Ethereum has always been one of the fastest growing and strongest ecosystems in the crypto market. In this article, I will analyze with him from overview to details about the Ethereum ecosystem, which will include:
- Current roadmap situation and what Ethereum has achieved.
- Overview analysis of the Ethereum ecosystem.
- Analysis from the puzzle piece in the Ethereum ecosystem.
- Future projections and investment opportunities.
Ethereum Overview
What is Ethereum?
Ethereum is a smart contract platform for developing decentralized applications (dapps). This is considered the first platform and also the largest platform for developers at the moment.
Ethereum was started by Vitalik Buterin in 2013, after he noticed limitations in Bitcoin's functionality. Buterin published Ethereum's whitepaper later that year, describing a distributed computing platform for executing smart contracts and building decentralized applications (dApps). With that vision in mind, Vitalik Buterin and his associates raised 31,529 BTC (around $18M at the time) for core protocol development and Ethereum ecosystem growth.
Up until now, all major crypto market applications have originated and developed on Ethereum before spreading to other ecosystems. Some prominent use cases that you may know are DeFi & NFT.
Ethereum Blockchain Statistical Data
ETH Stats
- Mcap: $287,072,270,425.
- Circulating: 119,707,403 ETH.
- Max Supply: not fixed.
Ethereum Stats
- Mainnet: 2015.
- TPS: Around 15 TPS.
- Block time: Around 15s.
Ethereum Highlights
Ethereum has the following highlights:
- Ethereum Virtual Machine: The heart of Ethereum is called the Ethereum Virtual Machine ( EVM ), which is part of the protocol for executing transactions. It is a language-specific "EVM bytecode" Turing-complete virtual machine, usually written in a high-level language called Solidity .
- Full library and many developer tools: Ethereum mainnet in 2015, over a long time of operation, the Ethereum developer community has developed a full library and many supporting tools for Development on Ethereum has also been made available to developers.
- Ethereum 2.0: Ethereum 2.0 is a long-term expansion plan for Ethereum including the transition to PoS and the use of Sharding technology, with the vision provided by Ethereum 2.0, making Ethereum despite many limitations but developers stay and keep building with it.
Current Situation & Roadmap
Beacon Chain launched in December 2020, it prepares for the next major milestones of Ethereum including:
- PoS staking : Beacon Chain introduced proof of stake for Ethereum. This is a new way to help secure Ethereum. In fact, it will involve you staking ETH to activate the validator. As a validator, you will process transactions and create new blocks in the Ethereum blockchain. Staking and being a validator is easier than mining (revolution is now secured). With PoS , many hope this will make Ethereum more secure in the long run. The more people join the network, the more decentralized and secure it will become from attacks.
- Setup for shard chains : After the mainnet merges with the Beacon Chain, the next upgrade will bring the shard chains into the PoS network. These "shards" will increase the capacity of the network and improve transaction speed by scaling the network to 64 blockchains. Beacon Chain is an important first step in introducing shard chains, as they require staking to function securely.
Currently, the Ethereum mainnet operates separately from the Beacon chain. In 2022, the next major network upgrade called The Merge will "merge" with the Beacon chain's proof-of-stake system and this will mark the end of proof-of-work ( PoW ) for Ethereum and the process. full transition to proof of stake (PoS).
The Merge is expected to take place in Q2 2022. Ethereum's further future of Sharding is likely to be quite far away (2023 - 2025).
Ethereum Ecosystem Overview
2021 is the explosive year of Ethereum, the application layer has grown strongly and caught the attention of the public. The not-so-new term “ web3 ” became fashionable again as the world began to understand the vision of a more decentralized internet built on Ethereum.
For an overview of the Ethereum landscape let's just look at the most prominent developments of the Ethereum network, including:
- Layer 2 - after years of development, the L2 protocols launch the mainnet and expand the capacity of Ethereum.
- The creative economy goes mainstream - NFTs are everywhere and artists use Ethereum to make billions of dollars.
