With the new round of bull market Bitcoin narrative becoming the main line, the Ethereum ecosystem, which has always been optimistic about the bear market, is gradually weakening, 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 the new public chain".
Although the price of Ethereum has doubled in the past year, it is still sprayed by many people, and even began to have major problems with FUD Vitalik's decision-making level, the main reason for this phenomenon is that everyone has too high expectations for ETH (at least outperforming the pie), and it is also related to SOL's over-stellar performance. (FUD: Fear, Uncertainty, Doubt, short for fear, hesitation, and doubt, refers to the negative feelings spread by people and cause panic among investors.) ）
01
Ethereum has entered complete deflation
Year-to-date, the number of Ethereum has decreased from 120.5 million to the current 120.1 million, and a total of 340,000 ETH burned in a year, worth $750 million. With the arrival of the bull market, the amount of burns is bound to increase significantly.
Changes in the total supply of Ethereum, source: ultrasound.money
02
LSD track erupts
Since the completion of the merger of Ethereum in September 2022, after a few months of development, it has become a hot spot in the first quarter of 23, as the end of the bear market, the stable annualized income of about 4% has attracted a large number of funds to join, and LSD projects such as Lido, RPL, and SSV have ushered in a wave of outbreaks, and the Ethereum pledge rate has been rising, as of January 3, 23, the pledge volume has reached 28.8 million.
Changes in Ethereum stake, source: dune.com
With the continuous expansion of the volume of pledged funds and the approach of Shanghai's upgrade, a small number of project parties began to target this part of the funds and launched their own DeFi products, through layers of nesting dolls, to improve the utilization rate of pledged funds, after the wealth effect, more institutions and funds began to pour in, layout related tracks, thereby deriving LSDFi-related tracks, and gradually improving LSD-related infrastructure.
On the one hand, there are unsatisfactory places, with the increase of the pledge rate, Lido will occupy more than 1/3 of the Ethereum staking market share, the staking track is too centralized, and the market is beginning to worry about whether the growth of LIdo threatens the consensus security of the Ethereum mainnet. There are various opinions about whether Lido centralization is harmful.
On December 28, Vitalik mentioned the DVT (Distributed Validator Technology) technology to solve related problems from the perspective of staking centralization and verification decentralization, and on November 28, 2023, Lido DAO has begun to adopt DVT technology provided by Obol Network and ssv network.
The market share of each project in the pledge track, source: dune.com
With the advent of the bull market and the rise of Ethereum, the Ethereum pledge track has become a 100 billion market size almost a sure thing, and 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
Layer 2 is in full bloom
Layer 2 has grown into an important part of Ethereum. Each Layer2 has made different progress in various aspects, and it can be said that each chain has its own characteristics, let's briefly review it.
Layer2 TVL前十排名，来源：L2 Beat
- Optimism
With the establishment of the bottom of the bear market in 2022 and the beginning of 2023, the price of Optimism ushered in a wave of outbreaks, although the ecological side is obviously weaker than Arbitrum in all aspects, but the project has found a different way, relying on modular + one-click chain technology OP Stack cooperates with a number of projects, including BASE, opBNB, Manta Network, DeBank and many other well-known project parties choose to use OP Stack technology. Recently, because of the confirmation of the specific time of the Cancun upgrade, the second layer such as Optimism has once again attracted everyone's attention.
- Arbitrum
In the first quarter of last year, with the issuance of Arbitrum's Token, the Arbitrum ecosystem ushered in a big explosion, and was even called "Arbitrum Summer", representing projects such as GMX, MAGIC, RDNT, GNS, AIDOGE, etc., most of which have been launched on BN.
In the past year, watching the market value of the two Layer2 circulating floats upward, but the price of Token can be said to be immovable, completely reduced to an institutional "ATM", it can be said that the project is very good in all aspects, but it only gives retail investors a mouthful of soup.
- zkSync&StarkNet
zkSync and StarkNet can be described as PUA duo in the industry, relying on the handling fee to receive a soft hand, the wool party has been completely reversed, especially StarkNet, the project party has been operating all kinds of commotion, the community and the project party have become like water and fire, the wool party hates the itch, and zkSync insists on pua to the end, and even rumors that 2025 will issue Tokens. However, the progress of ZK is generally slow, and there is nothing worth talking about in 2023.
- Base
Base has attracted a lot of capital in the short term by relying on the wealth effect of the ecology, and has risen through several waves of traffic, but most of the ecological projects are not long-lasting. At the beginning of August, the launch of the Base mainnet was approaching, and a thousand-fold meme Token Bald appeared on the chain, with a market value of more than 100 million US dollars in 2 days.
Not long after, the Ponzi gameplay of the social track project Friend Tech and the blessing of Paradigm Airdrop are expected to make it one of the few phenomenal products in the bear market, and bring hundreds of thousands of users to the Base chain, completely establishing the position of the Base chain in Layer 2, but at present, Friend Tech is in a cool state.
- Blast
Launched on November 21, relying on blur's own traffic and Airdrop's expected Ponzi gameplay, although there was a problem of centralized wallet management halfway, it still did not prevent it from going online about two months ago, and its own TVL exceeded 1 billion US dollars, and it has now become another place for large capital users in the industry to stabilize their financial management.
