Ethereum Status: Review Ethereum 2022 Q1

This article will review the financial results of Ethereum, the world’s leading smart contract platform, for the first quarter ended March 31, 2022.

01. Key Results

The data compares Ethereum’s performance in Q1 2021 and Q1 2022.

1. Ethereum Protocol

Ethereum Status: Review Ethereum 2022 Q1

Above: Ethereum network revenue (total revenue) and fee destruction (protocol revenue), source: Token Terminal

  • Ethereum network revenue grew 46% from $1.6 billion in Q1 2021 to $2.4 billion in Q1 2022 . This measures the value of transaction fees paid in ETH by users of the Ethereum network . Of this, $2.1 billion (87%) removed ETH from the circulating supply through the burn mechanism implemented by EIP-1559, which was activated in August 2021.

     

Ethereum Status: Review Ethereum 2022 Q1

Above: ETH circulation supply growth, source: Etherscan

  • ETH inflation fell 54% from 1.10% in Q1 2021 to 0.51% in Q1 2022 . This metric tracks the net change in ETH supply . New ETH is issued via block rewards (block rewards are paid to miners for confirming network transactions), and additional ETH is destroyed via EIP-1559 mentioned above.

Ethereum Status: Review Ethereum 2022 Q1

Above: Changes in the number of daily active addresses on Ethereum. Source: Etherscan

  • Average daily active addresses rose from 507,662 in Q1 2021 to 529,018 in Q1 2022, an increase of 4% . This metric tracks the average number of addresses interacting with the Ethereum network on a daily basis throughout the quarter.

Ethereum Status: Review Ethereum 2022 Q1

Above: Ethereum network transaction average fee (USD), source: Etherscan

  • The average transaction fee on the Ethereum network fell from $14.93 in Q1 2021 to $2.98 in Q1 2022, a drop of 80% . This metric measures the average fee users pay to the Ethereum block space to have their transactions confirmed.

Ethereum Status: Review Ethereum 2022 Q1

Above: The growth trend of the cumulative amount of pledged ETH. Data: Dune Analytics

  • The total amount of pledged ETH increased from 5.2 million in the first quarter of 2021 to 10.9 million in the first quarter of 2022, an increase of 111% . This metric measures the amount of ETH staked on the Beacon Chain before Ethereum transitioned from using a proof-of-work (PoW) consensus mechanism to proof-of-stake (PoS).About 9.2% of the total ETH supply has been staked in the expected “merger.”

2. DeFi ecosystem

Ethereum Status: Review Ethereum 2022 Q1

Above: Changes in TVL (Total Locked Value) in the Ethereum DeFi protocol. Source: DeFi Llama

  • The TVL (Total Locked Value) of Ethereum DeFi protocols has grown from $49.1 billion in the first quarter of 2021 to $89.5 billion in the first quarter of 2022, an increase of 82% . This metric measures the value of assets stored in Ethereum-based DeFi protocols such as decentralized exchanges, money markets, and options vaults.

Ethereum Status: Review Ethereum 2022 Q1

Above: total stablecoin supply growth, source: The Block

  • The total circulating supply of stablecoins increased by 188%, from $42.3 billion in Q1 2021 to $122.1 billion in Q1 2022 . This metric measures the value of centralized & decentralized stablecoins that are natively issued or bridged to Ethereum. Stablecoins counted include USDC, USDT, DAI, FEI, FRAX, MIM, UST, LUSD, HUSD, PAX, TUSD, sUSD, BUSD.

Note: The above chart includes stablecoins on all blockchains, not just Ethereum, as data for this metric must be obtained from multiple sources. Still, it largely represents growth for the industry. )

Ethereum Status: Review Ethereum 2022 Q1

Above: Changes in the trading volume of Ethereum-based spot and perpetual contract DEXs. Source: Token Terminal

  • Volume on spot exchanges rose 667% to $3.9 trillion from $513.4 billion, and volume on perpetual contracts rose 2704% from $7.4 billion to $209.1 billion . They track the trading volume of DEX exchanges on the Ethereum mainnet and perpetual contract futures exchanges on Ethereum L2, respectively.

Note: The above chart does not include GMX, and its trading volume has been included in the calculation of the perpetual contract DEX trading volume in the chart. The relevant data can be found here:

https://stats.gmx.io/

3. NFT Ecosystem

Ethereum Status: Review Ethereum 2022 Q1

Above: NFT market volume. Source: Dune Analytics

  • The NFT market volume surged by 19,290%, from $606.3 million in the first quarter of 2021 to $116.4 billion in the first quarter of 2022 . This is a volume tracking of OpenSea and LooksRare, the two largest general-purpose NFT marketplaces. A total of 226,176 unique wallets bought or sold NFTs in Q1 2022.

