Cabin Report: 2022 First Quarter Ethereum Ecological Development Report

Cabin VC

特邀专栏作者

2022-04-15 04:09

This article is about 12059 words, reading the full article takes about 18 minutes

The Merge exacerbated deflationary expectations, and the decentralized pledge pool ETH rose 89.52% in a single quarter

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The Merge exacerbated deflationary expectations, and the decentralized pledge pool ETH rose 89.52% in a single quarter

* This report was written by Cabin VC in association with TinTin.

In March 2022, the Federal Reserve will raise interest rates, which is in line with market expectations. The macro situation of the encryption market has improved and the market has stabilized. At the end of March, the total market value of the encryption market returned to US$2 trillion, and ETH returned to above US$3,500, accounting for 17.9% of the market value.

Ethereum is currently in a critical period before the merger of PoW and PoS. Ethereum ranks second in the market value of the encryption market, accounting for 17% - 22% of the long-term market value, which is of great significance to the entire encryption market. This report comprehensively sorts out the Ethereum Q1 data, application layer overview, and historical development cycle, and observes the Ethereum ecological overview, application layer development and trends for reference.

1. Ethereum: Before The Merge

1. Overview of Ethereum Q1 data

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(https://cryptorank.io/price/ethereum)

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（https://www.stateofthedapps.com/stats/platform/ethereum#new）

(Development activity shown on Santiment)

From the perspective of TVL market share, Ethereum accounts for 60.98% of the major public chains, and the quarterly TVL growth rate is 27.18%, which is much higher than the share of other public chains, but the proportion of public chains such as Terra, BSC, and Avalanche has increased. faster. In early March, the TVL of the Ethereum network hit a record low of 55%, and the trend of multi-chain is obvious.

The average number of active Ethereum addresses in this quarter was about 578,732, a slight decrease of 3.92% compared to the average number of 602,388 in the previous quarter. In late March, the number of active addresses in Ethereum reached a high point of 875,201 (within 24 hours), and user activity rebounded.

2. Progress of Ethereum 2.0

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(Ethereum road map: the red stage is the Ethereum 1.0 network, and the green part is the Ethereum 2.0 beacon chain)

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(The Ethereum Foundation is eliminating the terms "ETH 1.0" and "ETH 2.0", and uses the Execution layer and the Consensus layer to illustrate, that is, Ethereum will eventually consist of the execution layer and the consensus layer.)

In the second half of 2021, the "EIP-1559" upgrade of Ethereum 1.0 and the Altair upgrade of the Ethereum 2.0 beacon chain are all prepared for the second phase of The Merge.

In this quarter, the market has strengthened expectations for the merger (The Merge) of the Ethereum 2.0 beacon chain and the Ethereum 1.0 network, and the market has responded in advance to the deflation that Ethereum will bring after The Merge.

The official initial reference time for the merger (The Merge) is June-July, and the specific date of the merger has not yet been determined. After the merger, the two mechanisms are paralleled and eventually shifted to PoS. The opening of The Merge means that the PoW mechanism has been gradually discarded, and the original miners in the Ethereum ecosystem have withdrawn, reshaping the tracks of deflationary currency, decentralized pledge, and graphics card mining.

Whether Ethereum 2.0 can happen smoothly in Q2 depends on the operation of The Merge in the Kiln test network. The speed of progress of the existing ETH 2.0 is in line with community expectations. On March 15, Kiln, the public test network merged with Ethereum, was launched, which means that it has successfully transitioned and upgraded to a complete proof-of-stake (PoS) consensus mechanism. The next step for the developers is to merge the existing PoW test network, and the next step is the main network. According to official data, as of late March, there are more than 106,000 verifiers and 3.4 million testnet ETH on the Ethereum testnet that has transitioned to the POS consensus mechanism.

The technical discussion focus of Ethereum core developers has shifted to the "The Verge" stage after The Merge. It is expected that The Merge will be less difficult to implement and will be delivered relatively smoothly.

