What is the difference between ETH in 2017 and ETH in 2021?

Disclaimer: This article aims to convey more market information and does not constitute any investment advice. The article only represents the author's viewpoint and does not represent the official stance of Mars Finance

Disclaimer: This article aims to convey more market information and does not constitute any investment advice. The article only represents the author's viewpoint and does not represent the official stance of Mars Finance.

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Source: Blue Fox Notes

Today we are talking about the changes in ETH during this four-year cycle. ETH is the original token of Ethereum. The ETH in 2017 and 2021 are undergoing qualitative changes.

From sowing to harvesting

In 2017, Ethereum basically didn't have any real ecology. In 2017, Ethereum was popular for the Initial coin offering. At that time, the main use case of Ethereum was the financing of the Initial coin offering. At that time, almost all projects were just concepts, and people invested or speculated based on concepts. This kind of foam comes quickly, but it also goes violently.

Of course, the foam of 2017 is not without merit. The bull market in 2017 made many people see the potential of blockchain and Ethereum, as well as other blockchain opportunities besides Bitcoin. At the same time, during this period, some projects were financed and persisted, laying the foundation for the future ecological prosperity of Ethereum. Many projects such as Chainlink, Aave, MakerDAO, Kyber, Loopering, and others received funding for development during that period.

Therefore, around 2017 is the seeding stage of Ethereum ecology. In the crazy foam, most of the projects disappeared, but some excellent teams planted seeds on the land of Ethereum and began to take root.

Because there was no real value support for Ethereum ecology at that time, after the crazy Initial coin offering foam receded, the subsequent large-scale decline occurred.

After several years of exploration, ETH now has a solid ecological support. The biggest support among them is the formation of the DeFi ecosystem. Currently, the overall market value of DeFi exceeds 16 billion US dollars, and some agreements have a certain scale of users, transaction volume, and fee income. For ETH itself, most DeFi protocols lock in ETHs of different sizes, and ETHs have evolved from financing intermediaries to underlying value assets.

Nowadays, DeFi has a strong demand for ETH:

*The total number of ETHs locked in DeFi reaches 6.6 million

A large number of ETHs have been locked in DeFi, reaching 6.6 million, with a current value exceeding $3.4 billion.

In addition to Ethereum, DeFi's overall locked assets amount to US $12.8 billion. DeFi is forming an increasing demand for ETH, and on Unswap, ETH (WETH) has the best liquidity, with the highest trading volume still being ETH. As DeFi develops in depth, such as decentralized options, the demand for ETH in DeFi will only increase.

*Users of DeFi ecosystem

At present, DeFi users are close to 1 million, including DEX, lending, derivatives, insurance, Stablecoin, News aggregator, and so on. These are all real users of the product.

(DeFi users are breaking through one million, DuneAnalytics)

*Transaction costs of Ethereum driven by DeFi

The transaction costs of Ethereum, driven by DeFi, have gradually formed a trend of crushing other agreements and projects. At present, the annual capture cost of Ethereum is up to $760 million, second only to $770 million of Bitcoin. In addition, agreements and projects with higher costs are mostly in the DeFi field. With the development of DeFi, this trend will only strengthen. With the implementation of the EIP-1559 proposal, it means that ETH will have the opportunity to capture the cost benefits of Ethereum. It will reduce the inflation rate of ETH and even bring about the possibility of deflation at a certain critical point.

(Ethereum's annual capture cost is up to 760 million US dollars, Token internal)

*Ethereum has gradually become the primary position for carrying various assets

Due to the booming DeFi on Ethereum, it has formed a siphon for other various assets. This includes Bitcoin, the number one player in the encryption field. Today, there are more than 150000 BTCs circulating in Ethereum, worth more than 2.6 billion dollars, and this is just the beginning.

(There are more than 150000 BTCs circulating in Ethereum, BTCONETHEREUM)

In addition, the Stablecoin in circulation on Ethereum also exceeded US $16 billion.

