Ethereum continues to rise due to DeFi

By Aubrey Swanson·20 July 2020·1 min read

Key Points

Ethereum's transaction throughput has surged to levels not seen since the 2018 ICO boom, when the network hit record highs in both transaction count and asset value.
The resurgence stems from decentra

Ethereum's transaction throughput has surged to levels not seen since the 2018 ICO boom, when the network hit record highs in both transaction count and asset value. The resurgence stems from decentralized finance, a sector that has mushroomed during the pandemic despite broader economic turmoil. DeFi platforms cluster on Ethereum, driving the network's congestion and pushing transaction costs upward.

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On January 4, 2018, Ethereum processed 1,349,890 transactions. On July 13, 2020, that number stood at 1,151,834. The volume difference masks the composition shift: 2018 belonged to token launches; 2020 belongs to trading and lending protocols.

DeFi currently represents 1.44% of the total cryptocurrency market, with tokens like Compound, Aave, and Synthetix commanding roughly $455 million in aggregate value. Investors are accumulating ether in preparation for staking rewards as Ethereum 2.0 approaches.

The surge has collateral damage. Gaming platforms running on Ethereum have seen participation drop as transaction fees consume a larger percentage of each transaction. A five-dollar gas fee crushes a small game transaction worth a few dollars. That same fee barely registers for a DeFi trade worth thousands. The Blockchain Game Alliance documented the impact in a recent report.

Ethereum users are banking on 2.0 to ease congestion. Most applications have resisted migration to layer-two scaling solutions, preferring to wait for the protocol upgrade. DeFi momentum will define whether Ethereum maintains its position as the network prepares for its next upgrade.

MiningPool content is intended for information and educational purposes only and does not constitute financial, investment, or legal advice.

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