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Messari: Ethereum Merger Successful, Data to Watch

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Q3 Analysis of key indicators of the Ethereum network.

Original title: "State of Ethereum Q3 2022"

Original author: Tom Dunleavy, Kunal Goel, Messari

Original compilation: Moni, Planet Daily

The Ethereum protocol transitioned from proof-of-work to proof-of-stake on September 15, 2022. It is also widely recognized in terms of development depth, decentralized financial ecology, and Web3 use cases, but before entering the last quarter of 2022 , there are still some key indicators and data that need attention.

& nbsp; 2021 Q4-2022 Q3 Ethereum key indicators & nbsp ;

Ethereum network performance analysis

1. Highlights of the third quarter

After the Ethereum merger, the daily block reward dropped from about 13,500 ETH to about 2,000 ETH, greatly reducing the security costs of the network. The active addresses and transactions of Ethereum remained basically stable, with relatively small changes from the previous month. While addresses and volumes will likely increase with wider crypto adoption, ethereum's network scaling still comes primarily from L2 rather than the higher performance L1.

It should be noted that the total network fee of Ethereum in the third quarter of 2022 has plummeted to the lowest level since 2020. If this trend continues until the second half of this year, it will directly affect the consolidated Ethereum staking income Rate.

2. Network performance

In the third quarter of 2022, the average daily transaction volume of the Ethereum network was 1.2 million, an increase of 6% from the previous quarter, of which ETH transfers and DeFi transactions increased by 7% and 14%, with an average daily transaction volume of 415,000 and 82,000 strokes. On the other hand, NFT and bridging transactions saw a decline. NFT transactions fell 17% to 181,000 transactions per day during the quarter, and bridge transactions fell 41% to 9,000 transactions per day.

The increase in the number of active addresses on the Ethereum network follows a similar trend to transaction growth, with 550,000 active addresses per day in the third quarter, a 5% increase from the previous quarter. However, this increase is mainly due to the surge of active addresses on July 27, 2022, when the famous miner Guo Hongcai (Bao Erye) announced the Ethereum PoW fork plan, and some wallet "maintenance activities" on Binance, so These active addresses may not be due to an influx of new users or the launch of new applications.

ETH supply grew by 0.7% during this period, an annualized growth rate of 4.2%, with all inflation coming from PoW rewards as transaction Base fees consumed slightly more than beacon chain reward inflation.

Since 2020, ETH in smart contracts has seen an upward trend as more and more digital assets are used in DeFi and other applications. However, Terra 's debacle appears to have eroded trust in smart contracts, even in the ecosystem as a whole. On May 9, 2022, the same day Terra crashed, the percentage of ETH held in smart contracts peaked at 30% and has been trending downward since then. At the end of August, the proportion of ETH on smart contracts fell to 27%, down 2% from the end of June.

3. Market indicators

Ethereum’s merger event led to an increase in bullish bets in the third quarter, with the ratio of calls to puts increasing, with the data showing that the strike price of the call option was as high as $5,000 when it expired on September 30, while the At maturity on December 30 it is $2,500. The strike price of the call option suggests that investors may be paying more attention to the ethereum options contract expiring in December this year.

Throughout July and August, ETH's average daily volatility was much smaller. Both the cryptocurrency and stock markets saw a decline in absolute volatility after a very challenging second quarter. Ethereum’s correlation with Bitcoin remained around 90%, while its correlation with the S&P 500 declined slightly.

4. Layer 2 analysis

While the average number of transactions on Ethereum may have remained within a reasonable range, there has been a large increase in L2 transactions. Arbitrum's average transaction volume has nearly tripled, from 39,000 in January 2022 to 115,000 in August 2022. During the same period, Optimism 's transaction volume also increased nearly 3.5 times, from 41,000 to 142,000 transactions.

The emerging underlying ecosystem is driving L2 activity, and L2 apps attracting a lot of usage and attention, such as GMX on Arbitrum and Synthetix on Optimism, are also among the biggest drivers of TVL on their respective platforms . However, with OP incentives going live and an Arbitrum airdrop expected, we see that L2 growth may not be coming from organic users.

5. Other factors leading to L2 growth

Arbitrum's Nitro upgrade is live and the Arbitrum Odyssey is expected to be revived again.

Three different teams announced breakthroughs in zkEVM: Polygon, zkSync , and Scroll. zkSync’s zkEVM is expected to launch its mainnet in Q4.

StarkNet announced plans to launch its own Token.

Subfield Analysis

1. DEX

In the second quarter of 2022, the average daily trading volume of DEX was 2.78 billion US dollars. In the third quarter, this figure dropped to 1.83 billion US dollars, and the year-on-year trading volume also dropped to about 800 million US dollars. During the period, Uniswap's dominance increased from 60% at the end of the second quarter to 72% at the end of August, but remained at around 75% of the DEX market share throughout the third quarter.

2. Borrowing

In the third quarter, the average loan transaction volume in the crypto market dropped sharply. It fell to $116 billion a day from an average of $280 billion in the second quarter. July was a noticeably slow month, and trading volumes picked up slightly in August, mainly due to increased demand for spot ETH from ETH POW airdrops.

3. NFT

The average daily trading volume of NFT has dropped significantly, but the average daily number of traders has not dropped as much as expected, and the NFT industry can still attract about 40,000 loyal users per day on average. The average monthly dollar volume of NFT transactions in the third quarter was down 90% from January, with less than $1 billion in sales, compared to a whopping $4.6 billion in the second quarter. It should be noted that the decline is not only related to the slowdown of the NFT market, but also to the decline of ETH price. OpenSea continued to hold the largest share of NFT market transactions in the third quarter.

Sudoswap will go live in the third quarter of 2022, a liquidity pool similar to Uniswap for NFTs, and its trading volume will peak in August.

4. Stable currency

The correlation between stablecoin and Ethereum is very close. Although the trend and overall trading volume of stablecoin are basically unchanged compared with the second quarter, some policy events in the third quarter deserve attention, such as:

Circle , the group behind USDC , banned 38 addresses after the U.S. Office of Foreign Assets Control (OFAC) sanctioned the smart contracts of privacy protocol Tornado Cash.

MakerDAO 's DAI plans to reduce its holdings of the centralized stablecoin USDC.

The Tribe DAO program is disbanded and all FEI will be redeemed.

Circle launches EUROC, a stablecoin denominated in euros.

Aave has announced the launch of GHO, a USD stablecoin.

USDC’s market share fell to 41% in the third quarter. The main reason for the decline is "absorption" by BUSD, whose stablecoin market share has increased from 14% to 16%.

L1 Competitive Analysis

Currently, Ethereum and its L2 ecosystem together account for 62% of the total TVL of crypto smart contracts, with Ethereum contributing the largest share at $34 billion, while Arbitrum and Optimism each contributed $1 billion. In the long run, the TVL share of Ethereum and its L2 has been declining since the beginning of 2021.

Developers are the "key moat" for the thriving Ethereum ecosystem. Compared to other cryptocurrency ecosystems, the number of weekly active developers on Ethereum is still far ahead. Even in a bear market, Ethereum's development activity The share increased by 10% compared to last year.

Summary

Ethereum remains the most active crypto ecosystem with the majority of developers, users and applications, despite the fact that we are in the midst of a crypto bear market, and a successful transition to PoS helps further development of Ethereum. However, with the launch of "Layer 1 challengers" such as Aptos, Sui and Celestia in 2022 Q4, Ethereum must consolidate its "moat" and accelerate its roadmap to maintain its leading position in the smart contract field.