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(https://ultrasound.money/)

The current ETH is in a state of inflation, with an inflation rate of about 3%. The annual burning volume of ETH is about 1 million ETH, and the combined ETH issuance will be about 500,000 ETH per year. As of March, the total supply of ETH was about 118.5 million, of which, the number of pledges (Staking) reached 14.5 M, accounting for 12.2%, and the supply of ETH in the contract was 21.6 M, accounting for 18.22%. After the merger happened, ETH’s deflationary expectations increased. Compared to Bitcoin's current inflation rate of 1.73%, the combined ETH's inflation rate will be 4 times lower than Bitcoin's.

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image descriptionhttps://ultrasound.money/）

(ETH burning, supply, and circulation after The Merge; data source: https://ultrasound.money/)

In the Q3 quarter of last year, the EIP-1559 proposal in the upgrade of Ethereum London adjusted the fee mechanism and increased the destruction of the basic fee of ETH, which has reduced the circulation of ETH and objectively added a deflationary effect to ETH.

During the same period, the pledge amount of the ETH 2.0 deposit contract continued to increase steadily, and now there are more than 10,000,000 ETH bets (approximately more than 27 billion US dollars), accounting for about 9% of the current circulation of Ethereum. Among them, 66% of the funds are deposited by exchanges and pledge service agencies, and the largest deposits come from Lido (22%) and Coinbase (15%), which exceed the pledge share of centralized exchanges such as Kraken and Binance. The trend of institutionalization obvious.

Since under the PoS mechanism, the return rate of ETH pledged in Ethereum is based on the number of pledged ETH, it is expected that after The Merge is opened and stabilized, the scale of pledged ETH will expand again. This part of ETH will be locked and cannot be circulated (except pledged derivatives).

Considering the technical improvement and performance improvement after the Ethereum PoS mechanism, the demand of developers has increased, and the scarcity of ETH as a consumer product has increased. ETH in pledge and ETH burned are increasing the scarcity of ETH. The arrival of The Merge will show this more intuitively through data.

3. Before The Merge: Deflation expectations intensify, pledge agreement attracts attention

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interest-bearing assets;

The pledge introduced by Ethereum 2.0 makes ETH a "material of production" in the ecology (ETH holders have the right to obtain income), and this attribute first increases the scarcity of ETH. Regarding The Merge, with the deepening participation of exchanges, DeFi protocols, wallets, and ETH pledge services, the market and the community have expected an increase in the pledge returns after the merger. It is generally believed that "20-25% of ETH's circulation ” is a reasonable range of ETH pledge scale. Considering that more ETH will be locked, and the circulation of newly generated blocks is limited in the short term, there will be further supply constraints.

On the other hand, the prosperity of the DeFi ecosystem, the entry of mainstream institutions, and the outbreak of the public chain market are all emphasizing the "asset" attribute of ETH. ETH is used as trustless collateral in DeFi transactions to provide liquidity to the market. During the peak period, nearly 10 million ETHs were locked in DeFi, and the data in the Q1 quarter was about 4.907 million. These mortgage assets are indispensable in the DeFi ecosystem.

Institutional investors use ETH as a store of value. Grayscale's ETH holdings can well reflect the optimistic attitude of institutions:

A variety of factors have driven the scarcity of ETH to increase. When the macro market in the encryption market has stabilized, but hot spots such as NFT and DeFi are obviously insufficient, The Merge, as an important step in the upcoming transformation of the consensus mechanism, has made Ethereum deflation expectations in the short term. Pushed to climax. After the reconstruction of the original ETH ecological relationship and the gradual withdrawal of miners, this change gave birth to a new track, which is expected to relay market hotspots:

(1) Pledge derivatives

Pledge derivatives represent staking ETH and obtaining ERC20 Token for normal transactions, providing liquidity for ETH, usually with a certain premium.

Centralized staking

Centralized staking mainly includes ETH 2.0 Staking service providers. Currently, centralized exchanges, mining pools, wallets or custodians all provide ETH 2.0 Staking services. Such platforms already have a large amount of liquid ETH in reserve and can provide this service without increasing user costs. It is expected that such platforms will be able to integrate these services in the future and become an important new business share.

