.

Miners originally used for ETH can be directly used for ETC mining. In the week from March 16 to March 23 this quarter, ETC rose as high as 87.65%, and its imminent reduction in production and the expected shift in idle mining machines were the main reasons for this rise.

2. The ecological development of Ethereum

1. Review of the Ethereum cycle

The ETH white paper was born in 2013 and is the first blockchain smart contract platform. Its market value has gone through the cycles of 2013-2014, 2017-2018, 2020-2021, and 2021-present. Combined with the development history of the public chain, the ecological development history and ecological incentive methods of Ethereum are the best reference for other public chain ecosystems.

Development nodes and driving factors of Ethereum over the years:

End of 2013: The Ethereum white paper was born, and Ethereum became the first blockchain smart contract platform.

2014: The non-profit Ethereum Foundation is established.

2015: First market launch of Consensys, founded by Ethereum co-founder Joseph Lubin.

2016: Ethereum hard fork. The Ethereum development team is split.

2017: ICO boosted the market value of Ethereum to exceed 100 billion.

2018: The technical focus shifted to scaling issues, and the number of core protocol developers increased.

2019: Constantinople upgrade;

2020: Ethereum 2.0 mainnet deposit contract. 2021, new Ethereum high; London upgrade (including EIP-1559 proposal);

Q2 2022: Delivery of The Merge (combined) is expected in Q2 2022;

Ethereum ecological plate rotation and ecological support changes:

  • 2013 – 2014

In 2013, the crypto market reached its first peak, and this crypto cycle saw an exponential increase in developers and crypto startups, and Ethereum was one of them.

  • 2017 – 2018

At the end of 2015, Ethereum proposed the ERC20 standard, which eventually directly brought about the bull market caused by the issuance of lCO in 2017. In 2017, the issuance of smart contracts expanded the boundaries of blockchain technology, and blockchain entered the mainstream as the underlying technology. In this round of market value, the market value of Ethereum ranked second, which laid the foundation, and drove the valuation of other smart contract platforms and infrastructure sectors; within the ETH ecosystem, the number of DAPPs exploded, and the NFT, chain games, and forked currency sectors had obvious rising effects. ETH initially became the anchor target for the altcoin market.

  • 2020-2021

During this cycle, the total market capitalization of cryptocurrencies topped $3 trillion, and the transaction volume on the Ethereum network exceeded $3.6 trillion. Ethereum’s share of market capitalization has risen from 11% in early 2021 to around 20%. In this round of market, the rotation of sectors in the Ethereum ecosystem includes DeFi (DEX, AMM, liquidity mining, mortgage lending), NFT, Meme, GameFi, Metaverse, etc.

  • 2021-present

In the small cycle of the encryption market, in addition to the continuation of NFT and DeFi hotspots, the market’s reconstruction of the public chain’s valuation logic has pushed up the public chain’s rising market.

In the above process, the projects that appear in each cycle of the Ethereum ecosystem will undergo reshuffle in the bear market. Only 10%-20% of the projects survive and grow, becoming important blue-chip projects and common infrastructure in the next cycle.

The Ethereum Foundation has played a very good role in guiding and supporting the development of these high-quality projects, providing bonus support and helping incubation for community projects. The foundation will also be responsible for the community infrastructure, part of the employment of Ethereum’s main software, as well as the fees for developer and user experience, and market education, but the foundation does not control the technical direction of the network.

The Foundation has an annual budget of $30 million, and its Branch Ecosystem Support Program (ESP), which provides additional non-financial support, complements the Grants (self-help) program.

The Ethereum Foundation values ​​developer resources and is the host of the annual Developer Conference (DevCon).Through the publicity of the conference, fund support, hackathon activities, etc., a wave of new projects has appeared in a certain period of time. The community portals for the foundation include official websites, Reddit, blogs, Twitter, Youtube, Facebook and other channels. The Ethereum Reddit sub-forum is the most comprehensive Ethereum forum at present, and is the most active place for core developers.

The Ethereum ecosystem has always dominated developer activity. In GitHub, the number of repositories citing the word “Ethereum” is orders of magnitude higher than other blockchains. With the relative maturity of documentation, infrastructure, and other developer tools, development speed on Ethereum tends to be higher than on other chains.

Financial aid is the main means for the Ethereum Foundation to support the ecology, and can guide project developers to focus on specific areas. The theme of foundation support is closely related to the staged development of the Ethereum ecosystem. For example, it proposed a subsidy program in 2018 to incentivize developers to provide scaling solutions for Ethereum.