- Manta Pacific
Recently, in less than three weeks, TVL has skyrocketed from 30 million to 650 million, the same financial management method as Blast, through the New Paradigm activity to attract funds to pledge to obtain Airdrop, the selling point is that the pledge period is shorter than Blast, and the capital utilization rate is high.
- Metis
Recently, the Cancun upgrade is approaching, Metis has sprung up, the market has performed well in the short term, and TVL has also improved to the top three in the short term, because most Layer 2 has the problem that Sequencer (sequencer) is too centralized, and Metis is doing the decentralized Sequencer solution. As for whether it is driven by technology or capital, there are different opinions.
- ZKFair
After the gas fee Airdrop event was opened, 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 PUA users are very conscientious, and as for the follow-up development, they can continue to pay attention.
It can be seen that the development of the second layer is to take advantage of each other's advantages, as the market gets better, the rise is getting faster and faster, more and more simple and crude, many no longer need months or even years to accumulate slowly as before, but through a series of stimuli, a short period of time to occupy the market, as for whether it can continue for a long time, it remains to be seen.
04
Dex Bot is on the rise
It can be said that before the BRC20 inscription was raised, almost more than 90% of the Earth Dog issuance was on Ethereum, and dozens or hundreds of new projects were produced every day, and some players stared at the on-chain dynamics every day, expecting to obtain more than expected returns. With the increase in players, good tools are a great tool 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 2 months, making tens of millions of dollars in a bear market environment, resulting in the entire track and related concepts being 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 overshadowing of Bitcoin and SOL, the transaction volume on the Ethereum chain has plummeted, and the demand for Dex Bot is naturally decreasing, but as a new narrative that has run out this year, it is worth continuing to pay attention to.
Dex BOT trading market share, source: dune.com
04
Ethereum inscription &meme
The emergence of the Ethereum inscription protocol Ethscriptions can be said to be a complete copy of the Bitcoin Ordinals protocol, and since it was proposed, it has been rejected by everyone.
At present, there is no other eye-catching existence in the entire Ethereum inscription track, except for ETHs, although there are some micro-innovations and the emergence of runes + NFTs, but most of them are short-term hype, FOMO and then chicken feathers. In addition, the inscription casting fever of the new public chain is also, it is lively when it is played, and the performance of each public chain is tested, but in the end, most of them are short-term prosperity, as long as they dare to take over, they are all buried, without exception. As for whether there can be new narratives and new things running out of the relevant tracks in the future, we need to continue to pay attention. (Note: FOMO: Fear Of Missing Out)
As one of the mainstream narratives in the last round, Meme has run out of doge, shib and other phenomenal projects, and in this round, the emergence of PEPE can be said to have further stimulated the activity on the Ethereum chain. In the middle of 2023, users will start FUD Institutional Token, and the project will be launched just to dump their chips, and retail investors will always be at the last stick.
The Meme coin just solves this part of the pain point, relatively speaking, fair distribution, community-driven, no threshold, anyone can participate, and the BRC20 that exploded after the explosion is not unrelated to this. Although many projects are meteor-like short-term hot and extremely high, there is no more after the heat, and very few really run out, but it is indeed the closest track to retail investors.
05
other
Other than that, the rest of the track was mediocre.
In the DeFi track, RWA, represented by Maker, began to expand outward, but the response was mediocre, and the old DeFi represented by Uniswap began to expand inward, carrying out some technical micro-innovations, and launching a full-chain expansion plan, hoping to further occupy more market share;
Although some chain games have been launched in other chains, and full-chain games have also been promoted to a certain extent, they have not completely detonated the market.
NFT track, although Yuga Labs has made some efforts in the game, but the response is mediocre, and its own NFT has not made much progress in this year, Azuki raised 20,000 Ethereum at the end of June, but the final product was directly copied red beans, siphoning away the already small liquidity in the NFT market, and the red bean series also ushered in a wave of decline. Regarding the NFT trading market, OpenSea has shrunk from the previous valuation of 10 billion to 1.4 billion, or even less, and institutions have lost more than 90%. Blur is also eating into OpenSea's market share. Projects on Ethereum have occupied market share, so to speak, it is currently in a red ocean, the market competition is fierce, and it is difficult to make some achievements, but Bitcoin is just the opposite, and it can directly copy Ethereum, which is completely undeveloped virgin land.
06
brief summary
The above are some of the new innovations that I have personally paid attention to about Ethereum this year, among which concepts such as account abstraction and AI are also under construction, but there are no phenomenal products, so they are not listed one by one.
On the other hand, due to the recent poor performance of Ethereum, many people have begun to FUD, believing that the reason is that Vitalik has major problems at the decision-making level of Ethereum development, and the decentralization of tax authority will lead to the division of Layer 2 princes and the weakening of Ethereum's value capture.
Finally, the next things worth looking forward to about Ethereum: one is the upgrade of Cancun, which is good for Layer 2, and the other is the approval of the Ethereum ETF application after the Bitcoin ETF is approved.