Ethereum: Can this new trend become a cause of concern ahead of the ‘Merge’

Polygon not too long ago commissioned a report to check the Layer 2 scaling options and create a framework for comparability. It makes use of the instance of the Ethereum for finding out layer-1 ecosystem challenges and throws mild on ETH layer-2 scaling options.

Notably, the Ethereum market cap elevated multifold from its earlier excessive of $125 billion to roughly $500 billion in 2021. It was an enormous yr for the Ethereum community with the growth of DeFi tasks and NFTs on this planet.

Stat-alert

The statistics are additionally suggestive of an enormous surge in exercise on the well-known blockchain. The common every day transactions have been round 1.5 million by 2021 displaying a 35% improve yr over yr. The every day energetic addresses clocked at 600,000 on the community displaying a 40% surge yr over yr.

The Whole Worth Settled confirmed an enormous leap in its year-over-year worth. The full worth settled was $7.7 trillion which represented a 500% improve. Stablecoin accounted for the most important share inside this, with a share of 54% at $4.2 trillion.

One of many key findings within the report places the Ethereum worth settled in opposition to apex bank card corporations comparable to Visa and Mastercard. The full buy quantity on Visa stood at $8.9 trillion (in 2020) whereas Mastercard recorded $4.7 trillion (in 2020). Ethereum, nevertheless, was far away from fintech large PayPal which accounted for $1.3 trillion (in 2021) looking back.

Ethereum’s TVL reported an excellent yr with the quantity surpassing $150 billion in 2021 and rising ~750% yr over yr. The decentralized exchanges elevated by an element of ten in 2021 on Ethereum.

Standing at $750 billion, they have been nonetheless unable to compete with conventional exchanges comparable to Coinbase at $1.7 trillion. 2021 was particularly an excellent yr for the NFT market with Ethereum on the coronary heart of it.

The rise of NFT marketplaces immensely elevated the exercise on Ethereum. OpenSea alone processed $13 billion price of NFT buying and selling quantity.

What’s the draw back right here?

Whereas these astronomical numbers have led to a widespread exercise quantity on the Ethereum community, they’re additionally the explanations for the headwinds. The dramatically elevated quantity has led to scaling challenges on the community. These challenges are seen with the rise in transaction charges.

The common charge per transaction on Ethereum elevated from $1.5 in 2020 to as excessive as $21.1 in 2021. The report additional states, “Some customers have stomached these excessive charges and continued to make use of the platform. Others have explored the ‘greener pastures’ of other layer-1 blockchains which have decrease transaction charges however distinct and, oftentimes, inferior safety profiles.”

This can be a significantly worrying pattern for the Ethereum community and it makes the case for Layer-2 options extra wise. The upcoming Merge occasion is seeking to deal with these points and the Ethereum group is certainly looking forward to that.