Ethereum remains by far the largest smart contract platform by market capitalization. The network, which ranks second on the market capitalization leaderboard, hosts DAPPs across multiple sectors.
According to DeFiLlama, while metaverse, gaming, and NFT activity have since died down, DeFi is here to stay, seeing a steady recovery in total value locked (TVL).
DeFi takes the lead in Ethereum gas fee generation
The dominance of DeFi on Ethereum shows that smart contracts and distributed ledgers have revolutionized finance. To confirm this position, and specifically to look at gas price trends and key sources over the years, DragonFly's Managing Partner, X, decided to share data from CoinShares.
Analysts at CoinShares note that gas prices have continued to rise since its launch on Ethereum. After the ICO frenzy of 2017 and 2018, there was a notable drop-off. Annual gas costs incurred decreased from $143 million in 2018 to $46 million in 2019.
However, after this contraction that occurred after the crypto winter of 2018, the gas fees incurred increased explosively. This resurgence in momentum coincides with the popularity of ERC-20 tokens, allowing protocols to issue tokens, and increasing adoption of DeFi.
The resurgence of DeFi follows the launch of Uniswap, a decentralized exchange (DEX), in late 2018 and the introduction of an automated market maker (AMM) model to decentralize the provision of liquidity. DEXs are a big part of DeFi. Looking at DeFiLlama, some of the most popular DeFi protocols include DEXs such as Curve and Uniswap.
From 2018 to 2020, the network earned fees from ERC-20 transfers. However, as DeFi gained momentum on Ethereum during the last bull cycle starting in 2021, most of the gas fees came from DEXs.
DEX gas fees fall due to increase in ERC-20 and stablecoin remittances, is it Denkun's fault?
Interestingly, gas prices from DEXs continue to fall, decreasing from $2.4 billion in 2021 to $512 billion in 2024. Meanwhile, as of September 2024, ERC-20 remittances ranked second, up from third place in 2021-2021. 2023. Last year alone, ERC-20 transfers generated $223 million for validators, a significant portion from meme coins such as PEPE and stablecoins.
Furthermore, data shows that gas prices from layer 2 continue to be depressed. In 2023, Ethereum generated $247 million in fees from layer 2 platforms such as Arbitrum and Optimism. According to CoinShares, it had reached $90 million at the time of publication. The sharp decline is mainly due to the activation of Dencun.
Featured image from Canva, chart from TradingView
