As the new round of bull market Bitcoin narrative becomes the main line, the Ethereum ecosystem, which has been optimistic in the bear market, gradually weakens. Coupled with the strong outbreak of Solana, the crypto industry seems to have ushered in the beginning of 2024 with the "narrative of the rise of new public chains". Although the price of Ethereum has doubled in the past year, it is still criticized by many people, and even FUD Vitalik's decision-making level has major problems. The main reason for this phenomenon is that everyone has too high expectations for ETH (at least outperforming Bitcoin), and it is also related to the overly impressive performance of SOL. Today we will take stock of the new changes that have taken place in the Ethereum ecosystem in the past year. (FUD: Fear, Uncertainty, Doubt, an abbreviation for fear, hesitation and doubt, refers to the negative feelings spread by people that cause panic among investors.)
01 Ethereum has completely entered deflation. Since the beginning of the year, the number of Ethereum has decreased from 120.5 million to the current 120.1 million. A total of 340,000 Ethereums were destroyed in a year, worth 750 million US dollars. With the arrival of the bull market, the destruction volume will inevitably increase significantly.
02 The LSD track exploded since the merger of Ethereum in September 2022. After several months of development, it became a hot spot in the first quarter of 2023. As the end of the bear market, the stable annualized return of about 4% has attracted a large amount of funds to join. Lido, RPL, SSV and other LSD projects have ushered in a wave of explosions. The Ethereum pledge rate has continued to rise. As of January 3, 2023, the pledged amount has reached 28.8 million.
With the continuous expansion of the pledged funds and the approaching of the Shanghai upgrade, a small number of project parties have begun to target this part of the funds and launch their own DeFi products. Through the layered nesting method, the utilization rate of pledged funds is improved. After the wealth effect appears, more institutions and funds begin to pour in and lay out related tracks, thus deriving LSDFi related tracks and gradually improving LSD related infrastructure. There are good things, and there are unsatisfactory things. With the increase in the pledge rate, Lido will occupy more than 1/3 of the Ethereum pledge market share. The pledge track is too centralized, and the market begins to worry whether LIdo's growth threatens the security of Ethereum mainnet consensus. There are various opinions on whether Lido's centralization is harmful. On December 28, Vitalik mentioned the DVT (distributed validator technology) technology, which solves related problems from the perspective of pledge centralization and verification decentralization. On November 28, 2023, Lido DAO has begun to adopt DVT technology provided by Obol Network and ssv network.
With the arrival of the bull market and the increase in Ethereum’s value, it is almost certain that the Ethereum staking track will become a market with a scale of hundreds of billions. In addition, with the development of the industry, stable financial management will gradually become a rigid need for some people, and the development and innovation of related tracks are worth looking forward to.
03 Layer2 is flourishingLayer2 has developed into an important part of Ethereum. Each Layer2 has made different progress in various aspects. It can be said that each chain has its own characteristics. Let's briefly review
Optimism has established the bottom of the bear market in 2022. In early 2023, the price of Optimism has seen a surge. Although the ecosystem is obviously weaker than Arbitrum in all aspects, the project has found a different path. It has cooperated with many projects based on the modularization + one-click chain technology OP Stack, including BASE, opBNB, Manta Network, DeBank and many other well-known projects that have chosen to use OP Stack technology. Recently, because the specific time of the Cancun upgrade has been confirmed, Optimism and other second-layers have once again attracted everyone's attention.
Arbitrum In the first quarter of last year, with the issuance of Arbitrum Token, the Arbitrum ecosystem ushered in a big explosion, and it was even called "Arbitrum Summer". Representative projects include GMX, MAGIC, RDNT, GNS, AIDOGE, etc., most of which have been launched on BN. However, "institutional tokens" such as Optimism and Arbitrum have the same problem, that is, high market value and low circulation. In the past year, watching the two Layer2 circulation market values soaring, the token price can be said to be unchanged, and it has completely become an institutional "cash machine". It can be said that the project is good in all aspects, but it only gives retail investors a taste of the soup.
zkSync&StarkNet zkSync and StarkNet are the two PUA leaders in the industry. They have been collecting fees and the wool party has been completely reversed, especially StarkNet. The project party has been doing all kinds of tricks. The community and the project party are already at loggerheads. The wool party is itching with hatred, while zkSync insists on PUA to the end, and even said that it will issue tokens in 2025. However, ZK's progress is generally slow, and there is nothing worth mentioning in 2023.
Base Base has attracted a lot of capital in the short term by relying on the wealth effect of the ecosystem, and has risen with the help of several waves of traffic, but most of the ecological projects are not long-lasting. In early August, when the Base mainnet was about to be launched, the thousand-fold meme Token Bald appeared on the chain, and the market value exceeded 100 million US dollars in 2 days. The huge wealth effect FOMO users entered the market, but unfortunately the project ended in a rugged end, but the funds that entered were settled. Not long after that, the Ponzi gameplay of the social track project Friend Tech and the Airdrop expectations with the support of Paradigm made it one of the few phenomenal products in the bear market, and brought hundreds of thousands of users to the Base chain, which completely established the position of the Base chain in Layer2, but Friend Tech is currently in a cold state.
Blast was launched on November 21st. Relying on blur's own traffic and the Ponzi scheme expected by Airdrop, although it encountered the problem of centralized wallet management in the middle, it did not prevent its TVL from exceeding 1 billion US dollars in about two months after its launch. It has now become another place for large-capital users in the industry to manage their finances stably.
