Jan. 2022, simon@footprint.network

Data Source: public chainThe year of the outbreak, the yearEthereumEthereumFootprint AnalyticsThe data shows that the market share of Ethereum TVL has dropped from nearly 100% at the beginning of the year to about 65%.

Footprint Analytics - Market Share of TVL by Chain

image descriptiongasEthereum has the first-mover advantage, and there are many excellent projects on the chain, making it difficult for users to find a public chain that completely replaces it. However, under the PoW (Proof of Work) mechanism, the work efficiency of the entire network is low, and the throughput is slow, causing network congestion, and thus

In the long run, Ethereum will gradually lose the advantages accumulated in the early stage one day. However, Ethereum has long been aware of and gradually promoted the upgrade of Ethereum 2.0. It has carried out four hard fork upgrades throughout 2021, making full preparations for PoS (Proof of Stake) to replace PoW.

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Ethereum's Four Hard Fork Upgrades

• There will be many major changes in the upgrade of Ethereum 2.0, so all nodes need to use the same version to maintain consistency. Compared with soft forks, the upgrade of Ethereum needs to be completed with hard forks. Since nodes that have not been upgraded to the latest version will not be accepted by other upgraded nodes, hard forks can upgrade all nodes to the latest version .

Berlin upgrade in April

• Reduce the cost of ModExp gas fees through EIP-2565, EIP-2718, EIP-2929 and EIP-2930, introduce new transaction types to easily support more transaction types, and solve the largest DoS attack vector still on the Ethereum protocol The impact of the proposal can alleviate the problems such as the increase of gas fee caused by the proposal.

August London Upgrade

• Modified the gas fee structure through EIP-1559, EIP-3198, EIP-3529, EIP-3541, and EIP-3554, proposed a burn mechanism, and reduced the gas return to a maximum of 20%, by rejecting new contracts starting with 0xEF bytes The deployment paves the way for later EVM improvements, again delaying the difficulty bomb until December.

October Beacon Chain Altair Upgrade

• After the upgrade, developers can build a light client to interact with the network without keeping the entire blockchain in sync at all times, making it easier and simpler. The punishment for pledgers who do not perform their duties will change from a permissive state at the beginning to a strict state, and the pledged ETH will be truly cut. This upgrade ensures that the beacon chain of Ethereum can run smoothly before the merger.

Another postponement of the difficulty bomb until the summer of 2022, delaying the "freeze" mining mechanism activated during the transition to PoS to prevent the arrival of the Ice Age.

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Review London Upgrade

Among the four hard fork upgrades, the London upgrade has received the most attention, mainly because the upgraded EIP-1559 involves a wider range of users, miners, and ETH holders.Footprint Analytics was featured in the AugustFootprint Analytics: Who is the beneficiary after the EIP-1559 upgrade?

This upgrade was analyzed in ", this upgrade makes the gas fee change more stable by allowing the block size to be variable, and changes the gas fee by splitting it into a base fee (Base Fee) and a priority fee (Priority fee). The income of miners and the mechanism of destroying the base fee have also changed the economic model of ETH.

• The main impacts of this upgrade are:

For users, the efficiency of gas fees is improved.

• Since the price of the base fee is based on the usage of previous blocks, the base fee can vary by up to 12.5% ​​between blocks, making it easier for users to accurately predict the amount of gas they will spend. On the whole, after the upgrade, the gas fee spent by users will not be significantly reduced, but it will be more stable and predictable than before the upgrade.

For miners, part of the income is lost.

• After the upgrade, miners will no longer receive the entire gas fee as before, and the income will only be part of the priority fee, which will reduce a lot of income compared to before, and future income will also mainly rely on block rewards.

For the Ethereum ecosystem, the ETH economic model has changed.

Five months after the burning mechanism started, as of December 31, it can be seen through Footprint Analytics that a total of 1,317,700 ETHs have been burned, about 6.22 ETHs are destroyed every minute, and 1.43 ETHs are burned per block .

Footprint Analytics - ETH Burnt

The number of users who choose EIP-1559 as the transaction type is also gradually increasing, from 50% at the beginning to 70%, and an average of about 10,000 ETH will be destroyed every day.

Footprint Analytics - Daily ETH Burnt

Although the London upgrade did not fundamentally solve the problems of poor network experience and high transaction fees, this upgrade laid the foundation for Ethereum 2.0. Delaying the difficulty bomb ensures that miners can still earn income under the PoW mechanism without "strikes" until the beacon chain is ready to implement PoS.

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Deflation is about to start?

The upgrade of London opened the first step of ETH deflation, and the expansion of Ethereum 2.0 and layer 2 will continue to push forward. The Ethereum main chain will complete the merger with the beacon chain in 2022. After the upgrade, the PoW will be converted to a PoS mechanism, and the block structure will be changed from a single chain to a multi-chain shard.

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epilogue

In 2021, we saw that the price of ETH rose from US$738 at the beginning of the year to US$4182 in May. After experiencing a sharp drop in currency prices, the price of ETH gradually recovered, reaching an annual high of US$4826 in November. Although the vigorous development of various projects under DeFi Summer has contributed to the flames, the reduction in the rate of inflation after the London upgrade also has a certain impact.

Footprint Analytics - ETH Price

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