Under the new crown virus, how does Ethereum perform in the global market shock?

Editor's Note: This article comes fromCrypto Valley Live (ID: cryptovalley), Author: ConsenSys, translation: Ziming, reprinted by Odaily with authorization.

Editor's Note: This article comes from

Crypto Valley Live (ID: cryptovalley)

Crypto Valley Live (ID: cryptovalley)

Over the past few weeks, decentralized finance protocols have undergone what many consider to be the only test in a digital currency’s life cycle. The test continues (for both DeFi and traditional finance) as the world reels and recovers from the COVID-19 pandemic.

On February 12, the Dow, Nasdaq and S&P 500 all closed at record highs. A month later, stock market circuit breakers were triggered around the world to curb panic selling, with U.S. markets suffering their biggest one-day percentage drop since the 1987 crash. March 12th proved that traditional finance and decentralized finance are still quite related. As traditional markets contracted on Black Thursday, so did digital currency markets, with ETH and BTC prices dropping more than 40% in less than 24 hours.

Here are six data-driven takeaways from last month's intense trading activity. These views are derived in conjunction with Alethio, ConsenSys' analytics platform, specifically Alethio's API and custom reporting tools.

secondary title

Hash rate (hashrate) refers to the operating speed of the Ethereum mining machine, specifically refers to the number of hashes guessed per second, which is used to solve the random number (nonce) of a block transaction. During March 12, the most unstable day, the hashrate of the Ethereum mainnet stabilized at around 170TH/s. During the week from March 12th to 18th, the daily average hash value was about 165TH/s, which was almost the same as the daily average level of about 167TH/s in March. Ethereum’s hash rate remains stable compared to other blockchains such as Bitcoin, which saw a 20% drop in mining hash rate. Overall, this means that during periods of price volatility, the majority of miners remain on the network.

secondary title

Gas prices surged but quickly returned to normal levels, and Ethereum’s incentive mechanism came into play

secondary title

Decentralized exchanges (DEXs) handle this historic volume with zero downtime

During the market drop on March 12, DEXs handled incredible volumes without any major issues, attacks, or outages. DEXs recorded a volume of 550,000 ETH (an increase of more than 5 times from the previous day), and transactions by 6,639 unique traders (an increase of nearly 50% from the previous day). Among the 17 active DEXs detected by Alethio’s dex.watch, about $70 million was traded on March 12 alone, of which Uniswap’s trading volume was $42 million, nearly 6 times the average daily trading volume in March . By March 17, ETH’s daily trading volume and the number of unique traders across DEXs had returned to pre-slump levels. This shows that although the panic is real, it is also short-lived.

In contrast, U.S. stock exchanges halted trading four times in mid-March. Market circuit breakers were instituted after the original Black Monday in 1987 to allow the latest accurate information to flow into the market. Circuit breakers were last updated in 2013 to prevent high-frequency trading-driven flash crashes. However, an unintended consequence of this disincentive may be that it interferes with efficient pricing, exacerbating panic selling by traders trying to defeat the disincentive. Another interesting data point: Robinhood, a commission-free trading platform, experienced a technical glitch in early March. The outage was not related to a circuit breaker, but rather to stress on Robinhood's infrastructure.

Interoperable (Interoperable) DeFi protocol allows users to quickly move assets and interact across platforms

On March 13, the number of active users of the DeFi protocol reached 9,267 within 24 hours, accounting for 11.5% of the total 80,000 unique users in Q1, reaching a peak.

However, more interesting than the overall number of DeFi users is the number of users interacting with multiple DeFi protocols, because they can give people a glimpse into the future trends of the network and the interoperability between different platforms. Comparing user behavior between January, February and March, it is clear that during the market turmoil in mid-March, users migrated from the long-term game of borrowing and lending, gathered around DEXs such as Uniswap and Kyber, and turned to stablecoins and other safe haven assets.

This increased user overlap due to Black Thursday, the dense yellow cloud of users interacting with Uniswap and Kyber above, reflects the ease with which DeFi users can swap assets and move between exchanges. DeFi protocols like Kyber also aggregate on-chain liquidity sources like Uniswap and other DEXs, enabling users to invoke a single smart contract function for more efficient price discovery.

secondary title

A stablecoin is a digital currency asset whose value is pegged to a fiat currency or a basket of assets to prevent wild fluctuations. Digital currency stablecoins like Dai require Ether (the native token of the Ethereum network) as a collateral asset, which needs to be held in smart contract escrow. The market capitalization of stablecoins continues to trend upwards as digital currency holders seek to de-risk their assets while maintaining liquidity. The chart below shows the days when Uniswap exchange processed the largest transaction volume in each month of this quarter. On March 13, Dai and USDC alone accounted for more than 80% of Uniswap trading volume.

As many have analyzed, the Dai stablecoin underwent a unique stress test last month. On March 12, we observed a sharp drop in the DeFi score of the Dai coin pool through Codefi’s Defi score (the score scores DeFi lending platforms based on factors such as smart contract risk, collateral, liquidity, and centralization risk). During the market turmoil, users rushed to borrow Dai on platforms like Compound and dYdX to avoid liquidating their collateralized debt positions (CDPs). As people borrow Dai, individual asset pools become more utilized and less liquid. Limited liquidity drives a pool’s DeFi score down (as lenders face increased risk of exiting positions). The price drop in mid-March liquidated Maker Vaults below 150% collateralization in an instant, leaving over $4 million worth of Dai undercollateralized while the stablecoin sat above the $1.00 peg.

The increase in network gas fees has had some consequences for the Maker protocol. MCD-Medianizer, Maker's on-chain transaction flow (price feed) got stuck in the transaction queue, stalling accurate price updates. This allows some Vault owners to salvage their CDPs, but for others it means that they may face immediate and complete liquidation once the value intermediary is updated. Additionally, some liquidators took advantage of the stagnant transaction flow to front-run bids in debt auctions by increasing transaction fees, and received a total of over $8 million in ETH at 0Dai bids.

These anomalies have spurred a conversation across the DeFi community about the need for circuit breakers similar to traditional markets, and whether these are actually anomalies, or whether the system is functioning as designed. In the days following the market turmoil, MakerDAO added the fiat currency-backed and more centralized USDC stablecoin as collateral on the platform, and recently auctioned $5 million in MKR tokens to cover losses, making Dai more stable. Price close to $1."secondary title"Digital assets are more correlated with assets in traditional financial markets, but digital transparency makes them different

Last month’s market turmoil proved that digital currencies and traditional assets are still connected, as evidenced by the bumps in the price correlation graph below for the S&P500, BTC, and ETH.

For many investors, digital currencies remain an "alternative investment" in a broader portfolio and are not a fully adopted hedge against the unpredictability and opacity of traditional markets. Through the entry of users and the continuous improvement of the macro economy of DeFi (taking Dai as an example), the decoupling and integration of traditional finance and decentralized finance

decoupling