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Ethereum Wrapped: An Onchain Year in Review for 2023

From J Hackworth Data @ Variant

At the end of 2022, the crypto world was grappling with the collapse of FTX and market sentiment was grim. Today, the industry is buzzing with excitement and positivity from crypto users and builders alike.

So, what does the onchain data tell us about 2023? After it felt like the whole internet spent a week sharing their Spotify Wrapped stats in December, I wondered what an Ethereum Wrapped would look like.

At the end of 2022, the crypto world was grappling with the collapse of FTX and market sentiment was grim. Today, the industry is buzzing with excitement and positivity from crypto users and builders alike.

So, what does the onchain data tell us about 2023? After it felt like the whole internet spent a week sharing their Spotify Wrapped stats in December, I wondered what an Ethereum Wrapped would look like.

In this post, I explore all 372 million transactions to determine what activities and trends shaped Ethereum in 2023.

In 2023, Ethereum users and degens…

Faced the bear market head-on

As we spent most of the year in a tough bear market, it’s no surprise that metrics dropped across the board. But it wasn’t all bad.

Source: Dune, Defillama

Downside: 2023 saw a dip in all the big metrics. Notable hits included total gas fees (-26%), NFT volume (-59.9%), and DEX volume (-35%)

Upside: We ended the year on a high note. TVL (total value locked) increased by 33% year to date likely due to an increase in ETH and other token prices. Despite some metrics not having the most impressive year, activity is now on the rise, including $20 billion in stablecoin inflows since October[1] and a strong upward trend in gas usage.

Source: Hildobby, Ethereum Gas Fees

Diving further into what's happening onchain, we can see three major trends in 2023 that are shaping the Ethereum ecosystem:

  1. L2 growth
  2. DeFi driving gas demand while NFT interest declines
  3. Increased amount of ETH staked

Embraced Layer 2s

Despite a decrease in Ethereum’s activity, L2 usage continues to grow. The year began with an estimated 16 live L2s and $4.95B in TVL. By the end of 2023, there were over 34 L2s and $20.74B in TVL [2].

Source Value Locked, L2 Beat

Increased adoption of L2s led to a surge in activity. Active addresses on L2s increased from under 70,000 addresses to over 400,000 addresses, exceeding even Ethereum’s total addresses

Source: Dune

While L2s collectively exceeded Ethereum's active addresses, there’s still no one L2 coming for Ethereum’s crown: only on 9 days in 2023 did a single L2 surpass Ethereum’s active addresses (zkSync, Arbitrum). The takeaway: L2s still need to further develop their ecosystems and infrastructure to rival Ethereum’s activity.

Source: Dune

In 2023, L2s made significant progress by drawing new capital and users, offering cost-effective features for protocols, and allowing the creation of unique applications that aren’t feasible on Ethereum.

Went deeper down the DeFi rabbit hole

What is a Wrapped list without a top ten? Below, you can see a list of the top ten entities with the most transactions this year and categories by gas.

One clear takeaway: Ethereum mainnet activity in 2023 concentrated around DeFi.

Source: Dune

Source: Artemis BAM

You’ll notice two things right away:

  • USDC and Tether were two of the leading applications by transactions and accounted for 7% of gas usage, highlighting the demand for stablecoins on Ethereum.
  • DeFi, led by Uniswap, made up 41% of Ethereum gas usage, emphasizing the important role DeFi and DEXs play in Ethereum’s use case.

DeFi really had quite the year. When the year began, in the month of January, DeFi accounted for about 31% of Ethereum's total gas, but by year's end, it used nearly half of Ethereum's gas.

Source: Artemis BAM

While a majority of gas burned is from DEXs, some other noticeable strong performers:

  • Maker had its best year for total fees with over ~$105M fees[3]  and hit all-time highs in terms of daily revenue this year
  • Curve and Aave offered new stablecoins that have grown by over ~103M and ~34M, respectively[4]
  • Tokenized Treasuries, part of the surge in Real World Assets, grew to over $450M within a year on Ethereum [5].

Cooled it on NFT trading

As DeFi began to consume more blockspace on Ethereum, NFT trading activity declined. NFT gas usage on Ethereum dropped from 32% in January to 7% in December[6], indicating a waning interest in NFTs.

In addition to this, NFT volume hit a two-year low in September 2023. Still, recent L2 upticks and new excitement around NFT use cases show us that no one can be sure what happens next with NFTs.

Source: Dune

Kept on staking

It's hard to believe that Ethereum's proof-of-take system is only just over a year old.

2023 marked the first year for ETH withdrawals from the Beacon Chain, leading to huge inflows for staking. The Staked ETH supply increased 82.6% in 2023 and now ~24% of the ETH supply is staked[7]. 2023 was the biggest increase in the amount of ETH staked.

Source: 21.co, Ethereum Staking

As more ETH gets staked, it's becoming a key part of the next phase of Ethereum's applications and use cases:

  • Using LSTs in collateral for DeFi applications or even yield on L2s like Blast
  • Supporting new stablecoins such as Lybra, Prisma, and Ethena which collectively have over a $345M market cap [4]
  • Restaking ETH through Eigenlayer to provide Ethereum’s security to other applications

As staking and LSTs become more common, ETH will be used in various ways and the number of use cases for it will continue to grow.

That’s a wrap!

Despite obvious hurdles, Ethereum made strides in 2023.

L2s expanded in adoption, DeFi took over Ethereum, and ETH staking rose. With these trends and many others, Ethereum is setting the stage for a big growth year in 2024.

Sources:

[1] Defillama, Stablecoin Supply on Ethereum: https://defillama.com/stablecoins/Ethereum

[2] L2 Beat, L2 TVL https://l2beat.com/scaling/summary

[3] Defillama, Maker Fees: https://defillama.com/fees/maker

[4] Defillama, Stablecoin Supply https://defillama.com/stablecoins

[5] RWA.xyz, Tokenized Treasuries: https://app.rwa.xyz/treasuries

[6] Artemis, NFT Gas Usage

[7] 21co, Estimated Staking Ratio https://dune.com/21co/ethereum-staking-and-withdrawals

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