Decentralized Finance Survey
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Contributor: Lucas Outumuro, Senior Analyst at IntoTheBlock
- Ethereum has matured remarkably over the past three years. While ETH’s price is still down 75% from it’s all-time high, Ethereum’s on-chain metrics are approaching January 2018 levels as demand for Ethereum block space and Ethereum-based dapps continue to grow. This is evidenced by the number of Ethereum transactions reaching its second-highest level on September 17, 2020 (see graph below).
- Ethereum’s on-chain indicators and ETH’s price have diverged significantly since 2018. The high number of transactions relative to price is indicative of the utility Ethereum addresses derive from using the underlying blockchain, and point to a discount relative to 2017’s (over-extended) valuations. Other key on-chain metrics such as Daily Active Addresses (DAAs) exhibit the same pattern.
- The number of daily active addresses used to be strongly correlated to the price of Ethereum, but this correlation has dropped year after year. The decreasing r-squared between ETH’s price and active addresses points to a lower amount of variation in address activity being explained by price movements. This is likely due to less speculative activity taking place and more ‘organic’ demand to use the Ethereum blockchain and applications built on top of it. ETH token indicators also signal positive developments and optimism amongst holders.
- 31.3 million Ethereum holders (67%) are currently in the money or are profiting from their positions based on the average price at which they purchased/received ETH on-chain. This number is up 10x from January 2020 when prices were roughly one-third of current prices suggesting that this year a high amount of new addresses bought at lower prices, in addition to existing holders lowering their average costs. This also means that the number of ETH addresses profiting is nearly the total amount of addresses holding BTC (31.8 million) [Source].
- Ethereum holders are increasingly buying in ETH with a long-term investment horizon as reflected in the number of addresses that have been holding for over one year (considered as hodlers by IntoTheBlock). The number of hodlers has grown steadily over the year, even during March when prices collapsed by over 50%. Ethereum hodlers’ unwillingness to sell points to investors’ strong conviction in the asset retaining or increasing in value long-term. Ultimately, this highlights the potential of ETH as a store of value for the Ethereum ecosystem as it continues to grow.
Decentralized Finance Survey
We collected 4,129 responses during the course of the survey. The main takeaways from the survey are listed below.
Quick Take Away:
- 79% of survey respondents have heard of decentralized finance, but only 48% have an intermediate to good understanding;
- Among users who have heard of DeFi, 53% have not used it before. Only 15% use DeFi just as often or more often than they use centralized products or services;
- The two main use cases for DeFi among survey respondents who have used DeFi are earning passive income and trading on decentralized exchanges, with 25% and 18% of responses respectively;
- Respondents were most interested in seeing improvements in passive income and making payments through DeFi;
- Greatest adoption barriers for DeFi are as follows: 1) lack of understanding/accessibility, 2) DeFi is new and has unknown risks;
- Regarding centralized exchanges, the two most cited pain points for users were deposits/withdrawals, and high fees. These are potential areas where DeFi can outcompete centralized services;
- Surprisingly, 57% of respondents who have some understanding of DeFi believe it will fully replace centralized products in the future