At present, trading platforms represented by Kraken and Binance charge commissions of more than 15% for custody services; in institutional custody services such as Coinabse, Midas, SwissBorg, and Bitcoin Suisse AG, service commissions for institutional users are also more than 15% . In the ETH 2.0 Staking service, service providers such as Stakefish, P2P Validator, and Stakewise that have not yet issued tokens charge a commission of about 10%.

However, centralized staking platforms are facing problems of over-centralization, such as the possibility of joint election bribery in the early stage.

decentralized staking

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(Data source: DuneAnalytics)

Lido

Lido is currently the largest decentralized staking pool in the market, allowing users to earn staking rewards without locking assets or maintaining staking infrastructure. Lido currently accounts for more than 80% of the entire ETH2.0 staking market share. Lido adopts a multi-chain expansion strategy. In addition to ETH, the protocol also provides liquidity staking of LUNA, SOL, KSM and MATIC. Lido's previous financing has received a total of about 140 million US dollars, mainly led by a16z and Paradigm.

RocketPool

RocketPool is one of the earliest Ethereum staking protocols and has grown rapidly recently. Rocket Pool's model aligns interests between the protocol and node operators by requiring node operators to stake RPL tokens, and minimizes trust assumptions by automating the process of joining the network. The protocol focuses on Ethereum, and currently available investors include ConsenSys Ventures.

SSV.network

SSV.network is a fully decentralized open ETH2.0 pledge network, developed based on Secret Shared Validator (SSV), the platform provides an open foundation for users, pledge pools, large institutions and others who need to run Ethereum validators facility. SSV has received US$188,000 Grants from the Ethereum Foundation. In addition, it also received $10 million in financing from Coinbase, Lukka, and DCG.

(2) GPU graphics card mining

Mining machine manufacturers and miners in the original ecology may tend to look for new GPU graphics card mining projects and continue to use GPU graphics cards as mining machines with the core of computing power.

Take the recent GPU graphics card mining project Aleo as an example:

Aleo is a recently popular GPU graphics card mining project. It uses zero-knowledge cryptography to build a private and scalable underlying blockchain. Aleo moves smart contract execution off-chain to support a variety of decentralized applications, making applications completely private and scalable. Aleo miners do not need to re-run each transaction, only to verify its correctness.

Aleo received $28 million in Series A financing, led by a16z; $200 million in Series B financing, led by Kora Management LP and SoftBank Vision Fund 2, with participation from Tiger Global, Sea Capital, Samsung Next, Slow Ventures, and a16z. This became the largest round of financing in the field of zero-knowledge proofs, with a valuation of up to $1.45 billion. In a recent testnet event, its test nodes exceeded 10,000.

(3) ETC (Ethereum Classic) ecology

ETC is a hard-forked currency of Ethereum after 1,920,000 blocks, and its function is very similar to that of Ethereum. It follows the original chain of Ethereum, and insists that the PoW consensus will not change to the PoS consensus. It has modified the Token supply policy with reference to the mining decrement and quantity upper limit mechanism set by Bitcoin.

Mining machines originally used for ETH can be directly used for ETC mining. In the week from March 16th to March 23rd in this quarter, ETC rose by as much as 87.65%. Its upcoming production cuts and expectations of idle mining machine conversion are the main reasons for this rise.

2. The ecological development of Ethereum

1. Ethereum cycle review

The ETH white paper was born in 2013 and is the first blockchain smart contract platform. Its market value has gone through cycles of 2013-2014, 2017-2018, 2020-2021, and 2021-present. Combined with the development history of the public chain, the ecological development history and ecological incentives of Ethereum are the best reference for other public chain ecology.

The development nodes and driving factors of Ethereum over the years:

End of 2013: The Ethereum white paper was born, and Ethereum became the first blockchain smart contract platform.

2014: The non-profit Ethereum Foundation is established.

2015: First marketplace for Consensys, founded by Ethereum co-founder Joseph Lubin.

2016: Ethereum hard fork. The Ethereum development team splits.

2017: ICO boosted the market value of Ethereum to exceed 100 billion.

2018: The technical focus shifts to scaling issues, and core protocol developers increase.

