Things have really started to rev up for the Ethereum ecosystem this year, and it’s not hard to see why: the rising project’s momentum is turning into traction.
Indeed, the reigning smart contract platform’s developers are making great headway on the coming rollout of the major “Ethereum 2.0” upgrade, multiple talented teams are on the verge of breakout Layer 2 scaling solutions, and users are increasingly rushing to use Ethereum dApps for a wide variety of promising, and even unprecedented, activities.
Between DeFi, DEXs, DAOs, and NFTs, 2020 thus far has easily been a de facto “Year of Ethereum” in the cryptoeconomy. That said, let’s explore some key dynamics already pointing the way to a possible “Decade of Ethereum” in the years ahead.
Ethereum Settling More Value Than Bitcoin
At the beginning of June 2020, daily transaction fees on Ethereum overtook daily transaction fees on Bitcoin. Ethereum’s held the lead on that metric ever since.
That reality clearly indicates that demand to use Ethereum is on the rise. But there’s another metric that’s even more telling regarding how Ethereum is gaining on Bitcoin, and it’s daily settlement value.
Indeed, earlier in July cryptoeconomy data firm Messari noted how Ethereum has recently overtaken Bitcoin when it comes to daily settlement value, i.e. the total daily USD value of facilitated transactions atop a given blockchain. Simply put, Ethereum is now handling significantly more value than Bitcoin is, and that could be a self-reinforcing dynamic going forward. Ethereum has the most action so that’s where the most action is poised to go, so to speak.
Daily Active Users Boom
With so many things going on around the Ethereum ecosystem this year, there’s been no shortage of interesting activities to participate in. The variety of promising possibilities has accordingly led to a surge in active Ethereum users lately.
For example, active Ethereum addresses — addresses that send or receive ETH or ERC20 tokens on a daily basis — have doubled year-to-date (YTD) as of July. The number of such addresses is currently just shy of 600,000. Yet at this point, 1 million and beyond seems all but inevitable.
Smart Contract Calls Booming, Too
Ethereum smart contract activity is starting to explode, and there’s no indication the bustle is going to slow down any time soon.
Last week, crypto data provider Coin Metrics highlighted how on July 25th there had been over 3.1 million Ethereum contract calls, a new record for organic activity the blockchain. There’s still plenty of room for growth, to be sure, but supporting billions of dollars’ worth of activity is a great and legitimizing start.
DEX Volume at Unprecedented Levels
Decentralized exchange projects like Uniswap, 1inch, and Balancer are some of Ethereum’s brightest early stars, and the proof is in the numbers.
That’s because in July 2020, Ethereum’s rising DEX projects collectively powered over $4 billion in trades — all done permissionlessly, non-custodially, and 24/7. That $4 billion mark is a new monthly record for DEX volume, but with these exchanges just starting to take flight, this undoubtedly won’t be the last time that record’s extended.
Ethereum-Based Assets Shining
Notably, as of July Ethereum-based assets are the best-performing asset class so far in 2020 per data from Messari.
According to the firm, right now the average YTD gain for the nearly 180 Ethereum-backed assets considered was 130%, while 10 of those assets had YTD gains surpassing 500%.
The influx of buy pressure in recent months comes as governance tokens in Ethereum’s decentralized finance (DeFi) sector like COMP, LEND, and SNX have been exploding in popularity. These tokens give users a seat at the DeFi table, as it were, while DeFi has been blooming.
DeFi Hits $4 Billion TVL
Popularized by DeFi Pulse, total value locked (TVL) is a metric that tracks the total USD value of assets locked in DeFi protocols. For folks from traditional finance, we can think of TVL like an assets under management (AUM) measurement.
The good news for Ethereum, then? Its DeFi sector is having something of a breakout year, as the arena collectively just hit the $4 billion TVL milestone this summer. That’s still small, relatively speaking, but what’s been impressive is the rate of growth: the $1 billion TVL mark was first crossed back in January 2020, meaning the DeFi TVL has quadrupled YTD.
And things are only beginning, as there’s still much more room for growth. Messari researcher Ryan Watkins recently highlighted how the top DeFi projects combined are still worth less than either Bitcoin Cash and XRP alone. It’s not that BCH and XRP don’t have anything to offer, rather they don’t offer the range of productive use cases that DeFi projects do, and thus they lack a certain magnetism. Look for both the DeFi TVL and the market cap of DeFi projects to climb in the years ahead accordingly.
The entirety of what we call DeFi is worth less than both XRP and Bitcoin Cash alone.
Despite its rerating over the past couple months, DeFi is still extremely small in perspective.
The “Fat Protocol Thesis” has been around the cryptoeconomy for a few years. The thrust of it is that base layers like Ethereum would accrue more value, i.e. be “fat,” than the “thin” layer of applications built atop them.
The argument seemed apt for years, but it’s being challenged more than ever courtesy of the Ethereum ecosystem. That’s because this summer, the combined market cap of all Ethereum-based ERC20 tokens overtook the market cap of Ethereum’s currency, ETH, for the first time ever.
This reality drives home the fact that Ethereum is powering a teeming economy in the here and now and that the platform is an increasingly promising avenue for app builders.
Ethereum + Bitcoin = Crypto Tour de Force
Currently, Bitcoin and Ethereum are collectively on pace to facilitate around $1.3 trillion in transactions this year. Trillion.
To this end, these blockchains are already historic and proven success stories, but there’s more to be done, and they can go farther together — at least for the foreseeable future. Bitcoin is a tank when it comes to its core use case and name recognition, and tokenized bitcoin projects on Ethereum can extend BTC to make it that much more flexible and productive and raise Ethereum’s profile. This kind of mutualism could lead to Bitcoin + Ethereum’s first $10 trillion.
Ethereum the Kid
What the Ethereum blockchain and the project’s community have been able to achieve to date is nothing short of incredibly impressive. But it’s also just barely started.
Indeed, on July 30th, 2020, Ethereum turned five years old. And if this is how far the project’s ecosystem can progress in just five short years, then the next five may prove to be absolute rippers for the platform and its blooming app layer. At the rate things are going, Ethereum could be a household name in ten years’ time.
If you’re into the cryptoeconomy, ignore Ethereum going forward at your own peril.
It’s not that other interesting projects won’t rise and fall in this space; it’s just that Ethereum is becoming a major gravity well of DeFi activity and in this regard it’s vastly ahead of all other platforms in the space. They have a lot of catching up to do, while Ethereum is only picking up speed lately.
Things are still early, of course. Ethereum still has plenty of growing to do. Yet with each passing day, it seems more and more inevitable that Ethereum’s ecosystem will do more than just rise to the occasion.