Ethereum first went live in July 2015, and its ecosystem of decentralized applications (dApps) has advanced wonderfully over the years. 0x’s first OTC markets were launched in 2017. Uniswap was first deployed in November 2018. Yearn Finance orchestrated its spectacular airdrop in 2020. Decentralized Finance (DeFi) was an ever-evolving industry whose growth, in retrospect, seemed almost inevitable.
As it is with any economy with competing products, protocols rose and fell in dominance, relentlessly innovating to form the DeFi landscape we see today. The history of DeFi might be subjective, but the Ethereum blockchain is not. In this research piece, we tell the story of Ethereum, and the growth of such protocols, through the data. Here, we plot total gas fees spent on Ethereum, aggregated by 4-week periods, from 2018 till today.
Ethereum activity was rather quiet from 2018-2019. Total gas spent barely went above 40,000 ETH per month. Activity began to pick up in 2020, and gas spending saw a parabolic run that peaked at 650,000 ETH in 4 weeks nearing September of 2020. That was when Ethereum was still $400 apiece. Time really does fly.
We give the data a closer look by analyzing the percentage of total gas fees spent by various protocol entities. In this article, we want to examine the historical proportion of gas spent by the top 30 gas spender entities through time.
Gas fees spent over time are a function of many things: how many users are interacting with a smart contract, the computational intensity of the function executed, and overall gas prices at that time.
Before we dive in: we must note that the landscape of Ethereum in from 2018-2019 was very different. A large number of contracts active in 2018-2019 are no longer used today. We can sort the top 30 gas spenders for the period of 2018-2019 here to take a closer look.
Other than entities, I also aggregated the total gas spent by token contracts in this dataset, a group which consistently took up around 10% of Ethereum’s activity. Many of the contracts in 2018 were ponzi schemes and gambling games, with a notable proportion of them originating from China. LastWinner, for example, was based on this simple mechanic: Users deposit ETH into the contract until a certain ETH cap is reached. The last person who deposits ETH then wins the entire pot of ETH. You can view it's spike in activity in the middle of 2018
Here’s what’s even more interesting: The relative proportion of gas spent for our top 30 entities today, since 2018.
The data tells an intriguing story from year to year. Let's begin with 2018.
0x takes out the middleman. Many people think Uniswap was the first swap DEX that was born into existence, but the history of trustless exchange using smart contracts went much further back. Initial DEX models in 2017 attempted to mimic the order book models of centralized exchanges, but they were so computationally intensive and slow that they were rendered unusable. 0x deployed a method for on-chain order settlement of trades in July 2017.
It was called 0x OTC, because the model was quite literally that. When people trade on OTC markets, 1. Price discovery occurs between only two parties 2. Negotiation occurs without guaranteed offers (I could rescind anytime, but on an open market, an order I place can be immediately taken up). Users would post their orders off-chain on social media platforms like twitter, but have them settled on-chain through 0x. In 2018, 0x was doing 4 million USD in transactions daily.
Bancor was the go-to DEX. The idea of having Automated Market Makers was mentioned by Bancor in a blog post in August 2018, and flipped the idea of order book style markets completely on its head. All tokens are paired against BNT, a practice that continues until today. Uniswap, by contrast, allows all sorts of pairs to be construed.
Kyber makes its mark. Kyber essentially facilitates parties to access and contribute liquidity in a decentralized manner. It’s not a DEX per se, but rather focused on integrating pools of capital across various sources, including both DEXes and centralized market makers. Think of it like a generalized Uniswap router! This liquidity can then be utilized by entities such as payment networks, which was truly groundbreaking at the time.
Chainlink grows to be the trunk of DeFi. First introduced in 2017, Chainlink’s oracles connected external, off-chain data to Ethereum smart contracts securely. People don’t realize how essential oracles were to synthetic and margin products. BZx used Chainlink oracles for its margin trading platform, while Synthetix immediately integrated with Chainlink to provide price feeds for real world assets. Decrypt even published a canonical list of Chainlink integrations in May.
An alternative oracle service was Tellor, which had a momentary surge in usage in October. Up till 2021, Chainlink’s share of Ethereum gas fees has consistently remained above 4%. Talk about a winner.
Advanced trading features sprout. Dydx, which initially hosted lending and borrowing markets, began developing a margin trading feature for up to 4x leverage with a sleek UI. Nothing really came closer to a CEX experience.