2019: Constantinople upgrade;

2020: Ethereum 2.0 mainnet deposit contract. In 2021, Ethereum will reach a new high; London upgrade (including EIP-1559 proposal);

Q2 2022: The Merge is expected to be delivered in the second quarter of 2022;

The rotation of Ethereum’s ecological sector and the change of ecological support:

2013-2014

In 2013, the encryption market reached its first peak. In this cycle of encryption, developers and encryption start-ups have multiplied, and Ethereum is one of them.

2017-2018

At the end of 2015, Ethereum proposed the ERC20 standard, which eventually directly brought about the bull market caused by the issuance of ICO in 2017. In 2017, the issuance of smart contracts has expanded the boundaries of blockchain technology, and blockchain has entered the mainstream as an underlying technology. In this round of market, the second place in the market value of Ethereum laid the foundation and drove the valuation of other smart contract platforms and infrastructure sectors; in the ETH ecosystem, the number of DAPPs exploded, and the NFT, chain games, and forked coin sectors rose significantly. ETH initially became the anchor target of the altcoin market.

2020-2021

During this cycle, the total market capitalization of cryptocurrencies topped $3 trillion, and the transaction volume of the Ethereum network exceeded $3.6 trillion. The market value of Ethereum has risen from 11% in early 2021 to about 20%. In this round of market, the sector rotation in the Ethereum ecosystem includes DeFi (DEX, AMM, liquidity mining, mortgage lending), NFT, Meme, GameFi, Metaverse, etc.

2021-present

In the above process, the projects that appear in each cycle of the Ethereum ecosystem will undergo a reshuffle in the bear market. Only 10%-20% of the projects survive and grow stronger, becoming important blue-chip projects and common infrastructure in the next cycle.

The Ethereum Foundation has played a very good guiding and supporting role in the development of these high-quality projects, providing bonus support and helping incubation for community projects. The foundation will also be responsible for the community infrastructure, part of the employment of Ethereum's main software, as well as the cost of developer and user experience, and market education, but the foundation does not control the technical direction of the network.

The foundation's annual budget is 30 million US dollars, and its branch Ecosystem Support Program (ESP) can also provide additional non-financial support, which has become a supplement to the Grants (self-help) program.

The Ethereum Foundation attaches great importance to developer resources and is the organizer of the annual Developer Conference (DevCon). Through conference promotion, fund support, hackathon activities, etc., there has been a wave of new projects within a certain period of time. The community portals for the foundation include official website, Reddit, blog, Twitter, Youtube, Facebook and other channels. The Ethereum Reddit sub-forum is currently the most comprehensive Ethereum forum and the most active place for core developers.

The Ethereum ecosystem has always dominated developer activity. In GitHub, the number of repositories citing the word "Ethereum" is orders of magnitude higher than other blockchains. With the relative maturity of documentation, infrastructure, and other developer tools, development rates on Ethereum tend to be higher than on other chains.

Financial assistance is the main means by which the Ethereum Foundation supports the ecology, and it can guide project developers to focus on specific areas. The foundation's support theme is closely related to the phased development of the Ethereum ecosystem. For example, it proposed a subsidy program in 2018 to encourage developers to provide scaling solutions for Ethereum.

In 2018, the Ethereum Foundation funded emerging projects such as DeFi and NFT fields. Uniswap, an experimental project, received funding of US$100,000 in this year; in the bear market of 2019, the ecological objects of the Ethereum Foundation mainly lie in ETH2.0 client, ETH1.0 upgrade, Layer 2, zero-knowledge proof (privacy track); in November 2020, the Ethereum Foundation launched "Ethereum 2.0 Pledge Community Funding"; the above topics have become the next round of rising Hot plate in the cycle.

The later Ethereum Foundation eliminated the distinction between official internal teams and external contributors, and internal teams also need to compete for resources.

The support of another organization, Consensys, has also provided great support for the aggregation of Ethereum ecology and industry resources. Its business mainly includes the development, consulting, training and services of Ethereum basic platforms and tools, and has played an enterprise-level technology provider and incubator The role of Ethereum has become an important part of the cooperation and interconnection between Ethereum and enterprise-level institutions.