In less than three weeks, Manta Pacific's TVL has skyrocketed from 30 million to 650 million. It uses the same financial management method as Blast, attracting funds to pledge through the New Paradigm event to obtain Airdrop. The selling point is that the pledge period is shorter than Blast and the capital utilization rate is high.
Metis is approaching the Cancun upgrade. Metis has emerged as a dark horse, with outstanding market performance in the short term. Its TVL has also risen to the top three in the short term. Since most Layer2s have the problem of over-centralization of Sequencers, Metis is working on a decentralized Sequencer solution. As for whether it is driven by technology or capital, it depends on one's opinion.
ZKFair will Airdrop 100% of the tokens to all community users in the form of Gas fee Airdrop to attract users to participate in the short term. After the Gas fee Airdrop activity was launched, in less than a week, the gas fee consumed on the chain exceeded 60 million USDC, the number of active addresses exceeded 200,000, and the TVL exceeded 120 million. It has fallen back after the recent activities. The main focus is on fair distribution. It can be said that for users who continue to be affected by zkSync and StarkNet PUA, it is very conscientious. As for the subsequent development, you can continue to pay attention. It can be seen that the development of the second layer is that each company takes advantage of its own advantages. As the market improves, the speed of rise is getting faster and faster, and it is becoming more and more simple and crude. Many no longer need months or even years to accumulate slowly as before, but through a series of stimulations and short-term bursts to occupy the market. As for whether it can be sustained in the long run, it remains to be seen.
04 Dex Bot emerges suddenly It can be said that before the BRC20 inscriptions came into being, almost 90% of the local dog issuance was on Ethereum. There were dozens or hundreds of new projects every day, and some players kept an eye on the dynamics on the chain every day, hoping to get returns beyond expectations. With the increase in players, good tools are even more powerful for investors, and Dex Bot was born in this environment. In mid-May, the Unibot project was established and became a phenomenal product in just over two months. It made a profit of tens of millions of US dollars in a bear market, causing the entire track and related concepts to be hyped. However, after the launch of Banana Gun in September, Unibot's market share was compressed due to its better operating experience. Recently, due to the fact that the limelight has been overshadowed by Bitcoin and SOL, the transaction volume on the Ethereum chain has plummeted, and the demand for Dex Bot has naturally decreased. However, as a new narrative that has emerged this year, it deserves continued attention.
04 Ethereum Inscriptions & meme The emergence of Ethereum Inscriptions protocol Ethscriptions can be said to be a complete replica of Bitcoin Ordinals protocol, and since it was proposed, it has been rejected by everyone. The mainstream view is that it is a historical reversal, but it cannot withstand the outbreak of Bitcoin ecology, coupled with other reasons, which also brought it up. At present, in the entire Ethereum inscription track, except for ETHs, there are no other bright spots. Although there are some micro-innovations and the emergence of runes + NFT, most of them are short-term speculation, FOMO wave and then a mess. In addition, the inscription casting craze of new public chains is also lively when it is played, and the performance of various public chains is tested, but in the end most of them are short-term prosperity. As long as you dare to take over, you will be buried, without exception. As for whether there will be new narratives and new things in the relevant tracks in the future, we need to continue to pay attention. (Note: FOMO: Fear Of Missing Out, fear of missing opportunities)
Meme, as one of the mainstream narratives in the last round, has produced many phenomenal projects such as doge and shib. In this round, the emergence of PEPE can be said to have further stimulated the activity on the Ethereum chain. In mid-2023, users began to FUD institutional tokens, and the project was launched only to dump their chips, and retail investors were always at the bottom of the list. The Meme coin just solved this part of the pain point. Relatively speaking, it is fairly distributed, community-driven, and has no threshold. Anyone can participate. The subsequent explosion of BRC20 is also related to this. Although many projects are extremely hot in the short term like meteors, there is no follow-up after the heat, and very few really run out, but it is indeed a track for retail investors recently.
05 Others In addition to the above, the performance of other tracks is mediocre. In the DeFi track, RWA represented by Maker began to expand outward, but the response was mediocre. The old DeFi represented by Uniswap began to expand inward, making some technical micro-innovations and launching full-chain expansion plans, hoping to further occupy more market share; the chain game track is in a completely stalled state. Although some chain games have been launched on other chains and full-chain games have also been promoted to a certain extent, there has been no explosive product that has completely detonated the market; in the NFT track, although Yuga Labs has made some efforts in games, the response has been mediocre, and its own NFT has not made much progress this year. Azuki raised 20,000 Ethereums at the end of June, but the final product directly copied Red Bean, draining the already scarce liquidity of the NFT market, and the Red Bean series also ushered in a wave of declines. Regarding the NFT trading market, OpenSea has directly shrunk from its previous valuation of tens of billions to 1.4 billion, or even less, and institutions have lost more than 90%. Blur is also constantly eroding OpenSea's market share. Projects on Ethereum have already occupied market share. It can be said that it is currently in a red ocean with fierce market competition. It is extremely difficult to achieve any results. However, Bitcoin is just the opposite. It can be directly copied from Ethereum. It is a completely undeveloped virgin land.
On the other hand, due to the recent poor performance of Ethereum, many people began to FUD, believing that the reason was that Vitalik had major problems in the decision-making level of Ethereum development, and the decentralization of tax authority would lead to the separatism of Layer2 princes and the weakening of Ethereum's value capture. Regarding this statement, everyone has different opinions. Finally, about the things worth looking forward to in Ethereum: one is the Cancun upgrade, which is good for the second layer; the other is the approval of the Ethereum ETF application after the approval of the Bitcoin ETF.
