What does the Ethereum 2.0 smart contract TVL hitting a record high mean?

Blockchain May 11 News 2022 is of great significance to Ethereum. With the vigorous development of global DeFi projects and NFTs, the market value of Ethereum has soared from the previous high of 125 billion US dollars. Similarly, 2022 is also an extremely brilliant year for the NFT market centered around Ethereum. The popularity of the NFT market has greatly driven transactions on Ethereum. The decentralized exchange OpenSea alone has processed NFT transactions worth 13 billion US dollars.

Statistics show that the total locked value (TVL) on the Ethereum chain exceeded $150 billion last year, an increase of about 750% year-on-year. In addition, trading activities on Ethereum have also grown rapidly, with an average daily transaction volume of about 1.5 million transactions, up 35% year-on-year; the number of daily active addresses is 600,000, up 40% year-on-year.

At the same time, a data analysis company also compared the amount of transaction settlements conducted on Ethereum with top credit card companies such as Visa and Mastercard. The results show that the total amount of transaction settlements conducted through Ethereum in 2021 increased by 500% year-on-year to US$7.7 trillion, of which stablecoins accounted for 54%, reaching US$4.2 trillion. The transaction settlement amount through Visa was US$8.9 trillion (2020), and that through Mastercard was US$4.7 trillion (2020). In addition, compared with the settlement amount of US$1.3 trillion (2021) of financial technology giant PayPal, Ethereum is far ahead by an absolute advantage.

Ethereum 2.0 smart contract TVL hits record high, but ETH faces downward trend

As we all know, ETH is known as the king of altcoins in the current crypto market because of the large number of its holders and supporters. Currently, all kinds of negative news about ETH are overwhelming, but ETH holders have not wavered in their stance and still maintain firm confidence in the tokens they hold.

Still, numbers don’t lie, and the amount of ETH in centralized exchanges has dropped by nearly 2.56 million since January. And with the Federal Reserve announcing its largest rate hike in nearly 20 years, market concerns are growing, so will ETH continue its downward trend?

In fact, ETH investors have anticipated the upcoming "transfer from exchanges to smart contracts" since last year. Sure enough, the total amount of ETH locked in Ethereum 2.0 smart contracts has reached a record high. According to on-chain data from crypto analysis platform Glassnode, the total amount of ETH locked in Ethereum 2.0 smart contracts has reached 12,526,996 ETH, the highest level in history, which also means that the amount of ETH locked in Ethereum 2.0 smart contracts has exceeded 10% of the total supply.

Although the price of ETH is falling at an alarming rate, it is undeniable that the amount of ETH staked on the beacon chain has reached a new milestone. Although the current annualized rate of return of Ethereum 2.0 smart contracts is only 4.4%, far lower than the double-digit returns enjoyed by early Ethereum stakers, the market demand is still huge, and investors have transferred their ETH on exchanges to Ethereum 2.0 smart contracts. According to statistics from Ultrasonic.money, 2.27 million ETH have been destroyed so far, with a total value of approximately US$6.25 billion.

What happened on Ethereum?

Unfortunately for investors, those bullish indicators did not have any impact on ETH price movements this week, with ETH still falling more than 7% in 24 hours to trade around $2,700. ETH holders were hit hard as a result, with the number of profitable addresses (7d MA) falling to 55,775,513.583, the lowest point in a month.

The data source of the above picture: Glassnode

In fact, the number of daily active addresses has also dropped by 3%. This shows that the frequency of investors' participation in Ethereum activities has also begun to decline over the past week. All these downward trends inevitably affect the enthusiasm of new participants.

Source of the above data: IntotheBlock

Not only that, data from ETH whale holders also reflects the current serious situation. The data fell by 50% this week, which means that the amount of ETH sold by these whales has begun to exceed the amount of purchases.

Source of the above data: ITB

Despite Ethereum’s recent negative performance, fortunately, institutional acceptance of ETH has not decreased. Recently, a real estate company stated that they accept cryptocurrencies (BTC or ETH) as payment when selling a $6.5 million property in Greenwich, UK.

Will Ethereum " merger " be the ultimate answer?

As transaction activities on Ethereum have increased dramatically, some problems have gradually surfaced, especially the increase in transaction fees has brought considerable challenges to Ethereum.

From 2020 to 2021, the average fee per transaction on Ethereum increased from $1.5 to $21.1. Since then, some users have chosen to continue to bear the high fees for transactions on Ethereum, while others have begun to turn to "greener pastures" on the Lay1 alternative layer. Such blockchains have the advantage of low transaction fees, but are generally less secure. However, what the entire Ethereum community is looking forward to is that Ethereum is about to "merge", and the current consensus mechanism will be replaced with a more environmentally friendly, efficient and secure Proof of Stake (PoS) consensus mechanism.

In fact, as the first step in the entire upgrade plan, it is hoped that Ethereum can solve the problems of network congestion and high transaction fees through "merger", hold its ground, and no longer hand over market share to competitors with lower costs and faster speeds. Now, the time for "merger" seems to be getting closer, so let us wait and see.