Ethereum remains by far the largest smart contract platform by market cap. The network, which ranks second on the market cap leaderboard, hosts decentralized applications across multiple verticals.
While Metaverse, gaming, and NFT activity has since dissipated, DeFi is standing and looking forward to a steady recovery in total value locked (TVL), according to DeFiLlama.
DeFi leads Ethereum gas fee generation
DeFi’s dominance over Ethereum continues to show that smart contracts and decentralized ledgers have revolutionized finance. To confirm this position, especially given the trends in gas and lead source fees over the years, DragonFly’s Managing Partner moved to X, sharing Data from CoinShares.
Following its launch on Ethereum, CoinShares analysts noticed that gas fees continued to grow. There was a noticeable decline after the ICO mania in 2017 and 2018. Annual gas royalties generated fell from $143 million in 2018 to as much as $46 million in 2019.
However, after this downturn, which came after the crypto winter of 2018, generated gas fees rose significantly. The surge in momentum coincided with the popularity of ERC-20 tokens, allowing protocols to issue tokens and the growing adoption of DeFi.
The return of DeFi follows the launch of Uniswap, a decentralized exchange (DEX), in late 2018 and the introduction of the Automated Market Maker (AMM) model, which brought decentralized liquidity to the table. DEXs make up a big part of DeFi. Some of the most popular DeFi protocols, looking at DeFiLlama, are DEXs like Curve and Uniswap.
From 2018 to 2020, the network derived its fees from ERC-20 transfers. However, as DeFi gained strength on Ethereum in the recent bull cycle from 2021, most of the gas fees were from DEXs.
DEX Gas Fees Drop as ERC-20 Transfers and Stablecoins Grow, Is Dencun to Blame?
Interestingly, gas fees from DEXs continue to decline, falling from $2.4 billion in 2021 to $512 billion as of 2024. Meanwhile, as of September 2024, ERC-20 transfers are in second place, Up from third place, where it was from 2021 to 2024. 2023. Last year alone, ERC-20 transfers, a fair portion of cryptocurrencies like PEPE and stablecoins, generated $223 million for validators.
Additionally, Tier 2 gas fees continue to decline, according to the data. In 2023, Ethereum generated $247 million in fees from layer-2 platforms like Arbitrum and Optimism. According to CoinShares, it was worth $90 million by the time of publication. The sharp drop is primarily due to Dencun activation.
Featured image from Canva, chart from TradingView
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