DeFi’s Multi-Chain Movement: Traffic Gathering to Head Applications, Ether Still the Main Front

Ether still maintains a dominant position in the multi-chain competition, not only DeFi has come online with Ether versions, but also doing many versions with significantly higher lockups on Ether than other chains.

DeFi's Multi-Chain Movement: Traffic Gathering to Head Applications, Ether Still the Main Front

At this time last year, the DeFi ecology on Ether began to explode. According to DeBank’s data, the total net locked position of DeFi protocol on Ether surged from $848 million at that time (June 1, 2020) to $46.975 billion currently (June 9, 2021), which is equivalent to a 55-fold increase. This has directly driven on-chain transactions on Ether towards activity. According to glassnode, the number of single-day transactions on the Etherchain soared from 913,900 at the time to 1,150,900 currently, an increase of about 25.93%, with a maximum increase of about 78.63%.

However, as DeFi has simultaneously brought about a surge in demand for on-chain transactions, ethereum transaction fees have also gone up. According to glassnode’s data, the average fee for a single transaction on Ether rose from 0.0019 ETH at that time to 0.0023 ETH at present, reaching a peak of 0.032 ETH at one time and exceeding 0.01 ETH for many days.

The high fees have become the main crux of the underlying network and the upper ecology constraining each other’s development, but the reform of fees by Ethernet is not completed overnight, which makes many projects start to lay out protocols on the Layer 2 of Ethernet and other public chains, and the era of multiple chains of DeFi has been kicked off in a big way.

After analyzing the transaction data of 8 public chains, Polygon, xDai, Zkrollup, BSC, Solana, Fantom, Heco and Avalanche, with a total of 40 DeFi protocols [1], PAData found that.

1) DeFi traffic aggregates to the head. First, horizontally, different chains are seriously differentiated, such as the average lock volume, average transaction volume and average number of addresses of BSC and Polygon have significantly better comprehensive performance than other chains; second, vertically, different protocols within the same chain are seriously differentiated, such as PancakeSwap and Venus on BSC, QuickSwap on Polygon, Heco MDEX has significantly higher lock volume, transaction volume and address count than other applications on the same chain.

2) Several DeFi protocols have already achieved multi-chain deployment, among which Sushiswap has the fastest multi-chain process with 6 public chains/Layer 2. However, Ethernet still maintains the dominant position in the multi-chain competition, not only DeFi has launched the Ethernet version, but also the lock volume on Ethernet is significantly higher than other chains in many versions.

3) It is not yet sufficiently clear that multi-chain deployments will disperse traffic on Ether, but among the 8 projects in the statistical scope, 4 projects (AAVE, DODO, Sushiswap, WePiggy) have recently seen a slight decrease in the share of lock volume on Ether compared to 7 days ago, and among the 4 projects that can fully compare data from 30 days ago, 3 projects (AAVE, QIAN DODO) on Ether have all seen a more significant drop in lock volume. More protocols and longer data validation are needed on this issue.

4) A larger increase in DeFi lock volume on the chain does not absolutely mean a higher coin price increase.

  1. Significant divergence in lock volume across chains, with an average of 1,634 daily active addresses

DeFi traffic is gathering to the head. On the one hand, among many public chains/Layer 2 building DeFi ecology, the average data performance of BSC, Polygon and Heco is significantly better than others, on the other hand, the data performance of head applications in these chains is significantly better than others.

In terms of static lockups, the average (median [2]) lockup for the DeFi protocol on BSC reached $1.041 billion on June 8, followed by Heco with an average lockup of about $566 million, Polygon with an average lockup of about $204 million, and zkrollup with an average lockup of about $151 million. The average lock-up for DeFi agreements on other chains is less than $0.5 billion.

Of note, PancakeSwap, Venus, MDEX, Ellipsis on BSC, MDEX on Heco, and QuickSwap on Polygon all have significantly higher static lockups than other protocols on the same chain, with the highest being PancakeSwap at $7.268 billion. But otherwise, most of the DeFi protocols on these chains have lockups below $60 million.

Looking at the static trading volume of DEX or the static lending volume of debit and credit protocols, the static trading volume of MDEX on Heco reached about $2.2 billion on June 8, which is much higher than other protocols, and is not included in the analysis here in order to reflect the full picture more accurately. Other than that, the average trading volume of DEX on BSC and Polygon is higher, reaching about $52 million and $47 million respectively. Among them, the transaction volume of PancakeSwap and QuickSwap reached about $736 million and $231 million, respectively, except for most of the DEX transactions on other chains, which are in the million dollar range.

There is less data on the currently included lending agreements, but from the borrowing volume of the only two lending agreements on BSC, Venus is about $1.249 billion, much higher than WePiggy.

In terms of static address count, DeFi on Heco has an average of 25,600 addresses, while most of the other chains have an average of about 1,000-2,000 addresses, and the lowest, xDai, has an average of only 424 addresses. In terms of individual protocols, the highest number of addresses is PancakeSwap with about 250,100, and there are several other protocols with more than 10,000 addresses, while protocols with fewer addresses have mostly less than 500 addresses.

As can be seen, the number of addresses for DeFi protocols is likewise greatly divergent. It should be emphasized that neither too high nor too low address count is ideal, too high may mean that the woolly party squeezes the demand of ordinary users, too low may mean that the actual users are too small to form a generally liquid trading market.

  1. Several projects have much higher lockups on Ether than other chains, and some projects are diverted from lockups on Ether

In the scope of statistics, the multi-chain projects with more comprehensive data include 1inch, AAVE, Beefy Finance, Cream, Curve, DODO, MDEX, ParaSwap, QIAN, Sushiswap and WePiggy. In addition, most of the other multi-chain projects have only 2 to 3 chains, most of which will be on Ether. version.

