ethereum remains by far the largest smart contract platform by market cap. Ranked second in market capitalization, the network hosts dapps spanning multiple sectors.
While Metaverse, gaming, and nft activities have since dissipated, DeFi remains, seeing the steady recovery of total value locked (TVL), according to DeFiLlama.
DeFi leads ethereum gas fee generation
The dominance of DeFi on ethereum continues to prove that smart contracts and decentralized ledgers have revolutionized finance. To confirm this position, especially looking at the trends in gas rates and primary source over the years, the managing partner of DragonFly, turned to x, x.com/hosseeb/status/1840491937729798447″ target=”_blank” rel=”noopener nofollow”>exchange CoinShares data.
Following the launch on ethereum, CoinShares analysts note that gas fees continue to grow. There was a notable drop after the ICO mania of 2017 and 2018. Annual gas fees generated fell from $143 million in 2018 to just $46 million in 2019.
However, after this contraction, which occurred after the crypto winter of 2018, the gas fees generated skyrocketed. The surge in momentum coincided with the popularity of ERC-20 tokens, allowing protocols to issue tokens, and the growing adoption of DeFi.
The DeFi resurgence follows the launch of Uniswap, a decentralized exchange (DEX), in late 2018 and the introduction of the automated market maker (AMM) model, which decentralized liquidity provision. DEXs form a large part of DeFi. Some of the most popular DeFi protocols, according to DeFiLlama, are DEXs like Curve and Uniswap.
From 2018 to 2020, the network derived its fees from ERC-20 transfers. However, as DeFi gained momentum on ethereum in the latest bull cycle of 2021, the majority of gas fees come from DEXs.
DEX Gas Fees Fall as ERC-20 and Stablecoin Transfers Grow, Blame Dencun?
Interestingly, DEX gas fees continue to fall, going from $2.4 billion in 2021 to $512 billion in 2024. Meanwhile, in September 2024, ERC-20 transfers rank second, down from third, where it has been from 2021 to 2023. Last year alone, ERC-20 transfers, a decent portion of meme coins like PEPE and stablecoins, generated $223 million for validators.
Furthermore, according to the data, Layer 2 gas rates continue to fall. In 2023, ethereum generated $247 million in fees from layer 2 platforms like Arbitrum and Optimism. According to CoinShares, it was at $90 million at the time of publication. The sharp drop is mainly due to the activation of Dencun.
Featured image from Canva, TradingView chart