In 2018, the Ethereum Foundation funded emerging projects in the fields of DeFi and NFT, and the experimental project Uniswap received $100,000 in funding that year; in the bear market of 2019, the ecological objects of the Ethereum Foundation mainly lie in ETH2.0 client, ETH1.0 upgrade, Layer 2, zero-knowledge proof (privacy track); In November 2020, the Ethereum Foundation launched “Ethereum 2.0 Pledge Community Funding”; the above themes have become the next round of rising Hot spots in the cycle.

The later Ethereum Foundation eliminated the distinction between official internal teams and external contributors, and internal teams also needed to compete for resources.

The support of another institution, Consensys, also provides great support for the Ethereum ecosystem and industry resource aggregation. Its business mainly includes the development, consulting, training and services of the Ethereum basic platform and tools, serving as an enterprise-level technology provider and incubator. It has become an important part of the cooperation and interconnection between Ethereum and enterprise-level institutions.

Consensys also plays an important role in the Enterprise Ethereum Alliance (EEA), a global industry standard organization, which promotes the implementation of Ethereum-related technologies in the enterprise field. companies including Intel, JPMorgan, Microsoft and IC3. In terms of industrial structure, banks or financial companies account for about 24%, blockchain companies account for 5%, and crypto-native projects account for 17%. All of them have become high-quality resources in the Ethereum ecosystem.

2. Ethereum application layer ecology

The technical level of Ethereum adopts a layered architecture. From top to bottom are the application layer, the contract layer, and the protocol layer. The protocol layer includes basic components such as EVM virtual machine, block management, KV database, consensus algorithm, and P2P network. The smart contract layer builds the rich DApp ecosystem of Ethereum.

Cabin Report: Ethereum Ecological Development Report in the First Quarter of 2022

Various smart contracts in the Ethereum contract layer can be divided into 21 categories according to application scenarios:

Cabin Report: Ethereum Ecological Development Report in the First Quarter of 2022

(Data source: stateofthedapps)

DApps can be divided into multiple categories according to their functions and properties: games, finance, development, trading platforms, storage, wallets, governance, property, identity, media, NFT, DeFi, social, security, energy, health, insurance, storage.

At present, the trustlessness and transparency of DApps have achieved the greatest landing in the application scenario of DeFi (decentralized finance). In 2017, the largest market capitalization of the sector reached $6.291 billion, and then retreated to $998 million. After 2020, the DeFi sector has broken through several times, and the market value in August exceeded US$10 billion for the first time; in September 2021, the market value of DeFi reached a record high of US$143.953 billion. At present, DeFi has become the most successful application scenario on Ethereum. According to incomplete statistics, the annual revenue generated by DeFi applications is about 4.5 billion US dollars. Markets benefit from each other.

The NFT sector is another rapidly growing sector. Before 2017, the market value of the NFT sector was below $300 million for a long time. By 2021, the total market value of NFTs has exceeded $40 billion. In the first quarter of 2022, the average daily sales of NFTs on Ethereum is over US$100 million, and the transaction volume of NFTs based on Ethereum accounts for 90% of the total NFT transaction volume. In the several upward cycles of Ethereum, NFT and chain games are the sections that have exploded in the early days. After many upgrades, Enjin and Opensea have provided a huge impetus for the emergence of this rich ecology.

The new things that appear in each cycle are built on the basis of the previous technology and market, and the Top 20 projects will have more than 50% shuffles. More than 80% of DeFi blue-chip projects in this cycle are based on Ethereum. It is expected that the hot sectors in the next cycle will still include chain games, DeFi and social sectors.

3. Top 10 DAPPs in the ecosystem 

The top 10 Dapps currently used in the Ethereum ecosystem are:

Cabin Report: Ethereum Ecological Development Report in the First Quarter of 2022

Cabin Report: Ethereum Ecological Development Report in the First Quarter of 2022

(Data source: Dappradar)

The top 10 Dapps by users are:

Cabin Report: Ethereum Ecological Development Report in the First Quarter of 2022

Cabin Report: Ethereum Ecological Development Report in the First Quarter of 2022

(Data source: Dappradar)

Representative sample profiles :

  • NFT trading platform OpenSea

OpenSea is the largest NFT trading market and the most used DApp on Ethereum, mainly based on the Ethereum ERC-721 standard and Polygon (a layer 2 scaling solution for Ethereum). Opensea provides NFT generation, trading, auction and other services.

In 2018, OpenSea received a seed round from Y Combinator, and in November 2019, a $2.1 million round led by Animoca Brands. In March 2021, OpenSea secured $23 million in venture capital led by A16z. In July 2021, OpenSea announced another $100 million funding round. In September 2021, OpenSea released its own mobile apps for Android and iOS. In January 2022, OpenSea received $300 million in financing led by Paradigm and Coatue Management, with a valuation of $13.3 billion.