Ethereum Status: Review Ethereum 2022 Q1

Above: Growth in the cumulative number of wallets holding NFTs, source: Dune Analytics

  • The number of unique wallets holding NFTs increased from 9,813.15 million in Q1 2021 to 3.98 million in Q1 2022, an increase of 306% . This metric measures the number of wallet addresses holding ERC-721 tokens, the token standard used to issue NFTs, at a point in time.

Ethereum Status: Review Ethereum 2022 Q1

Above: BAYC and CryptoPunks floor price changes. Source: Dune Analytics

  • The base price of CryptoPunks increased by 513%, from $17.42 in Q1 2021 to 106.87 ETH in Q1 2022 . This metric tracks the most recent minimum selling price for CryptoPunks. Although BAYC (Boring Ape Yacht Club) was launched in the second quarter of 2021, as the most expensive profile picture NFT series, BAYC will have a base price of 108.93 ETH at the end of the first quarter of 2022, which is worth about 35.1 ETH at the current price Ten thousand U.S. dollars.

4. L2 Ecosystem

Ethereum Status: Review Ethereum 2022 Q1

Above: TVL (Total Locked Value) in the Ethereum L2s network, source: L2 Beat

  • The TVL of the Ethereum L2s network increased from $686.9 million in Q1 2021 to $7.3 billion in Q1 2022, an increase of 964% . This metric measures the total value locked in Ethereum L2s scalability schemes such as Optimistic Rollups, ZK-Rollups, and the Validiums network. At press time, over $23 billion in assets (including $4.2 billion in ETH) have been bridged from the Ethereum network into these L2s and other L1 blockchains.

Ethereum Status: Review Ethereum 2022 Q1

Above: Monthly active addresses for the Optimism network. Source: Dune Analytics

  • The Optimism network has an average monthly active address count of 31,100, while the Arbitrum networkhas a cumulative unique address count of 483,077 . This metric measures the average number of addresses that made transactions on the Optimism network (Optimism is an Ethereum-based Optimistic Rollup) per month during the quarter, and the total number of unique addresses on the Arbitrum network (Arbitrum is also an Ethereum-based Optimistic Rollup) Rollup). Given that both L2 networks were launched in Q3 2021 and the limited data available on both networks, we cannot make year-over-year comparisons.

Ethereum Status: Review Ethereum 2022 Q1

Above: Arbitrum daily network revenue. Source: Cryptofees.info

  • Arbitrum network revenue was $9.4 million, while Optimistim network revenue was $5.7 million . This measures the transaction fees that users pay with ETH on the two L2 networks, Arbitrum and Optimistim, respectively.

     

02. Ecosystem Essentials

1. Stable coins, Curve wars, and bribery

During the first quarter of 2022, Ethereum has a number of exciting developments, perhaps the most important of which isthe continued growth of stablecoins . As previously mentioned, the circulating supply of stablecoins on the Ethereum network increased by more than 188% year-over-year to more than $122 billion . In particular, algorithmicstablecoins such as FRAX and UST have seen huge growth relative to their competitors. This growth suggests that despite market weakness, capital may not be fleeing the ethereum economy on a massive scale.

Ethereum Status: Review Ethereum 2022 Q1

Above: 6-month growth rate of stablecoins, source: Coingecko & Bankless

A more notable secondary effect of the stablecoin industry boom is the continued development of the ” Curve Wars .”This is a battle between some of the major stablecoin DAOs to build liquidity on Curve (DeFi’s largest decentralized exchange) . In Q1 2022, as these stablecoin DAOs increase their holdings of CVX (Convex Finance’s native token) (as the Convex protocol controls a substantial supply of CRV (Curve’s governance token) , its holdings exceed 73% of the total CRV, so control of Convex is equivalent to control of Curve), this “conflict” takes center stage.

Ethereum Status: Review Ethereum 2022 Q1

Above: The amount of CVX tokens held by DAOs. Source: DAOCVX.com

To match their purchase of CVX, these DAOs paid more than $89.2 million in “bribes” to CVX holders who locked their CVX tokens to secure their votes to direct CRV token rewards to Curve Different liquidity pools . With annualized returns on CVX bribes exceeding 40%, the first quarter of 2022 solidified the notion that these bribe payments could be a significant source of cash flow for holders of strategically important governance tokens .

