The number of daily transactions on the Ethereum blockchain network has exceeded one million, a level never seen since January 2018.
In recent months, network activity on Ethereum has increased due to the growing demand for decentralized financing applications (DeFi) and the growing anticipation towards ETH 2.0.
Why is Ethereum's daily transaction volume growing so rapidly?
Since January 2020, within six months, the daily trading volume of the Ethereum blockchain has increased from 435,000 to 1.073 million.
Ethereum daily transaction volume . Source: Etherscan.ioTwo factors have likely triggered the increase of 146.6% of user activity on Ethereum : a peak of investors sending funds to DeFi applications and transfers stablecoins chain.
DeFi platforms essentially allow users to perform conventional financial services in a decentralized environment.
For example, via DeFi, cryptocurrency investors can lend their excess assets to borrowers. In exchange, borrowers encourage lenders to produce monthly returns.
In order for users to start using DeFi, they must first send funds to the blockchain network. It can be ETH , Tether, or whatever token they hold. To do this, users must send transactions to and from the DeFi applications.
When the demand for DeFi continues to increase, this inevitably leads to the volume of transactions on the blockchain network growing at a rapid pace.
The increasing use of stable parts like Tether also feeds the growing daily volume of Ethereum .
Tether first released an ERC20 compatible version of its stablecoin about three years ago. Since then, it has been possible to send and receive USDTs via ETH wallets .
The valuation of the USDT has reached more than $ 9.1 billion, accumulating a massive user base. The strong appetite for Tether has also resulted in increased user activity on Ethereum .
The moment of the high volume over 2 years is interesting
Chain data shows that the fundamentals behind Ethereum are only strengthening three months after the so-called "Black Thursday" in March.
On March 13, the crypto-currency market collapsed in tandem as investors in all asset classes at risk have started to panic. The bitcoin fell to $ 3 600, while the ETH fell below $ 100.
Ethereum daily chart from TradingView.com | Source: TradingView.comAt the time, the total amount of capital frozen on the DeFi market fell from $ 1 billion to less than $ 500 million.
Since then, the DeFi market has completed a V-shaped recovery. The total value frozen in DeFi has exceeded an all-time high, reaching $ 1.53 billion.
Compound, which has surpassed Maker and Synthetix to become the most dominant DeFi protocol, now has $ 588.3 million on its network.
But, if the optimistic fundamentals of Ethereum and the growing demand for DeFi will cause a short term frenzy around ETH is a different argument.
Jacob Franek, co-founder of CoinMetrics, wrote:
“For example, it could take another 2 to 5 years before very large institutions are comfortable transferring critical infrastructure to ETH 2.0 and buying shares. This does not happen in 6 months in an optimistic scenario. "
The general feeling around Ethereum and ETH 2.0 remains positive, as long as the DeFi area does not experience a marked slowdown as in March.