- Core protocol upgrades - Ethereum's R&D community submits multiple upgrades, preparing for the transition to Proof of Stake (PoS).
- DeFi Evolution - Several hundred DeFi protocols have been developed and hundreds of billions of dollars are locked in DeFi protocols.
DeFi's Development
Booming in the summer of 2020, Ethereum's DeFi sector continues to thrive, they are the category with the largest number of locked assets in the entire Crypto market.
According to data from defillama, there are currently over 400 DeFi protocols in development on Ethereum with Total TVL over $136B. This total locked-in value exceeds assets under management of Robinhood ($80 billion) and Bridgewater Associates ($140 billion).
Layer 2
After years of research and development, L2 scaling technologies for Ethereum are out in 2021. Ethereum's transaction capabilities are no longer simply Ethereum's Layer 1 capabilities. Instead, the transaction capacity of Ethereum will be equal to the capacity of L1 plus the capacity of all of Ethereum's secure legacy L2 protocols.
In the Layer 2 ecosystem, there are two popular approaches: Zk Rollup or Optimistic Rollup.
Optimistic Rollup has had certain achievements with the development of Optimism, Arbitrum or BoBa network, all 3 of these rollups are compatible with EVM. Users can easily migrate Ethereum assets to them and developers can deploy Solidity contracts and applications to these 3 rollups with ease.
Compared to Optimistic, Zk Rollup is still in its early stages, the applications are still simple and limited. Some prominent Zk Rollups built on Ethereum:
- Loopring launched the zkRollup decentralized exchange in 2020. They completed the launch of their v2 in early 2021 and added support for minting and NFT trading in August 2021.
- Matter Labs launched payments aggregator (zkSync) in June 2020, which is integrated into wallets like Argent and apps like Gitcoin.
- Aztec launched its private payments aggregator (zk.money) in March 2021, adding support for stablecoin DAI in April.
Many projects are launched using Starkware's StarkEx platform , including:
- DeversiFi (a decentralized exchange) launched in June 2020 (validium).
- ImmutableX (an NFT exchange) launches in April 2021 (validium).
- dYdX (a defi trading platform) launching in April 2021 (zk rollup).
- Sorare (a fantasy football NFT project) launches in July 2021 (validium).
Ethereum’s Creator Economy
Not only DeFi, Ethereum's Creator Economy has grown tremendously, more and more artists are experimenting with the tools Ethereum provides them to capture the value of their work.
Ethereum's Creator Economy can be understood as a collection of tools, services, and marketplaces that allow creators around the world to monetize their work using Ethereum.
Until now, the Creator Economy of the Internet has been dominated by large centralized platforms. Most of these use a similar model, where a platform like YouTube or Spotify earns revenue from advertising or subscription fees, and then passes a small portion of that revenue to creators.
This business model has turned Spotify into a $40 billion company. But it always fails to please the majority of artists, who earn a tiny fraction of each stream.
In 2021, artists, musicians, writers, and other creators used Ethereum to earn a total of $3.5 billion. This sum makes Ethereum one of the largest global platforms for creators.
Looking beyond, the high level of awareness associated with NFT assets, celebrity interest and the arrival of the Creator Economy on Ethereum marks a silent revolution for our community.
Where most of the history of the cryptocurrency industry has been, the people who have been able to make a living using these technologies fall into only a few categories: investors, developers, or those who work for crypto companies. death, but in 2021, that has changed.
Core protocol upgrades
In 2021, the Ethereum developer community released two significant upgrades to the Ethereum mainnet, “Berlin” in April and “London” in August. These upgrades include many changes. The most notable are EIP-1559 and EIP-2929:
- EIP-1559 reformed the way the Ethereum fee market works.
- EIP-2929 improves Ethereum's defense against DOS attacks.
In addition, the Ethereum developer community has also upgraded the Altair network to Beacon chain to prepare for the next steps of Ethereum development including PoS & Shading - Beacon Chain is a Proof of Stake chain that runs in parallel with Ethereum. mainnet as of December 1, 2020.