Consensys also plays an important role in the global industry standard organization Enterprise Ethereum Alliance (EEA), which promotes the implementation of Ethereum-related technologies in the enterprise field. EEA covers more than 3,000 global developers, covering 45 countries around the world, and more than 300 companies, including well-known institutions such as Intel, JPMorgan Chase, Microsoft and IC3. In terms of industrial structure, banks or financial companies account for about 24%, blockchain companies account for 5%, and encrypted native projects account for 17%. Both have become high-quality resources in the Ethereum ecosystem.

2. Ethereum application layer ecology

Ethereum adopts a layered architecture at the technical level. From top to bottom are the application layer, contract layer, and protocol layer. The protocol layer includes basic components such as EVM virtual machine, block management, KV database, consensus algorithm, and P2P network. The smart contract layer builds the rich DApp ecology of Ethereum.

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(Data source: stateofthedapps)

DApps can be divided into multiple categories according to their functions and properties: games, finance, development, trading platforms, storage, wallets, governance, property, identity, media, NFT, DeFi, social, security, energy, health, insurance, storage.

At present, the trustlessness and transparency of DApp have achieved the greatest landing in the application scenario of DeFi (decentralized finance). In 2017, the maximum market value of this sector reached US$6.291 billion, and then retreated to US$998 million. After 2020, the DeFi sector has made breakthroughs several times, and the market value exceeded US$10 billion for the first time in August; in September 2021, the market value of DeFi reached a record high of US$143.953 billion. At present, DeFi has become the most successful application scenario on Ethereum. According to incomplete statistics, the current annualized revenue generated by DeFi applications is about 4.5 billion US dollars. The revenue model of the public chain is obvious, and the superior liquidity allows users and Markets benefit each other.

The NFT sector is another fast-growing sector. Before 2017, the market value of the NFT sector was below $300 million for a long time. By 2021, the total market value of NFT has exceeded $40 billion. In the first quarter of 2022, the average daily sales of NFT on Ethereum will exceed 100 million US dollars, and the transaction volume of NFT based on Ethereum will account for 90% of the total NFT transaction volume. In the several upcycles of Ethereum, NFT and chain games are the sectors that have exploded in the early stage, and have undergone many upgrades. Among them, Enjin and Opensea have provided a huge impetus for the emergence of this rich ecology.

The new things that appear in each cycle are based on the previous technology and market foundation, and the Top 20 projects will have a reshuffle of more than 50%. More than 80% of the DeFi blue-chip projects in this cycle are based on Ethereum. It is expected that the hot sectors in the next cycle will still include chain games, DeFi and social sectors.

3. Top ten DAPPs in the ecosystem

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(Data source: Dappradar)

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(Data source: Dappradar)

Representative Sample Profile：

NFT trading platform OpenSea

OpenSea is the largest NFT trading market and the most used DApp on Ethereum, mainly based on the Ethereum ERC-721 standard and Polygon (Ethereum's layer 2 scaling solution). Opensea provides NFT generation, trading, auction and other services.

In 2018, OpenSea received Y Combinator's seed round of financing, and in November 2019, it received $2.1 million in financing led by Animoca Brands. In March 2021, OpenSea received a $23 million venture capital round led by A16z. In July 2021, OpenSea announced another $100 million funding round. In September 2021, OpenSea released its own Android and iOS mobile applications. In January 2022, OpenSea received $300 million in financing led by Paradigm and Coatue Management, with a valuation of $13.3 billion.

Decentralized trading platform Uniswap

Centralized trading platform Uniswap is one of the DeFi blue-chip projects on Ethereum. Uniswap has currently released 3 versions, the second and third versions are the second and third most popular DApps on the Ethereum network. Uniswap automatically trades between tokens on the Ethereum blockchain through smart contracts, creating the concept of an automated market maker (AMM).

Uniswap has received investments including Andreessen Horowitz, Paradigm Venture Capital, Union Square Ventures LLC and ParaFi. Coinmarketcap data shows that in the first quarter of 2022, Uniswap's average daily trading volume will be around $2 billion.