In terms of the static lock volume of multi-chain DeFi projects, the protocols that are laid out on Ether have significantly higher lock volume on Ether than other chains. AAVE, for example, has a locked position on Ether of about $8.265 billion, 2.4 times more than on Polygon. Curve, which has a more significant gap, has about 10 times the lockup on Ether than on Polygon and about 8,000 times that on Fantom. However, there is no advantage in lockup volume on Ether if the initial underlying layer is a non-Ethernet protocol, such as WePiggy and QIAN.

Although Ether has a significant first-mover advantage in multi-chain competition, will the widespread deployment of other chains affect Ether’s dominance? On the premise that the overall lock volume has shown some retreat recently, PAData analyzed the change of lock volume and its percentage change of 8 projects on different chains.

It can be found that in the last 7 days, except Curve and Cream, the lock volume of other multi-chain DeFi projects in the observed range on Ether has decreased, and the drop in lock volume of AAVE and DODO on Ether exceeds that of other chains, with the drop in lock volume of the former being 3.2 percentage points higher than the drop in lock volume of other chains, and the difference of the latter being nearly 30 percentage points.

If we extend the time period to the last 30 days, then AAVE, Sushiswap, DODO and QIAN all have higher lock volume decreases on Ether than other chains. It is also worth noting that AAVE and Sushiswap have seen huge increases in lock volume on Polygon in the last 30 days.

The relative change in the share of lock volume across chains is perhaps more responsive to this issue than the absolute lock volume change. Among the eight projects in the statistical scope, four projects – AAVE, DODO, Sushiswap and WePiggy – have recently seen their lock volume share on Ether drop slightly compared to seven days ago, by 0.72 percentage points, 5.18 percentage points, 0.91 percentage points and 0.60 percentage points respectively. On the other hand, three projects, Cream, Curve and QIAN, have recently increased their share of locked positions in Ether compared to 7 days ago, with Curve showing the most significant growth of about 4.05 percentage points.

Among the four projects that can be completely compared with the data 30 days ago, AAVE, QIAN and DODO all have a more obvious decrease in the share of locked positions on Ether, with the current share of locked positions decreasing by 14.85 percentage points, 10.17 percentage points and 1.02 percentage points respectively compared with 30 days ago.

Although these individual cases reflect to a certain extent the phenomenon that traffic on Ether may be diverted, however, more data is needed to verify about this issue. Considering the possible idiosyncrasies of both the intercepted static data and the sampling sample, PAData believes that it is not yet sufficiently clear that multi-chain deployments will disperse traffic on Ether.

  1. Polygon lock volume has increased tremendously so far this year, but a larger lock volume increase does not mean a larger coin price increase

In a way, DeFi multi-chain competition was opened by Ether itself, and if Ether cannot continue to optimize the on-chain transaction experience through reforms, then multi-chain competition is likely to become white-hot. At present, the windfall of this track has clearly formed.

Although the current lock-up volume of DeFi on Ether is still far higher than other chains, reaching $48.55 billion, the next echelon of BSC, Heco and Polygon are only $8.79 billion, $6.78 billion and $5.47 billion respectively, equivalent to only 18.11%, 13.96% and 11.27% of the size of DeFi on Ether, respectively.

However, in terms of growth rate, the rise in the volume of Ether DeFi locks this year is only 167.96%, much lower than 803.88% in the second half of last year. While the increase of DeFi lock volume on other chains this year is above 2000%, much higher than the second half of last year [3]. Among them, Polygon, which has the highest increase in lock volume this year, even reached 3621990.01%, equivalent to a 36,000-fold increase, an amazing growth.

The boom of upper layer applications that has been proven by the development path of Ether will drive the surge of native tokens, which has also been reflected in the development path of other chains this year. With the growth of DeFi lock-in, the coin prices of MATIC, SOL, FTM and other native tokens have also pulled up rapidly, with the three rising 8313.19%, 2412.50% and 1666.13% respectively so far this year. And BNB, AVAX and HT are also up over 200%. Combined with an average daily amplitude of less than 4%, these tokens have all come out of a strong one-sided upward trend this year.

However, it should be noted that, on the one hand, the coin price increase is basically proportional to the average daily amplitude of the coin price, i.e. the higher the increase, the greater the amplitude, such as MATIC, whose average daily amplitude reached 3.64% this year; on the other hand, the coin price increase is not exactly positively correlated with the increase in DeFi’s locked position, i.e. the faster the DeFi’s locked position grows, it does not mean the higher the coin price increase of the native token.

Data Notes.

[1] A total of 40 projects were selected by PAData based on the high and low lock volume of DeFi projects on each chain, as well as covering DEX and lending protocols as much as possible, but each analysis category will further circle the sub-sample set based on data completeness.

[2] Considering that individual items have significantly higher data than others, which would result in arithmetic averages that do not accurately reflect the overall picture, all values in this paper refer to the median unless otherwise noted.

[3] According to the time when the data was included by the third-party data website, the starting time of the lock volume of each chain in the second half of last year varied. Considering that a period of cold start time is needed after the launch, in order to avoid data anomalies, the lock volume on the first day of the month following the launch was taken as the initial lock volume in the second half of last year in this statistics, and the statistics of this year’s data also refer to this principle. For example, BSC lock volume is calculated from October last year, Polygon lock volume is calculated from November last year, xDai lock volume is calculated from October last year, and Fantom lock volume is calculated from March this year.

Posted by:CoinYuppie,Reprinted with attribution to:
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