Layer 2, Decentralized Exchanges Show Strong Growth on Ethereum in Q1 2022
However, the average daily active addresses increased nominally, implying most growth came from existing users.
Apr 29, 2022 at 12:25 p.m. UTCUpdated May 11, 2023 at 6:58 p.m. UTC
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Growth of some applications and services built on the Ethereum network have more than doubled in the first quarter of this year compared to last year, even as other blockchains gained favor among investors, research shows.
- Value locked on layer 2, or scaling services built atop Ethereum, increased 964% to $7.3 billion in Q1 2022 compared to $686.9 million in Q1 2021, analysts at Bankless wrote in a report. Activity on Arbitrum and Optimism, two popular layer 2 networks, generated just over $15 million in fees for the Ethereum network.
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- The circulating supply of stablecoins grew 188% to $122 billion, while spot trading volumes on decentralized exchanges exceeded $3.9 trillion in the past year. Much of this came from tether (USDT), whose supply increased from $50 billion to $83 billion, as per CoinGecko.
- Volumes on decentralized exchanges (DEX), which rely on smart contracts instead of third parties to process user trades, grew 667%. DEX volumes for spot assets increased as much as $3.9 trillion traded over the past year, while futures volumes increased by 2,704% from $7.4 billion to $209.1 billion. Part of these trades came from layer 2-based DEXs, such as dydx and Loopring.
- However, the number of active addresses interacting with the Ethereum network on a daily basis rose by just 4%. This could imply most existing activity on Ethereum came from prior users instead of new market entrants, some analysts said.
- "While Ethereum ticked massive growth in the most important aspects, growth was conservative in terms of Daily Active Users which surged by a mere 4%,” said Egor Volotkovich, director at cross-chain solutions tool EVODeFi. “This does not mean users were priced out of Ethereum in Q1 as we saw no significant price surge in the cryptocurrency within this time frame.”
- Volotkovich explained the lower activity could be attributed to the growing competition around the Ethereum network, such as Terra, BNB Chain and Avalanche.
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Shaurya is the Deputy Managing Editor for the Data & Tokens team, focusing on decentralized finance, markets, on-chain data, and governance across all major and minor blockchains.