Polygon

Polygon was born in 2017 and is currently positioned as a Layer 2 aggregator, providing a variety of Layer 2 solutions, including Optimistic Rollups, zkRollups, and Validium. Polygon's scaling solutions have been adopted by more than 400 Dapps, more than 350 million transactions and more than 1.5 million users.

In February 2022, Polygon raised $450 million in a strategic funding round led by Sequoia India.

Metamask

MetaMask is an Ethereum blockchain-based software wallet that allows users to access their Ethereum wallets through a browser extension or mobile app. MetaMask was developed in 2016 by ConsenSys Software Inc., a blockchain software company focused on Ethereum-based tools and infrastructure, which was valued at $6.5 billion in its latest funding round.

MetaMask's browser extension has over 30 million monthly active users as of 2022.

1inch Network

1inch Network is an NFT function decentralized transaction aggregation platform, which finds the best DEX exchange for liquidity providers and provides liquidity in multiple markets on three blockchain networks. 1inch Network's protocol finds the best market price by splitting orders among multiple DEXs, and improves investors' DeFi profits through robots and other algorithms.

1inch's early seed round was participated by Binance Labs and Galaxy Digital, financing 2.8 million US dollars; the subsequent A round of financing. 1inch raised $12 million. Recently, its pre-money valuation in its Series B round of financing has reached $2.25 billion.

4. L2 ecological overview

According to L2BEAT data, as of March 3, the total lock-up volume on Layer 2 of Ethereum was 7.399 billion US dollars, which has surpassed most public chains. Layer2 is another important ecology of Ethereum. In September 2021, the daily transaction processing volume of Ethereum L2 surpassed that of Bitcoin.

Layer 2 is a scaling solution designed to improve the operational efficiency of the blockchain while reducing costs. Layer 2 has a separate execution layer and runs on top of L1 (Ethereum). Layer 2 massively reduces data processing on the blockchain by running computations off-chain. At present, the main expansion technologies are: state channel, side chain, Plasma, Optimistic Rollup, ZK Rollup, Validium. The relatively mature Rollup is the mainstream expansion method.

After the outbreak of DeFi, many Layer 2 projects are actively cooperating with DEX and DeFi projects to reduce transaction costs and improve user experience.

The L2Beat data highlights the current market leadership of Rollups, with the technology accounting for 70% of the total market value, with Arbitrum ranking first with $4.1 billion. L2 app dYdX using ZK-Rollup takes second place with a market capitalization of $986 million. Along with the adoption of NFT marketplace Immutable X, NFT game Sorare, the adoption of Validium is also increasing.

Taking the Arbitrum ecosystem as an example, Arbitrum has a clear first-mover advantage. 74 projects such as Uniswap V3, Aave, Curve, and MakerDAO participated in the early launch, and the subsequent projects that joined its ecosystem grew faster, including GMX, Dopex, Tracer, Premia, Ecological projects such as Umami Finance, Swapr, and Cap all have locked positions of more than 20 million US dollars. Currently Arbitrum's network transaction volume is steadily increasing.

3. The direction of foundation support

The recent support direction of the Ethereum Foundation for the market is mainly in the direction of Web3.0, Metaverse and so on. Mainly observe from recent activities, competitions, hackathons, and funding objects.

In Q2 last year, the Ethereum Foundation provided US$7.794 million in funding for 40 ecosystem projects, mainly in the direction of market education, zero-knowledge proof, and Layer 2; in Q3 and Q4, the Ethereum Foundation provided a total of US$13.82 million in funding. Items include DAO Drops, Zero MEV, L2BEAT, EthStaker, and more. During Q4, the Ethereum Foundation also launched a client incentive plan. Client teams eligible for the plan include Besu, Erigon, Go-ethereum (geth), Lighthouse, Lodestar (50% stake), Nethermind, Nimbus, Prysm, Teku .

In early March 2022, the Ethereum Foundation Ecosystem Support Program (EF Ecosystem Support Program) announced a $750,000 academic research grant program aimed at promoting Ethereum, blockchain, cryptography, zero-knowledge proof, etc. Academic research in related fields; in mid-March, the theme of the Ethereum Rio 2022 event is based on metaverse, digital currency and Web3.0.