  • Decentralized trading platform Uniswap

The centralized trading platform Uniswap is one of the DeFi blue-chip projects on Ethereum. Uniswap has currently released 3 versions, the second and third versions are the second and third most popular DApps on the Ethereum network.Uniswap automatically trades between tokens on the Ethereum blockchain through smart contracts, creating the concept of an automated market maker (AMM).

Uniswap has received investments including Andreessen Horowitz, Paradigm Venture Capital, Union Square Ventures LLC and ParaFi. According to Coinmarketcap data, in the first quarter of 2022, the average daily trading volume of Uniswap was around $2 billion.

  • Polygon 

Polygon was born in 2017 and is currently positioned as a Layer 2 aggregator, providing a variety of Layer 2 solutions, including Optimistic Rollups, zkRollups, and Validium, among others. Polygon’s scaling solutions have been adopted by over 400 Dapps, over 350 million transactions, and over 1.5 million users.

In February 2022, Polygon raised $450 million in a strategic funding round led by Sequoia India.

  • Metamask

MetaMask is a software wallet based on the Ethereum blockchain that allows users to access their Ethereum wallet through a browser extension or mobile application. MetaMask was developed in 2016 by ConsenSys Software Inc., a blockchain software company focused on Ethereum-based tools and infrastructure, whose latest funding round has valued it at $6.5 billion.

As of 2022, MetaMask’s browser extension has over 30 million monthly active users.

  • 1inch Network

1inch Network is an NFT-enabled decentralized trading aggregation platform that seeks the optimal DEX exchange for liquidity providers to provide liquidity in multiple markets on three blockchain networks. 1inch Network’s protocol finds the best market price by splitting orders across multiple DEXs, increasing investors’ DeFi profitability through bots and other algorithms.

The early seed round of 1inch was invested by Binance Labs and Galaxy Digital, and the financing was US$2.8 million; the subsequent A round of financing. 1inch took in $12 million. Recently, its pre-investment valuation in its Series B financing has reached $2.25 billion.

4. L2 Ecological Overview

According to L2BEAT data, as of March 3, the total lock-up volume on Ethereum Layer 2 was $7.399 billion, which has exceeded most public chains. Layer 2 is another important ecosystem of Ethereum. In September 2021, the daily transaction processing volume of Ethereum L2 exceeds that of Bitcoin.

Layer 2 is a scaling solution designed to improve the efficiency of blockchain operations while reducing costs. Layer 2 has a separate execution layer and runs on top of L1 (Ethereum). Layer 2 massively reduces data processing on the blockchain by running computations off-chain. At present, the main scaling technologies are: state channel, side chain, Plasma, Optimistic Rollup, ZK Rollup, and Validium. The relatively mature Rollup is the mainstream expansion method.

After the outbreak of DeFi, many Layer 2 projects actively cooperated with DEX and DeFi projects to reduce transaction costs and improve user experience.

Cabin Report: Ethereum Ecological Development Report in the First Quarter of 2022

The L2Beat data highlights Rollups’ current market leadership, with the technology accounting for 70% of the total market value, with Arbitrum taking the top spot with $4.1 billion. The L2 application dYdX using ZK-Rollup accounted for the second with a market value of $986 million. With the adoption of Immutable X in the NFT market and Sorare in the NFT game, the adoption of Validium is also increasing.

Cabin Report: Ethereum Ecological Development Report in the First Quarter of 2022

Taking the Arbitrum ecosystem as an example, Arbitrum has an obvious first-mover advantage. 74 projects including Uniswap V3, Aave, Curve, and MakerDAO participated in the early launch, and the subsequent projects that joined its ecosystem grew faster, including GMX, Dopex, Tracer, Premia, In-ecosystem projects such as Umami Finance, Swapr, and Cap all have a lock-up volume of more than $20 million. Arbitrum’s network transaction volume is currently rising steadily.

3. The direction of foundation support

The recent support of the Ethereum Foundation for the market is mainly in the direction of Web 3.0 and the Metaverse.Mainly observe from recent activities, events, hackathons, and funded objects.

In Q2 last year, the Ethereum Foundation provided US$7.794 million in funding to 40 ecosystem projects, mainly in the direction of market education, zero-knowledge proof, Layer 2, etc.; in Q3 and Q4, the Ethereum Foundation funded a total of US$13.82 million. Items include DAO Drops, Zero MEV, L2BEAT, EthStaker, and more. During Q4, the Ethereum Foundation also launched a client incentive program. Eligible client teams include Besu, Erigon, Go-ethereum (geth), Lighthouse, Lodestar (50% stake), Nethermind, Nimbus, Prysm, Teku .

