Ethereum dapps still dominating value
News of Binance’s operations in the UK hitting a bump this week have not had an effect on the blockchain’s activity. Instead what we are observing is Binance Smart Chain and Polygon transactions eclipsing Ethereum. At the time of writing, BSC has notched up 3.6 million daily transactions whilst Ethereum has processed just 1.1 million. Meanwhile, the Polygon network is counting 7.9 million transactions.
More interesting perhaps is that at the height of its activity in mid-May BSC was racking up almost 12 million transactions a day and Polygon around 9 million.
The reason this interests us is that these transactions are taking place through dapps. Especially DeFi dapps such as SushiSwap on Ethereum, PancakeSwap on BSC, and QuickSwap on Polygon. Ethereum has been stagnating of late whilst other networks have steamed ahead in pursuit of market share.
In the last few months, we have observed very few new dapps arriving on Ethereum, in any category. While at the same time BSC and Polygon are growing at frightening speeds. A further observation is that whilst BSC and Polygon have witnessed an explosion in user activity leading to some big peaks. Ethereum meanwhile has continued its steady usage.
More dapps, more users
DappRadar now tracks 881 BSC dapps, 661 of them sit in the DeFi and Exchange category. On Polygon the story is similar. Of a total of 204 dapps tracked, 131 are in the DeFi and Exchange category. Both networks have made it abundantly clear what their ambition is in the short term. Ethereum meanwhile has welcomed just 1 new dapp in the last 30 days – albeit a DeFi app. But the trend is clear. Developers are favoring alternative networks for one main reason. To give users slick and cheap user experiences.
Prior to the recent bull run, the number of investors looking to make the moves provided by services on BSC and Polygon was less. Furthermore, more established traders seemed very happy to use Ethereum token exchanges and apps. Especially as gas fees were just a few dollars. Fast forward eight months and we have a different story altogether. The recent run of cryptocurrency prices brought in a lot of new blood. That new blood arguably came across from traditional trading platforms where cheap, or zero fees were the norm. Imagine their dismay when they tried to buy into Ethereum for example at $500 only to be hit with around $100 in fees on top.
Enter Alternative Networks
For an Ethereum maximalist to just switch to another network and dapp the lure must be strong. Ethereum is the dominant blockchain for more reasons than simply longevity. It has a strong community, robust safety features, and more simply is still benefiting from its first-mover advantage and high trust levels.
Arguably, the thought train for a new user would not be so similar. As a new user, you would seek speed, efficiency, safety, and low fees. A combination that wasn’t available on Ethereum. But was on its sidechain Polygon and the independent Binance Smart Chain. New users were almost forced to try them first, and luckily for those platforms, they nailed it. Helped massively by established Ethereum finance apps such as Aave and 1Inch moving across to Polygon. Bringing their users with them. And more recently a trend is emerging of BSC dapps coming over to Polygon in a bid for further market share.
What About Value?
It’s important to recognize that although Ethereum may be processing far fewer transactions than BSC or Polygon, the amount of value flowing through those transactions can tell a different tale. One way to do this is to look at the top dapps running on each network.
Using the number of active wallets divided by the volume accumulated over the last 30 days we can see that the average amount of value flowing through each wallet interacting with the dapp is different. Moreover, Ethereum is now clearly the leader.
ETHEREUM – SushiSwap – $215,000
POLYGON – Quickswap – $26,000
BSC – PancakeSwap – $38,000
This shows us that whilst Polygon and BSC finance dapps are attracting users in droves. Ethereum finance dapps are processing the lion’s share of the value. Meaning that whale investors and those maximalists we mentioned earlier were, and are, still happy to utilize Ethereum finance dapps. Whereas newer users are happy with what they found on alternative networks. As you can see, the story is far from simple. We are just getting started on this multichain journey and it will be fascinating to observe the landscape shift once again with the much-anticipated arrival of Ethereum 2.0.
The above does not constitute investment advice. The information given here is purely for informational purposes only. Please exercise due diligence and do your own research. The writer holds positions in ETH, BTC, ADA, NIOX, AGI, SAFEMOON, PANTHER, JAGUAR, CAKE, LINK, GRT, CRO, SHIBA INU, AND OCEAN.