In the Ethereum Metaverse Hackathon BuildQuest that ended in March, metaverse game Parcels, NFT monster card game Clash Of Cards, NFT card game Ollie Verse, NFT group chat platform NiftyGuilds, NFT MMORPG game Shake Shock, 90s style RPG game Shattered Realm, geographic location NFT collection game GeoNFT, 3D NFT generator NF3D, idle NFT destruction and carbon neutral application NFT bonfire, metaverse music space MetaverseMusic.

The upcoming hackathon of the Ethereum Foundation will be "ETH Amsterdam" on April 22, 2022. The theme is to assist global developers and promote high-quality applications and projects in the development of the Web3 ecosystem. It is expected that the Web 3.0 ecosystem will receive more attention. focus on.

4. Development Trends and Risks

For a long time, the Ethereum system has developed within the legal framework of Europe and the United States, and the ecology of DeFi, NFT, and US dollar stablecoins has flourished. Ethereum has long assumed the responsibility of providing the most secure underlying technology for the entire encryption field. After The Merge, it is expected that the deflation data will improve in the short term, which will bring more confidence to the improvement of subsequent blockchain performance. In the short term, the next development focus of the Ethereum ecosystem will be the improvement of underlying security and maturity under the PoS consensus mechanism, as well as the development of the next stage of sharding technology.

ETH acts as a trustless collateral asset and is a required underlying asset in the DeFi protocol. As the leading settlement layer, Ethereum has a stable currency circulation value in the blockchain ecosystem. With the expansion of GameFi games, Metaverse, and Web3.0, and the support of Ethereum Layer 2 to a large-scale user group, the communication and intercommunication between Ethereum and other ecology is extremely necessary.

This is also the idea that many other ecosystems hope to undertake the overflow of Ethereum: for example, in the L2 direction, the early accumulation of the Polygon ecosystem has largely benefited from the close cooperation with the Ethereum community, allowing the top projects of Ethereum to be quickly deployed on the Polygon chain superior.

The L1 public chain NEAR has adopted a "pro-Ethereum" strategy: through the compatibility of EVM, it reduces the difficulty of copying existing codes; Solana and Algorand cooperate with stable currency providers through cross-chain bridges. The threshold for launching development on the blockchain, the above-mentioned institutions have cooperated with Circle to introduce USDC into its ecosystem.

At present, the development activities of the Ethereum blockchain are still active, but there are more and more successful cases such as BSC and Solana. With the further maturity of the security and performance of the cross-chain bridge, it is expected that the cross-chain bridge will become an important part of the blockchain. infrastructure.

In the L1 platform, the success of the public chain Flow is very representative. Compared with Ethereum, Flow meets certain development needs in the NFT vertical application field faster. In addition to the application scenarios of Flow, there are still a large number of differentiated and vertical application scenarios, and the application layer of the blockchain market is ushering in a stage of high growth.

Ethereum turned to the PoS mechanism, which means that the public chain is preparing for the outbreak of the application layer. After the DeFi financial field has become the landing scene of Ethereum, based on its vision of "world computer", Ethereum needs to improve its performance to adapt to more application scenarios. It is expected that in the next 3 to 5 years, there will be more demand refinement and scenario segmentation in the application layer, and Ethereum will still compete with other chains for DAPP and developers for a long time.

The risks to be aware of are:

*The progress of PoW to PoS is not as expected.

*Under the PoS consensus mechanism, the identities of miners and token holders are merged, and after the lack of a game group (miner group) in the ecology, the impact on the ecology still needs time to verify.

*Under the multi-chain trend, the share of Total Locked Value (TVL) on the Ethereum network has been diluted.

* For a long time, the centralization of the Ethereum ecosystem and Ethereum pledge nodes has been discussed by the community.

* DeFi lending pool serial liquidation, liquidation risk of liquidation. On March 12, 2020, the cryptocurrency market as a whole plummeted. As the underlying asset in the DeFi protocol, Ethereum faces the risk of a liquidity run when faced with short-term and rapid price fluctuations.

* Disclaimer: All content published by Cabin VC is for industry communication only, not as any investment advice.