In early March 2022, the EF Ecosystem Support Program announced a $750,000 academic research grant program aimed at promoting Ethereum, blockchain, cryptography, zero-knowledge proofs, and more Academic research in related fields; in mid-March, the theme of the Ethereum Rio 2022 event was based on the Metaverse, digital currency and Web 3.0.

In the Ethereum Metaverse Hackathon BuildQuest that ended in March, the Metaverse game Parcels, the NFT monster card game Clash Of Cards, the NFT card game Ollie Verse, the NFT group chat platform NiftyGuilds, the NFT MMORPG game Shake Shock, the 90s style RPG game Shattered Realm, geolocation NFT collection game GeoNFT, 3D NFT generator NF3D, idle NFT destruction and carbon neutral application NFT bonfire, Metaverse Music space MetaverseMusic.

The upcoming hackathon of the Ethereum Foundation will be “ETH Amsterdam” held on April 22, 2022. The theme is to assist global developers and promote the development of the Web3 ecosystem with high-quality applications and projects. It is expected that the Web 3.0 ecosystem will receive more focus on.

4. Development Trends and Risks

For a long time, the Ethereum system has developed within the legal framework of Europe and the United States, and ecosystems such as DeFi, NFT, and USD stable coins have prospered. Ethereum has long assumed the responsibility of providing the most secure underlying technology for the entire crypto space. After The Merge, deflation data is expected to improve in the short term, bringing more confidence to the subsequent improvement of blockchain performance. In the short term, the next development focus of the Ethereum ecosystem will be the improvement of the underlying security and maturity under the PoS consensus mechanism, as well as the development of the next stage of sharding technology.

ETH acts as a trustless collateral asset and is a required underlying asset in DeFi protocols. As the leading settlement layer, Ethereum has a stable currency circulation value in the blockchain ecosystem. With the expansion of GameFi games, Metaverse, and Web3.0, and the support of Ethereum Layer 2 for large-scale user groups, communication between Ethereum and other ecosystems is extremely necessary.

This is also the idea that many other ecosystems hope to undertake the overflow of Ethereum: For example, in the L2 direction, the early accumulation of the Polygon ecology has largely benefited from the close cooperation with the Ethereum community, so that the top projects of Ethereum can be quickly deployed on the Polygon chain. superior.

The L1 public chain NEAR adopts a “pro-Ethereum” strategy: the compatibility of EVM reduces the difficulty of copying existing code; Solana and Algorand cooperate with stable currency providers through cross-chain bridges, which also reduces the difficulty of developers in their The threshold for starting development on the blockchain, the above-mentioned institutions have partnered with Circle to introduce USDC into its ecosystem.

At present, the development of the Ethereum blockchain is still active, but there are more and more successful cases such as BSC and Solana. With the further maturity of the security and performance of the cross-chain bridge, it is expected that the cross-chain bridge will become an important blockchain infrastructure.

In the L1 platform, the success of the public chain Flow is very representative. Compared with Ethereum, Flow meets some development needs of the NFT vertical application field faster. In addition to the application scenarios of Flow, there are still a large number of differentiated and vertical application scenarios in need, and the application layer of the blockchain market is ushering in a stage of high growth.

The switch of Ethereum to PoS mechanism means that the public chain is preparing for the outbreak of the application layer. After the DeFi financial field has become the landing scene of Ethereum, based on its vision of “world computer”, Ethereum needs to improve its performance to adapt to more application scenarios. It is expected that in the next 3 to 5 years, there will be more demand refinement and scenario segmentation in the application layer, and Ethereum will still compete with other chains for a long time on DAPP and developers.

The risks to be aware of are:

The progress of PoW to PoS is not as expected.

Under the PoS consensus mechanism, the identities of miners and token holders are merged, and after there is a lack of a game group (miner group) in the ecology, the impact on the ecology still needs time to verify.

Under the multi-chain trend, the share of total value locked (TVL) on the Ethereum network has been diluted.

For a long time, the centralization of the Ethereum ecosystem and Ethereum pledge nodes has been discussed by the community.

DeFi lending pools are liquidated in series, liquidated and run on liquidity risks. On March 12, 2020, the cryptocurrency market plummeted as a whole. As the underlying asset in the DeFi protocol, Ethereum faces the risk of a liquidity run when it faces short-term and rapid price fluctuations.

Ethereum founder Vitalik Buterin has a great personal influence on the Ethereum ecosystem. Personal remarks and positions may have an impact on the ecology.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/cabin-report-ethereum-ecological-development-report-in-the-first-quarter-of-2022/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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