The Numbers tell you the truth about ethereum

Original title: "the development of ethereum from historical data"
Source: ethereum fans

Ethereum's goal is to become the world's computer. Many things have happened along the way: as a cat dealer, being attacked into a fork, as a crusader against authoritarian regimes, and creating a new financial architecture. There's a lot of talk about ethereum. Some say it's a currency, some say it's a failure, some say it's a tamperable ledger, and so on. None of these comments is quite to the point. Ethereum is like a knife that can be used as both a tool and a weapon, depending on who USES it. So I started exploring ethereum on my own. I became interested in this largely because I wrote an article on decentralised finance in May 2019. I found that almost all of the decentralized finance applications were built on ethereum. This article is the result of my attempt to sort out all the data related to ethereum.

In this article, I've avoided making a direct comparison between ethereum and bitcoin. Just as the financial system can produce commodities, currencies and financial instruments, I believe the digital asset ecosystem can experiment differently. If we believe in decentralization, one of the mechanisms that can be implemented is to keep multiple ledger backups, since individual ledgers are more susceptible to black swan events. In a world dominated by "book primacy", there is no room for such experiments to grow. But it is for the same reason that I am in favour of multiple ledgers, as long as they do their job and make no mistakes. I hope this article reflects the evolution of ethereum, not disparage bitcoin or ethereum.

Address number growth and activity

Of the 69 million addresses on ethereum, only about 250,000 are active each day. Of those, 50,000 were new addresses. Since it costs less to create a new wallet or transfer assets on ethereum than on most networks, the data itself isn't that impressive. What's interesting to me is that the number of active addresses and new wallets is much higher than it was during the ICO boom in 2017. A key factor may have been USDT's switch to the erc-20 standard and the rise of mixers on eaeum (mixers that confuse money flows and protect users' privacy by acting as a transfer point for multiple people). In 2019, about 226,000 different wallet addresses interacted with decentralized financial applications. These users are likely to be power users, who use their wallets a lot. While the area of decentralized finance is attractive, it is likely that non-homogeneous tokens (NFT) and digital gambling will underpin wallet activity on ethereum in the future. Games such as Axie Infinity and Gods Unchained are pushing a new generation of users to use ethereum without realizing it. It's like moving from an Internet chat room (IRC) to WhatsApp. The former is functional, the latter is mainstream. As projects continue to reduce the complexity of their interactions, more active addresses may emerge in the future.

Ethereum has handled 900 million transactions so far

If the number of active wallets and the number of new ones are used as a measure of the number of people interacting with ethereum, the number of transactions is a measure of how often they trade. We can see that there are striking similarities between the last two pictures. The volume of transactions and transfers has not fallen sharply compared with the same period of the year when icos were hot. Much of this is due to the maturing of decentralised financial and liquidity pools. If the total number of addresses on ethereum drops, it might be inferred that the remaining users are power users, often initiating multiple transactions. However, neither indicator fell, which suggests

(I) since 2017, new users have made up for lost users

(ii) the trading frequency of new users is the same as that of previous ICO investors

What's really changed dramatically is the next metric -- the average transaction size on ethereum.

The total is $2,100bn

The average deal size peaked on Aug. 11, 2017, at nearly $40,000. Total transactions on the ethereum blockchain peaked at $33 billion on January 14, 2018. These two figures can be linked to the popular use of ethereum at the time. The ICO boom first began in August 2017, attracting more than $1 billion by the end of September. On the other hand, the shanzhai currency boom peaked in January 2018 after bitcoin experienced price adjustments in December 2017. However, the future should be looked forward to, and not indulged in the past. The number of active addresses and transactions shows the number and frequency of transactions on ethereum's books, while the average transaction size reflects the amount of money transferred. At the time of writing, the average deal size was around $138. Based on these indicators, we can clearly see the popularity of digital assets.

In a nutshell:

The number of transactions has increased sixfold since February 2017
The number of active addresses has increased about tenfold since February 2017
The total value of transactions on the chain has increased about 12-fold (from $11m to $128m)
But the average deal size has fallen by about 99.5 per cent.
As non-homogeneous tokens mature, the average transaction size is likely to decline further. Typically, ethereum users don't need to transfer a lot of ethereum. An increase in the number of small traders would indicate that ethereum has a strong appeal to users. This can also be measured by the number of ethereum COINS in the top accounts.