Analyze each piece in the Ethereum ecosystem
As of January 24, 2022, the Ethereum ecosystem has more than 400 projects operating in various fields. In particular, the DeFi segment is the most focused and developed segment.
DEX
Decentralized exchanges ( DEXs ) allow users to buy and sell cryptocurrencies with each other without the need for professional brokers. Users simply connect their crypto wallet to the DEX, select the crypto trading pair of their choice, enter the amount, and swap assets.
The DEX serves as the liquidity hub for assets in the ecosystem, so it is also the leading TVL sector in the DeFi market on Ethereum. Some of the major DEXs on Ethereum:
- Curve (CRV): Curve Finance is an AMM-based decentralized exchange on the Ethereum ecosystem, dedicated to stablecoins (USDT, USDC, DAI, ...) or similar assets but denominated. displayed in different formats (renBTC, WBTC, pBTC,...). Curve is currently the protocol with the highest TVL on Ethereum.
- Uniswap (UNI): Uniswap is an Automated Market Maker ( AMM ) protocol that allows users to swap any ERC20 token, using a liquidity pool instead of an order book.
- SushiSwap (SUSHI): Launched in Q3/2020, Sushiswap has gone step by step from a fork of Uniswap v2 to becoming one of the leading DeFi ecosystems in the Crypto space. Up to now, Sushiswap's ecosystem includes many separate products operating in 3 main categories: DeFi, Metaverse, Launchpad. Sushiswap's vision is to be an "All-in-One" DeFi platform operated and built by SushiswapDAO.
Stablecoins
Stablecoins are one of the most important factors in DeFi. Without stablecoins, it would be difficult for liquidity to circulate in the crypto market and participate in DeFi activities. Currently, the total capitalization of Stablecoins is worth more than $100B including some major stablecoins such as USDT, USDC, DAI, UST,....
Among them, Ethereum is the blockchain with the most fertile stablecoin market with countless stablecoins of many types. First of all, Ethereum has the highest supply of USDT and USDC, the two most popular fiat-backed stablecoins at the moment.
In addition to fiat backed stablecoins, we also have leading decentralized stablecoins born like DAI (MakerDAO), MIM (Abracadabra), FEI (Fei Protocol),... While most of the crypto participants are Using only USDT and USDC, Ethereum has proven that decentralized stablecoins can indeed work in DeFi.
While decentralized stablecoins carry their own risk of losing their pegs (which is a big deal in volatile markets like crypto), they do allow farming/staking with high yields that typically fluctuate. is 20 - 40%.
Lending
Lending is a very strong development on the Ethereum ecosystem, along with DEX, they are the foundation for many other DeFi protocols to build. The most prominent of which is Aave & Compound.
In 2022, both Aave & Compound have their own plans, with Aave as Aave V3, with Compound as Compound Chain.
Aave V3 goes in the direction of leveraging Cross Chain Bridge infrastructures to achieve cross-chain interoperability and capital efficiency. These two properties are highlighted through 3 main features of Aave V3:
- Portal: Supporting cross-chain lending & borrowing.
- Emode: Support users can borrow the most capital with their collateral.
- Isolation Mode: Allows creation of different money markets with new assets. At the same time limit some of their risks.
Compound chain achieves cross-chain interoperability using Starport, a product that the Compound team built themselves. In addition, Compound Finance is also very ambitious when choosing to build an App Chain on Polkadot, this choice brings certain advantages and disadvantages:
Advantages: Autonomy in many things such as technology, product development direction.
Limit:
- The workload is very large, requiring the level and capacity of the team to be very high.
- Depends on Polkadot development progress.
- The gateway chain will also be very centralized, which is exacerbated when they choose to use PoA consensus .
- The ability to combine and communicate with other exchanges will be limited because they are not the EVM chain.