Additionally, Q1 2022 saw a number of protocols (such as Ribbon Finance, Balancer, Yearn, etc.) propose or implement aswitch to a voting custodial token model , hoping to replicate the success of Curve.

Ethereum Status: Review Ethereum 2022 Q1

Above: Value of bribes paid to CVX holders (blue bar) and revenue per CVX (yellow line). Source: Llama Airforce

Several exciting agreements were also announced this quarter:

  • Alchemix V2 : This is the second iteration of Alchemix, the self-paying loan DeFi lending protocol, including support for a large number of new collateral assets and yield-generating strategies.
  • Aave V3 : This is the third version of Aave, a multi-chain deployed DeFi currency market, with a new cross-chain lending portal (Portal), a function that enables cross-chain minting and burning of tokens.
  • Syndicate Protocol : Allows the creation of on-chain investment clubs.

2. NFTs seem to be heating up

The NFT ecosystem on Ethereum saw several major changes in the first quarter of 2022, thanks to the explosive growth momentum of the previous two quarters.

Ethereum Status: Review Ethereum 2022 Q1

Above: Revenue growth for LooksRare, an NFT marketplace. Source: Token Terminal

One of them is LooksRare , a new general- purpose NFT market that launched in January 2022 and a competitor to OpenSea, which had previously almost completely dominated the space. LooksRare conducted a vampire-like attack on this competitor by airdropping its native governance token, LOOKS, to OpenSea users.

The NFT marketplace also allows LOOKS token holders to stake their tokens for additional token issuance and ETH-based fee income generated by the platform. While this has led to allegations of laundering transactions to earn these rewards, LooksRare achieved over $22.1 billion in transaction volume in the first quarter of 2022, generating over $444 million in revenue for stakers. Even though LOOKS is 79% below its all-time high at the time of writing, LooksRare appears to have transformed the industry from an oligopoly to a duopoly.

Another major development in the first quarter of 2022 is the development of Yuga Labs as an ecosystem powerhouse.Yuga Labs’ Boring Ape Yacht Club (BAYC) is now a celebrity favorite, and the collection is now the best value NFT avatar (PFP) collectible in terms of BAYC’s base price. Yuga has also made several major moves to solidify its position in the emerging space of the Ethereum economy.

Ethereum Status: Review Ethereum 2022 Q1

Above: The distribution of APE tokens airdropped by Yuga Labs to BAYC and MAYC holders. Source: Apecoin.com

First, Yuga Labs acquired the intellectual property of Larva Labs’ NFT series, including Cryptopunks and Meebits. Soon after, Yuga Labs announced the release of the Apecoin (APE) token, with a portion of the token supply distributed to BAYC holders, with some airdrops in the six figures.

The price of APE, currently at an all-time high, with a fully diluted valuation of over $20 billion, will serve as a governance and utility token in the ecosystem of Yuga Labs’ various Metaverse projects , such as the recently released game Otherside. These developments have made Yuga Labs a blue-chip brand and Metaverse media giant in the NFT ecosystem.

3. L2 heats up

Ethereum’s thriving L2 (Layer 2) ecosystem continues to grow in Q1 2022.

As previously mentioned, TVL locked in the Ethereum L2 network increased 964% year over year to over $7.3 billion by the end of Q1 2022. To sum up, how to rank the TVL of these Ethereum L2 networks with the other L1 networks, the TVL of these Ethereum L2 networks is ranked fifth. Arbitrum leads the Ethereum L2 network with over $2.1 billion in TVL .

Ethereum Status: Review Ethereum 2022 Q1

Above: Arbitrum network TVL changes. Source: DeFi Llama

Among the many L2 network native applications, the most attractive one is from the derivatives industry . Derivatives applications like dYdX , Perpetual Protocol , and GMX have become three of the top five decentralized perpetual swap exchanges with the largest trading volume , thanks to the scalability advantages offered by the L2 network , which are listed on StarkEx, Optimism and Arbitrum.

Ethereum Status: Review Ethereum 2022 Q1

Above: Changes in the TVL of the decentralized options exchange Dopex. Source: DeFi Llama

Like perpetual contracts, another type of derivative, options , is starting to gain meaningful traction on the L2 network.Two decentralized options exchanges , Dopex  and Lyra , run on Optimism and Arbitrum respectively. Together, the two apps have more than $119 million in deposits, and both are among the top five most-used apps on their respective L2 networks.