The largest 100 wallets hold about 30 percent of the currency

The popularity of ethereum becomes more apparent once we consider the percentage of ethereum COINS in the top 100 addresses. The number of ethereum in the top 100 addresses, including exchange wallets, accounted for one-third of the total, or about 32%. For a programme that underpins "decentralised finance", that may look scary, but it is on the way down. By comparison, exchanges hold about 11 percent of bitcoin in circulation and 8 percent of ether, according to Glassnode. Since November 2018, ethereum's big holders appear to be stocking up on COINS. There are several explanations for this:

Investors who diversified during the 2018 currency peak are now buying ether. Now, they can use the lower price to buy what they sold in the same year.

The value of the currency has fallen sharply since its all-time high, and some investors have stopped selling it, so the share has stagnated.

As more retail investors buy the currency, the cost of holding a percentage of it has risen. It's getting harder and harder for ethereum to become a major player on the network.

Another reason why the big players are not selling more ethereum is that dollar-denominated borrowing (decentralised finance) can be done without the traditional financial infrastructure. If we analyze decentralized finance through the power law, this is obvious. Typically, three to five big players hold 60 to 80 percent of the assets in a product. (see my InstaDApp article for more details.) Another reason is that ethereum has retained a group of big money holders who are so bullish on its prospects. I think it's a sign of support.

Ethereum's transaction fees have reached about $242m

Ethereum's transaction costs totaled $242 million. Interestingly, the historical peak in transaction fees was not during the ICO boom of 2017, but in 2018, when total transaction fees were $160 million. That compares with $34m in transaction fees in 2019, about the same as in 2017. The cost per transaction shot up to $5.50 in February 2018 and is now down to $0.10. While transaction costs are currently very low, they have more than tripled from $0.03 before the February 2017 spike. Because transaction fees fluctuate, this can adversely affect products built on ethereum. Developers must take into account the transaction costs of small transactions. The need to decentralize computing and storage services generally entails the risk of gas becoming too expensive to attract customers. A number of projects are working to address this problem. For example, with Gasless by Mosendo, DAI transfers can be made without the user having to hold an ether currency to pay for gas.

Similarly, there will soon be a host of api-tier projects that trade on behalf of end users who don't own ether while charging companies directly. Nuo Network already has an early version of this online. In the long run, if the price of ethereum rises sharply, there will be more complex derivatives and futures that can hedge trading fees on a large scale, as in today's traditional financial world.

Once you compare the block rewards to the transaction fee accumulation, ethereum has an interesting feature. Over the past five years, block awards have totalled $150m. So far, ethereum has paid about $300 million to the miners, but not nearly as much as bitcoin, which has paid $16 billion to the miners so far. Judging from the volume we're seeing in the derivatives market, it's safe to say that given the fee mechanism, people would prefer to mine bitcoin than ethereum. I also found a common explanation that bitcoin miners also use ethereum as a sideline. Miners typically take net long positions because of bullish expectations. This is reinforced by my observation that the miners' balances fluctuate with the value of the currency.

A number of factors may have influenced miners' behaviour over the past few years. My understanding is that between January 2016 and January 2017, ethereum seemed to be a popular ticket item among geeks, given the low transaction prices of ethereum. The first plunge in The value of ethereum occurred at The end of 2016, when it was recovering from The "The DAO" incident. After the ethereum alliance was launched in March 2017, the currency recovered to $40, before falling again. As the price of ethereum soared, block rewards and transaction fees ensured ethereum's steady operation, and the miners' balances hit lows. Over the past year and a half, the balance of miners seems to have been growing. Over the past 18 months, miners' holdings of ethereum COINS have soared from 600,000 to 1.6m. These guys are real hoarders. But to study the behavior of the non-holders, we need to look at the exchanges.

During the bull market, exchanges held $11.5 billion worth of ether

A thriving exchange ecosystem may be a key factor in ethereum's scale and success. Unlike today's new COINS, ethereum had a low threshold for listings on the biggest exchanges at the time, Kraken and Poloniex. But then again, if it weren't for the lowering of the threshold for asset issuance and the creation of a community around new assets, we wouldn't be seeing nearly 1,600 digital assets flooding the market today. I can't even imagine the token ecosystem without ethereum. Putting these charts together, I noticed a key statistic: the amount of ether in circulation on exchanges is lower than that of bitcoin. According to glassnode, the supply of bitcoins is 18 million, with exchanges holding about 2.1 million (about 11.6 percent). By comparison, the supply of ethereum COINS is 109 million, while exchanges hold about 9 million (8.25 percent), slightly less than bitcoin. Much of that is probably because ethereum trades relatively quickly and at a lower cost. Because ethereum trades faster, it is easier to move assets and profit from them when currency prices are volatile.

Note: the actual amount of ethereum held by the exchange may be a few percentage points higher, as my data source does not include the Coinbase balance.

