Ethereum 2021 Q3 Quarterly Report: EIP1559, NFT, L2

Ethereum’s Q3 quarter report for 2021 is freshly released. Let’s take a look at what new changes have occurred in Q3 quarter compared with previous quarterly reports~

protocol

  • 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, the EIP 1559 implemented in early August burned $1.34 billion (68.2%).

  • The settlement value increased by 398%. This represents the amount of transactions settled on the Internet, which increased from US$107.75 billion in the third quarter of 2020 to US$536.48 billion in the third quarter of 2021, a year-on-year increase of 398%.

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

  • The hash rate has increased by 181%. The computing power dedicated to protecting 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, a year-on-year increase of 181%. 

  • The ETH issuance rate dropped by 29%. The expansion rate of ETH supply in 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%.

ecosystem

  • The total value locked in DeFi increased by 1,242%. The cumulative value of all assets deposited in the decentralized financial agreement increased from US$9.23 billion in the third quarter of 2020 to US$123.9 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. 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 1,158%. This highlights the amount of borrowed assets in decentralized currency markets such as Compound and Aave, which has grown from USD 1.27 billion in the third quarter of 2020 to USD 16.09 billion in the third quarter of 2021, with an annual growth rate of 1,158%.

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

Main highlights

EIP-1559

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

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

This mechanism is not to pay fees directly to miners or validators, but to destroy the basic fees and permanently remove ETH from the circulating supply. As mentioned above, since the implementation of the third quarter for a month, this has resulted in the burning of ETH worth 1.33 billion U.S. dollars.

NFT Mania

The NFT market activity in the quarter showed explosive growth.

Catalyzed by the increase in the price of Cryptopunks, Cryptopunks is the most valuable collectible based on the reserve price, with cumulative sales of more than $1 billion, and the entire NFT market has experienced parabolic growth.

Ethereum 2021 Q3 Quarterly Report: EIP1559, NFT, L2

Image source: The Block

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.

The valuations of other NFT collections have also risen sharply. A typical example is Fidenza from Art Blocks, a generative art collection that currently sells for more than $3.3 million on the market. Facts have proved that the explosion of NFT casting is the main reason for the increase in gasoline prices. During the launch of The Sevens series, the price soared to 7,300 gwei.

Facts have proved that the explosion of NFT minting is the main reason for the gas rise. During the launch of the NFT project The Sevens series, its peak was as high as 7,300 gwei.

With the explosive growth of sales indicators, the cultural relevance of NFTs in society has also continued to increase. Not only have celebrities such as Jay-Z, Odell Beckham Jr. and Stephen Curry blessed, companies have also begun to adopt this technology. Companies such as TikTok announced the launch of the NFT series on the Immutable X network, and Visa announced that it has purchased Cryptopunk.

Ethereum L2

The last major highlight of the third quarter was the significant progress made by L2. The most common is in the form of optimistic rollup or zk-Rollups. 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 the launch of Optimistic Ethereum ‘s Alpha in July and the launch of Arbitrum One’s mainnet alpha in August. Both networks are built on optimistic rollup and have experienced significant growth. For reference, the TVL on Optimism is currently $271 million, while Arbitrum holds assets worth $2.41 billion.

It is worth noting that although both networks claim to have deployed the main DeFi protocol, compared to Optimism, which must be whitelisted, Arbitrum can initiate and build new protocols without permission. Therefore, the adoption rate of Arbitrum is much higher than its main competitor Optimsim. This was initially catalyzed by the Arbinyan farm project that went online on September 13. As DeFi degens rushed into the agreement to seek to absorb high profits, the farm quickly accumulated USD 1.5 billion in value within 48 hours.

Ethereum 2021 Q3 Quarterly Report: EIP1559, NFT, L2

Picture source: L2Beat

Another important sign is the growth of dYdX . As a decentralized exchange that trades perpetual contracts based on StarkWare’s zk-rollup technology (StarkEx), the protocol has experienced rapid development after the launch of its governance token, which provides users with a series of Attractive 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

Ethereum clearly has an important catalyst in the fourth quarter of 2021 and 2022.

The most important thing is “merger”. The network will change the consensus mechanism from Proof of Work (PoW) to Proof of Stake (PoS). The upgrade will phase out energy-intensive hardware miners and replace them with validators. The network is protected by capital in the form of ETH rather than computing power. Therefore, this will enable Ethereum to significantly reduce its energy consumption and exclude miners from the network’s stakeholders.

In addition, the merger is expected to result in a significant reduction in the issuance of ETH in the future. When combined with the destruction of EIP-1559, this may lead to deflation of ETH, which is called a “super currency” by the community.

Another upcoming protocol-level catalyst appears in the form of shards, or changes the network architecture from a monolithic chain to 64 individual shards, each of which can process transactions. Although the timetable for the upgrade is not yet clear, sharding will be combined with the L2 solution to help Ethereum complete the transition to a modular blockchain.  

At the application layer, the catalyst for the continued growth of Ethereum’s DeFi comes from the rise of “DeFi 2.0”. A new wave of protocols emphasizing capital efficiency, liquidity management, and multi-network deployment are at the forefront of Ethereum’s innovation. These new protocols, as well as the increase in L2 adoption and development, should be combined to help new users join the Ethereum ecosystem.

There are also several non-DeFi catalysts on Ethereum. This includes the increasing adoption and financialization of NFTs, such as through the products provided by companies such as GameStop and agreements such as score art, and the use of encrypted games to attract new users to join.

This may be achieved through play to earn, such as the launch of new games like Illuvium on networks like Axie Infinity and Immutable X.

Summary of results

Ethereum 2021 Q3 Quarterly Report: EIP1559, NFT, L2

About Ethereum

Ethereum is an open source, decentralized blockchain network. Ethereum is a technology that is home to digital currencies, global payments and applications. The community has established a thriving digital economy, providing creators with new ways to make money online. It is open to everyone, no matter where you are-all you need is the Internet (taken from the Ethereum.org website).

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/ethereum-2021-q3-quarterly-report-eip1559-nft-l2/
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.

Leave a Reply