Ethereum Status: Review Ethereum 2022 Q1

Above: Changes in the TVL of Lyra, a decentralized options exchange. Source: DeFi Llama

These derivatives protocols, along with other L2-native projects such as Tracer DAO, Jones DAO, and Vesta Finance, appear poised for further growth on the back of several favorable factors, such as DeFi-native investors hedging and hedging amid volatile market conditions. There is an increased desire to find alternative revenue streams, as well as the upcoming native tokens of their respective Rollups networks (more on this below).

03. Outlook

While the market faces a maelstrom of macro headwinds, there are several catalysts on the horizon for Ethereum that appear to strengthen its fundamentals, competitive positioning, and token economics.

1. to combine, to combine, to combine

On top of that is the upcoming PoW to PoS merger, a transition that will bring many major changes to the Ethereum network and ETH assets. As far as the Ethereum network is concerned, the merger will reduce the energy consumption of the Ethereum blockchain by an order of magnitude , as the energy consumption of PoS is much lower than that of PoW.This helps reduce Ethereum’s environmental impact and increases its appeal to traditional institutional investors who tend to consider ESG (environmental, social and governance) requirements when making asset allocation decisions.

Ethereum Status: Review Ethereum 2022 Q1

Above: Estimated increase in ETH issuance after the merger. Source: Ultrasound.money

The merger will also have a significant impact on ETH’s supply schedule and value proposition . While EIP-1559 has brought ETH inflation down considerably, the transition to PoS seems likely to bring about a deflationary ETH. Based on the current amount of ETH staked, and the gas consumption since the activation of EIP-1559, ETH is expected to deflate, with an estimated issuance rate of -2.1%.

While the staked ETH is currently in a non-transferable state and will be gradually unlocked and made liquid after the merger, this massive supply shock could have a long-term Bitcoin halving-like effect as it significantly reduces the Selling pressure on ETH. The merger may also establish the pledge rate of ETH, which is expected to reach as high as 10%+ risk-free pledge rate after the merger, further increasing the attractiveness of ETH as a cash flow productive asset and internet-native bond.

In addition to changing Ethereum’s ESG profile and ETH assets, the merger will help pave the way for Ethereum’s future scalability upgrades, such as sharding and danksharding . This will allow Ethereum to better meet the growing demand for transactions in its economy.

2. Rollups launches native Token

Another major catalyst for Ethereum’s growth is the launch of the L2 token . While L2 networks have gained meaningful traction without native tokens or network-wide incentive programs, the rollout of governance tokens for these L2 networks seems set to fuel their growth and lead to the long-awaited ” L2 summer “.

The first dominoes in this regard fell this week on April 26th, when Optimism announced that it would launch and use its native token, OP, in the network governance system, and most likely, this will incentivize its emerging and rapidly growing activity in the DeFi ecosystem.

Ethereum Status: Review Ethereum 2022 Q1

Above: Distribution of OP tokens. Source: Optimism Docs

As we have seen with the explosive growth of ecosystems with incentives such as Avalanche, Polygon, and Fantom, this strategy has been very effective in steering network usage, liquidity, and developer activity. If this mechanism were implemented, Optimism would reasonably have experienced a similar level of growth.

In addition to Optimism , two other general-purpose Rollups networks, Arbitrum and ZK Sync ( Optimistic Rollup and ZK Rollup, respectively) are prime candidates to drive similar network usage growth by launching native tokens. While Arbitrum has yet to confirm if they will launch a native token, ZK Sync has revealed that they will have a token for the decentralization of their Rollup sequencer (the Rollup sequencer is responsible for batching transactions from the Rollup L2 network to L1) online).

The launch and incentive program of these Rollups native tokens should be an important catalyst for Ethereum to regain market share (currently Ethereum’s total DeFi TVL share in the sector has dropped to 51% from 80% in the same period last year), and increase Everyday users participate in the accessibility of this decentralized economy.

04. Comparison table of 2021 Q1 and 2022 Q1

1. Ethereum Protocol

Ethereum Status: Review Ethereum 2022 Q1

2. DeFi ecosystem

Ethereum Status: Review Ethereum 2022 Q1

3. NFT Ecosystem

Ethereum Status: Review Ethereum 2022 Q1

4. L2 Ecosystem

Ethereum Status: Review Ethereum 2022 Q1

This article was not published by Ethereum or the Ethereum Foundation.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/ethereum-status-review-ethereum-2022-q1/
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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