Ethereum; in a state?

On-chain data

We dive head-in by taking a look at the state of the Ethereum blockchain via key on-chain metrics.

Active addresses

Source: Santiment

Active addresses are defined as those that have engaged in cryptocurrency transactions at any point during the last 24-hours. Mirroring the activity in Bitcoin, it appears that the trend in active addresses has changed to the upside, after about 9 months of consistent decline (along with ETH’s price). Also, since late 2018, we are observing a divergence between the trends in price and active addresses. Will price trail back to active addresses? Not unlikely given the historical trend.

Velocity of tokens & transaction volume

Source: Santiment

Velocity points to the average number of times that a token changes wallets each day. Simply put, a higher token velocity means that a token is used in transactions more often within a set time frame.

Discounting for activity attributable to the notorious Ethereum mixer, both velocity and transaction volume seem to be growing linearly, on a trend that dates back to early 2016 — what is arguably a positive sign, nodding to increased utilisation of the network.

Source: Bloxy

What this might additionally imply, is that an exponential phase (S-curve) in transaction volumes is still a possibility in the future — though hard to imagine given the current performance limitations of Ethereum.

Median transaction value (USD)

Source: Coinmetrics

If the data actually reflects reality, the fact that as the network matures, the median transaction value goes down, might strike one as a surprise . However, on second thoughts, this is really not at all surprising. Remember Ethereum =! Bitcoin; it has actually been built and used with different purposes in mind. And given that ~50% of the transactions on the network are currently machine to machine transactions (as per the Token Analyst), it might just make sense that the median value decreases — particularly as the # of ERC-20 tokens exploded from a few dozen in 2017 to over 4000 today. Overall, we can interpret this as a sign of a maturing network and a nod the type of transactions that ETH is used increasingly for. Speaking of which…

DeFi adoption

Source: Mike McDonnald

Source: DeFi Pulse

DeFi (shorthand for decentralized finance) is the second big use case (after fundraising via private money) currently being explored on Ethereum and finding product-market fit. While the growth recorded so far has been impressive, the explosive part seems to have stalled for now. How much of this is due to the DAI’s peg woes and the stability fee hike from 0.5% to 7.5% in Maker (making it less attractive to own CDPs), and how much is due to the space having reached a structural ceiling for now, remains to be seen. My guess — a bit of both! After all, we need easier access to this ecosystem for the next batch of users to come on board.

Number of tokens by ERC type

Source: Bloxy

On to the first major use case that ushered Ethereum into the cryptoasset pantheon, we take a look at what happens in the world of tokens under the “world computer”. At present, the majority of the Ethereum network is overrun by ERC-20 type tokens; for all their promise, ERC-721’s (NFTs) and other emerging standards, still represent a marginal amount of activity on the network. Further, ~4k seems to be the equilibrium number of active tokens on the network — tentatively driven by both lack of further demand AND lack of network capacity.

Aggregate network Utilization

Source: Etherscan

This metric expresses the Average Gas Used/Gas Limit at any given point in time and acts as proxy to comparing utilisation with capacity. Interestingly, the picture here seems to verify the assumption laid out above, with respect to network capacity, and points to the fact that this particular S-curve has plateaued.

Smart contract dynamics

Source: Bloxy

The three charts above, together describe the state of smart contracts on the Ethereum network — at a high level. From February until present day, the aggregate smart contract calls (interactions with smart contracts) have picked up, and are verging towards all time high territory. Given that we are post speculative mania, and ICO activity is in multi-year low, at the very least, this implies that the utility to speculative value ratio in Ethereum is improving — indication of such activity correlates nicely with the rise of DeFi.

Now as far as Gas cost is concerned, the levels have been stable throughout 2018 — with an exception in July 2018, when F-coin spammed the Ethereum network (hence “call with token transfer” and “token transfer” costs exploded). Once again, stability here might imply that we’re operating close to network capacity. Finally, things get a little more curious when considering Daily Gas cost in USD, as it appears that for the past 12 moths, all 4 types of smart contract calls cost the same in USD terms, a phenomenon not observed before April 2018. One more sign of maturity, and/or the fact that the network is at capacity? Likely!

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