Second-tier and multi-chain DeFi protocol funds flow into new highs, Ethereum is under pressure

Since October, due to the soaring gas fees of Ethereum, investors and developers are trying to avoid using the Ethereum network, and the multi-chain compatible DeFi platform has seen a record inflow of funds.

In fact, since 2014, high transaction fees have been a thorny issue for blockchain projects. At the time, Ethereum co-founder Vitalik Buterin said when referring to Bitcoin , “Internet currency ( BTC ) should not cost $0.05 per transaction, which is a bit absurd.” But I never thought that the problem of high ETH transfer fees is much more serious than that of BTC.


In November 2021, the simple act of authorizing transactions on Uniswap may cost up to $50 in ETH as a handling fee (depending on the operating period).


Although more than 320,000 ETHs were burned in the past 30 days (over 10,000 per day), it has recently entered a deflationary state for several consecutive days, which has formed a strong support for the price of ETH, but the high gas cost has also discouraged many ordinary players.

Even the second-tier solution that is known to help solve the fee problem cannot get rid of the high fees caused by network congestion, because new users join the Ethereum ecosystem every day.

Users migrate to low-cost networks

As Ethereum costs continue to remain high, more and more users connect their assets to low-cost networks that are compatible with EVM (Ethereum Virtual Machine). Dune Analytics data shows that since the beginning of October, the total locked value of bridge agreements has been on an upward trend.


As shown in the figure above, the Ronin Bridge has become one of the more popular protocols in the past month, thanks in large part to the migration of assets by Axie Infinity users to Ronin, a lower-cost platform.


(Picture) Top-ranked agreements in cumulative revenue in the past 7 days

As can be seen from the above figure, Axie Infinity has accumulated revenue of 32 million U.S. dollars in the past 7 days, second only to Ethereum (383 million U.S. dollars), ranking second. The third-ranked protocol is PancakeSwap ($7.6 million), the DeFi protocol on the Binance Smart Chain, and its transaction fees are much lower than Ethereum.

Most of the winners in TVL (lock-in total value) in the past week are agreements on Ethereum competing products, or agreements that provide multi-chain functions in the Ethereum sidechain environment.


(Picture) Popular projects with rising TVL in the past 7 days

For example,, Yield Yak, Benqi, SpookySwap, and Loopring are all multi-chain or Ethereum side-chain compatible networks, and their TVL has increased significantly in the past 7 days. In the short term, the high transaction cost phenomenon of the Ethereum network is expected to be difficult to change, and the trend of overflowing liquidity to other blockchains may continue.

In fact, since April this year, all public chains or side chains have taken advantage of the high cost of Ethereum to introduce a series of subsidy measures: In April 2021, Polygon launched a $100 million DeFi fund “DeFi For All Fund” and announced Provide support for DeFi projects in the next two to three years; in July, Terra announced the launch of a $150 million ecological fund to support applications in the Terra ecosystem; in August, the Avalanche Foundation announced that it would launch a $180 million reward program, AvalancheRush, Encourage more applications and assets to join the Avalanche DeFi ecosystem; Celo also announced the joint launch of a $100 million “DeFi for the People” project with Aave and Curve, which aims to realize the use of DeFi on the mobile side; August 30, smart contract platform Fantom announced the launch of an incentive plan, which will invest 370 million FTMs to better adjust the incentives between users, builders and the network.

Under such fierce competition, the fundamentals of the Ethereum network are still improving-compared with last year’s Q3 data, the Ethereum network’s revenue in Q3 this year reached US$1.96 billion, an increase of 511% (of which US$1.34 billion was implemented in early August) EIP 1559 was destroyed). The settlement value was 536.48 billion U.S. dollars, an increase of 398%. The number of daily active addresses reached 457,402, an increase of 24.1%. The hash rate reached 705663 GH/S, an increase of 181%. In Q3 this year, the inflation rate of ETH supply was 0.79% (1.11% in Q3 last year), a decrease of 29% year-on-year.


In addition, it is worth noting that the balance of ETH in the trading platform address has continued to decrease. As of early November this year, only 9 million ETH were traded on the trading platform. The reduction in pressure on the supply side has also played an important role in supporting the price.

(The above content represents the author’s personal views, and aims to learn more about the industry and market conditions, and does not make any investment reference or suggestions.)

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