After studying the data, I came to two other conclusions

So far in 2016, the number of ethereum COINS held by exchanges has fallen by 50%. This may indicate that fewer people see ethereum as a speculative asset.
Currently, the exchange holds a total of $1.5 billion in ether COINS. By contrast, at the time of this article, the value locked up in decentralized financial intelligence contracts was half that of exchanges, at $875 million. By the time the amount of locked up ether in decentralized finance exceeds that of exchanges, the big reversal will have occurred.
Then there's the final indicator of the state of ethereum's ecosystem -- the ICO balance. But this indicator worries me.

Major ICO projects are running out of funds

During the ICO boom, projects raised about $8 billion to $16 billion (depending on the source and amount). Currently, the value of ethereum currency held by the major ICO projects is around $500 million. Over the past two years, the parties have been burning cash, and nothing seems to be left. Take EOS, for example. Despite raising $4 billion and buying http://voice.com for another $30 million, it still hasn't been able to build its own social media platform on the chain (perhaps to build one on bitshares, lol). If the network does not generate fees, or the platform does not generate revenue, the project will have to raise venture capital or go bankrupt. By the end of 2019, we've seen a lot of projects go out of business. By 2020, if these shanzhai COINS disappear, ICO projects will be completely yellow and assets will be greatly reduced, these projects will be in big trouble. There are two main reasons

For the past two years, the project has been burning cash and making little progress.

The indicators of these ICO projects will get worse and worse, but they can't have the sudden growth like MakerDAO, and the late-stage financing does not look optimistic.

Poor project prospects, lack of investment, poor market adaptability of products (e.g., Bancor and Uniswap), and the fact that capital is running out are cause for reflection for the entire industry and community. This is not necessarily a bad thing. Running out of money often causes entrepreneurs to switch to survival mode and focus on key performance indicators rather than burning cash. It may also prompt entrepreneurs to experiment with new business models that have never been done before. In the next few years, we're going to see a lot of projects go out of business.

Maker is responsible for the 30-fold increase in decentralised finance since March 2018

Decentralized finance has increased 30-fold since 2017, largely thanks to Maker. A key reason is that tokens are so volatile that they need stable assets as a hedge. Since Tether came along, stable COINS have become popular. In addition, with the price of ethereum COINS hitting new lows (i.e., $80), projects like MakerDAO allow ethereum whales to leverage their ethereum holdings through Maker. In any case, there has been considerable growth in decentralized finance since 2018. Interestingly, the locked up ethereum in decentralized finance shows a clear power law. In decentralized finance, locked-in ethereum is mainly used to generate SAI and DAI, while Compound ranks third. Trading tools such as Uniswap and DyDx also have lumped together some of the ether, but not as much. It seems that the market has decided on its preferred currency protocol. Projects such as Synthetix are experimenting with new models that use ethereum and SNX tokens to issue assets. At present, Synthetix's development momentum is good. As can be seen from the chart, the industry really needs new business models. The ethereum and transaction fees locked up in the project alone may not be enough to support a for-profit business. Hopefully we will see more new projects in 2020.

The power of ethereum comes from its users

Finally, what sets ethereum apart most is its users. The more users ethereum attracts, the richer its network will become. When people think about ethereum and its community, they often bring up controversial issues (icos, "The DAO" forks, etc.) that seem unacceptable to them. But what they tend to overlook is that ethereum is able to attract all sorts of people. Most of them are developers. Compared to other networks (and their github activities), ethereum has been far ahead, even during the long bear market. Because ethereum has always been so innovative, there have been so many innovative projects in the areas of decentralized finance, non-homogeneous tokens, and token issuance. As long as it keeps up the momentum, it will gain more influence in the market. Whether that influence is worth $10, $100 or $1,000, I don't know. The efficient market hypothesis and time will tell.

conclusion

Although ethereum has gone through many twists and turns along the way, I believe the entire network is evolving. Some may think ethereum is a sham, but it has never had a chain like the one that spawned ENS, decentralized finance, non-homogeneous tokens and icos. Ethereum and its community have a long way to go before it becomes mainstream. But as I approached the ethereum community and talked to ethereum's founders, it became more and more like Ubuntu/ Linux in 2007-08 (just as it was when I first encountered them). The learning process was difficult, but the community was fun. The product, though incomplete, has been slowly updated. Most importantly, there is a range of products available for my daily use. I don't know if all this will add value to the ether. I think ethereum (and tokens such as bitcoin) would still be useful even if they collapsed by 90 per cent. Not long ago, it was down all the way to $80. My focus has always been on usability and how to get end users as quickly as possible. I know this post doesn't include all the good things about ethereum, and I hope to write more in detail in the next few weeks.

(after)

Source:https://ethfans.org/posts/ethereums-numbers

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