See also: Overview of Aave V3 and Compound Chain
Yield aggregator
The Yield aggregator protocols provide different strategies to find the best return from farming & staking operations. This is one of the most important areas in DeFi because it helps users to gain a large amount of profit, which is one of the main reasons why anyone wants to participate in DeFi.
The innovator and pioneer of this space is actually Yearn Finance. As one of the key catalysts for DeFi Summer in 2020, Yearn Finance has succeeded in its operating model.
Up to now, Yearn Finance completely dominates the majority of the yield aggregator market on Ethereum with the total TVL (Total Locked Value) of all Yearn products on Ethereum $2.76B. Going through 2022, Yearn Finance will apply a new token model, promising to accumulate more value for the project's native token, YFI.
Derivative
In the traditional financial market, the derivatives market is one of the largest and most developed in traditional finance, but in the crypto market in general, the Derivatives market in general is still a market. nascent market in the DeFi market.
Across the Ethereum ecosystem, both L1 & L2, Perpetual is currently the most developed derivatives sector in the Derivative category. While there are a number of other protocols established and active in the field, dYdX is dominating the field.
In addition to Perpetual, Option (option) is also a strong development segment with the domination of Dopex & Opyn. The operating model of these two Option protocols is quite similar, they simply connect the Option seller and the Option buyer, replacing the role of intermediaries in traditional finance.
KNIFE
The DAO (Decentralized Autonomous Organization) has long existed to serve the decentralized vision of blockchain. However, it used to only appear at the protocol level as every DeFi protocol has to deal with its governance system to ensure that the network remains decentralized.
However, by the end of 2021, more types of DAOs have been implemented. Instead of being a small protocol, DAO can now be a separate product. Such DAOs have provided many businesses, namely Funding DAOs (Investment), Service DAOs, Collector DAOs, ...
A good example of this new type of DAO is BitDAO. BitDAO acts as a decentralized treasury where BIT holders contribute, propose, and vote on how its treasury should be used. By growing its treasury in a decentralized way, the protocol can function and grow without being owned by any particular human.
However, voting rights in the protocol are determined through ownership of BITs: The more BITs you have, the more voting rights you own. This is the problem with most existing DAOs: A large number of governance tokens can be accumulated to gain dominance over a DAO.
While Ethereum DAOs currently have many flaws, they have great potential for growth. Ethereum not only has every type of DAO, but there are many of them in every category, from Protocol DAOs (MakerDAO, BadgerDAO, KeeperDAO,...) to investment DAOs (BitDAO, The LAO,...), and many more types.
NFT
In 2021 NFTs exploded, a lot of them sold for millions of dollars and they all started on Ethereum with NFT Collections like CryptoPunks, Bored Ape Yatch Club,...
As a pioneer of the NFT space, Ethereum brings together most of the NFT operations. Compared to other blockchain platforms, Ethereum is far ahead of others in terms of NFT Transaction Volume, even with dedicated NFT blockchains like Flow.
During the NFT boom, NFT marketplaces are one of the main focus points, as they are the place to buy and sell NFTs. OpenSea is considered the largest NFT marketplace on Ethereum, it still dominates this market segment.
Similar to Uniswap and Sushiswap, there was a vampire attack between Lookrare and Opensea. Users are encouraged to trade NFTs on Lookrare in exchange for valuable rewards.
Up to now, Opensea & Lookrare is still far ahead of other competitors such as Magic Eden or Solanart (Solana). As stated above, this is understandable given that the most popular and expensive NFT collections are all located on Ethereum.
However, most NFTs traded on the Ethereum market are collectibles rather than interactive, meaning these NFTs have no use case. To some extent, this limits the potential growth of existing NFTs.
Learn more about how Vampire Attack works: What is Vampire Attack ?
GameFi
GameFi is another usecase of NFT, it is a combination of Game and Finance, which is a relatively new market that has exploded dramatically recently. It all started with CryptoKitties in 2017 - the first on-chain gaming app. CryptoKitties is a casual game that allows players to buy, breed, and trade virtual cats.