(The Stablecoin circulating on Ethereum is up to 16 billion US dollars, Coinmetrics)

With more and more Ethereum DeFi protocols, better liquidity and stronger security, it will also siphon more Bitcoin and Stablecoin. With the development of Layer2, DeFi can accommodate a larger number of asset sizes, which will create greater demand for ETH and other assets.

Currently, over $13 billion of assets are locked in DeFi, while ETH is worth over $60 billion. In the future, when hundreds of billions of dollars of assets are locked in DeFi, ETH must become a larger asset to accommodate the circulation of these assets and provide them with sufficient security.

*DeFi forms substantial competition with CeFi

Nowadays, DeFi is increasingly becoming a substantial competitor of CeFi, which is the first to show in the trading field. Nowadays, DEX's total trading volume since the beginning of this year has reached 89 billion US dollars, and in the past week, the trading volume has exceeded 5 billion US dollars. Although there is still a long way to go compared to CEX, this competitive trend has already emerged.

(DEX's trading volume since the beginning of this year is close to $90 billion, DuneAnalytics)

(The more eths locked on DeFi, the less eths on CEX, and this goes with each other, glassnode)

In terms of encrypted lending, Compound currently has locked in assets of up to $1.5 billion and Aave of up to $1.35 billion, with up to 1.1 million and 392000 ETHs respectively locked in. In addition, in terms of derivatives, Synthetix and UMA are continuing, as well as Hegic's decentralized options; The development of Cover, Nsure, and NXM in the insurance industry; YFI in the field of aggregate mining is rapidly evolving, continuously launching various DeFi products; There is even a combination of NFT and DeFi, such as MEME.

The prosperity of DeFi ecology promotes the evolution of Ethereum and makes ETH gradually become the most important underlying asset in the DeFi field. From this perspective, ETH has gradually evolved from a financing tool in 2017 to a underlying asset with substantial sustainable demand.

(The liquidity and trading volume of ETH on Uniswap remain stable at the top, Uniswap)

From encrypted goods to productive assets

People often say that BTC is digital gold, while ETH is digital oil. If we go back to 2017, ETH is not worthy of its name. But now, ETH has gradually evolved into encrypted asset features that are different from BTC. This may give it the opportunity to become the king of encrypted public chains in the future.

At present, BTC is the only entity in the encrypted world and its position is unshakable. Because it has almost no competitors in the value storage field. Due to its broad social consensus, PoW mechanism, non renewable hard top, security, and other characteristics, Bitcoin has gradually become digital gold and expanded its advantages in the field of value storage. In the field of digital currency, BTC can hardly find any competitors.

But the real opponents come from different fields. Ethereum is a smart contract platform. At the beginning, it did not want to be a Cryptocurrency, but more a token, serving the original dream of the world's computers. But now the settlement in Ethereum is almost the same as that in Bitcoin. Ethereum accidentally becomes the world settlement layer no less than or even more likely to surpass Bitcoin in the future.

Both ETH in 2017 and BTC are Cryptocurrency generated through PoW mechanism, but in 2021, some ETH will be generated through PoS. This means that ETH can become a productive asset, and ETH itself can generate more ETH. This may seem like a simple change, but it has a profound impact. For more information, please refer to Blue Fox Notes' ETH2.0: PoS Pledge Has a Profound Impact on ETH '.

ETH has evolved from crypto products to productive assets. While solving the security of Ethereum public chain, the integration of ETH with the protocol itself has been greatly improved, from the externalization of PoW to the internalization of PoS, which means that ETH is no longer mainly the object of profit selling and cash out for miners, but also the productive data for miners to obtain more profits.

This means that there will be a large-scale demand for ETH. Based on the current return rate of ETH, the problem of reaching the level of DeFi locking ETH in the short term is not significant. It is estimated that the ETH in PoS pledge will exceed 5 million in the near future. With the launch of ETH2.0 pledge services by Wallet and Exchange, it is possible to lock in over 20-30 million ETHs, with a current total of approximately 113 million ETHs. After a long period of time, especially with the reduction of various pledge thresholds and the resolution of liquidity issues, the amount of ETH locked in the PoS pledge network may reach around 20-30%, or even higher, excluding the ETH locked in DeFi.