It didn't take long for CryptoKitties to catch the attention of crypto users. Immediately after the product launch, the game caused a huge increase in transaction volume on Ethereum, and at one point accounted for about 25% of the total network traffic on Ethereum. This has caused Ethereum to become congested and has increased the network's gas fees, which may explain why the project's success is not really significant and cannot last.
However, it was again the catalyst for a GameFi boom in 2021, starting with Axie Infinity. Axie Infinity, with its smart gameplay and tokenomic design, Axie started attracting countless players with the new term: P2E - Play To Earn . The user got into the game and made a profit just by playing it.
But it seems that the GameFi market is growing too hot, plus the negative influence from the general market, GameFi projects in general have not had too good performance in 2022.
Projecting the future of the Ethereum ecosystem
Based on the information above, here are some contingencies about the future of the Ethereum ecosystem:
- Ethereum will continue to go strong, the focus is still on DeFi . While more and more blockchain platforms are emerging with their own DeFi ecosystems and cutting-edge technology, it is clear that most DeFi innovations happen on Ethereum.
- DeFi experience on Ethereum will be significantly improved . Although Ethereum has many applications, high gas fees and slow transaction speeds have rendered the network virtually unusable, especially for retail investors. Ethereum L2 and ETH 2.0 are the next big developments for Ethereum.
- Most innovation will take place on the Ethereum ecosystem . Ethereum has the most liquid and most secure market, allowing both investors and builders to participate safely. With a large developer community, Ethereum will continue to produce more and more innovative protocols, which will eventually attract more users and more cash flow into the ecosystem.
Investment opportunities on the Ethereum Ecosystem
Invest in tokens of the Ethereum ecosystem
As the Ethereum ecosystem grows, investing in tokens in the Ethereum ecosystem will no longer be highly profitable, but it will be one of the safest investments you can make in space. this time. The big names on Ethereum have become trusted not only in terms of security but also in how they are having real-life use cases and revenue.
Some of the possible options for investing in Ethereum are:
- Native token: ETH.
- AMM: Uniswap (UNI), SushiSwap (SUSHI), Curve Finance (CRV),...
- Lending: Aave (AAVE), Compound (COMP),...
- Yield aggregator: Yearn Finance (YFI), Rari Capital (RGT),...
- GameFi: Axie Infinity (AXS), Illuvium (ILV), Gods Unchained (GODS),...
Skin in the game to earn airdrop/retroactive
$1,600 UNI (Uniswap), $2,400 1INCH (1 inch), $10,000 DYDX (dYdX), $20,000 PSP (Paraswap),... that's how much you can earn through airdrop / retroactive on protocols that work on Ethereum . Ethereum is home to a lot of innovative products, you can earn incredibly valuable tokens using their protocol.
To get these opportunities, all you need to do is find potential projects that have not yet issued their tokens. Then you try them out a few times, if you're lucky then maybe you will get huge profits from hunting airdrops and retroactives on Ethereum.
Do you know how to do Retroactive effectively? If not, read this article now: Change position with 0 dong capital by doing Retroactive!
summary
Here are some brief summaries of the article;
- Ethereum is the pioneer of DeFi, leading the space with countless innovations like AMM, decentralized lending, P2E,... that's why in terms of DeFi, Ethereum has far ahead of other ecosystems .
- The Ethereum DeFi ecosystem is already fully developed with huge liquidity and reliable products but the downside to it lies in the infrastructure of Ethereum itself, it will take a long time for Etherum to settle. resolve this issue.
- Most of the innovations in the crypto space happen on Ethereum. While participating in DeFi on Ethereum may not be ideal for retail investors, it is highly recommended if you can afford it.
What do you guys think about the Ethereum ecosystem? Please comment below to discuss with Coin98!
Disclaimer : All information in this article is for informational purposes only and should NOT be considered investment advice. Investing in cryptocurrencies involves extremely high risk and you should only invest the amount that you are willing to lose.
