Digital assets management firm Grayscale has increased the weighting of Bitcoin and Ethereum in its Digital Large-Cap (DLC) investment fund—at the expense of other major altcoins.
Grayscale announced in a Twitter thread on July 12 that the composition of its DLC fund had shifted moving into Q2 of 2020. Between March and June, the percentage of Bitcoin in the fund increased from 81% to 81.5%, while Ethereum’s weighting in the fund increased from 9.6% to 11.7%.
The presence of three other major altcoins in the fund was reduced in the same time period. XRP’s (XRP) weighting dropped from 5% to 3.6%; Bitcoin Cash fell from 2.8% to 2%; and Litecoin’s presence decreased from 1.6% to 1.2%.
3/ Although no new assets qualified for inclusion following DLC Fund’s Quarterly Review (6/30/20), the below table highlights how DLC Fund’s weightings have changed from March 31, 2020 to June 30, 2020: $BTC$ETH$XRP$BCH$LTCpic.twitter.com/1OyP0JJ4Rb
Grayscale’s single-asset investment funds for Bitcoin and Ethereum are the largest under the firm’s management, totalling $3.5 billion and $410 million respectively. Comparatively, the single-asset funds for Bitcoin Cash, Litecoin and XRP total less than $12 million between them.
Grayscale’s appetite for Bitcoin
The world’s largest crypto-investment firm signaled a renewed thirst for Bitcoin throughout most of 2020. Prior to the Bitcoin halving event, Grayscale was estimated to be purchasing the equivalent of around half of all Bitcoin mined. In the two weeks after Bitcoin’s halving, Grayscale’s rate of Bitcoin acquisition increased to 153% of all BTC mined in that period.
By early April, the digital asset investment firm was also shown to be purchasing the equivalent of half of all ETH mined in 2020, eventually coming to own 1.1% of Ethereum’s circulating supply.
It’s conceivable that Grayscale’s re-evaluation of its DLC fund is a reaction to market conditions. Since March 31, the global market dominance of Ethereum increased from 8.17%, to over 9.8% at time of writing. In the same time period, XRP’s market dominance fell from 4.21% to 3.28%. Bitcoin Cash’s dominance decreased from 2.27% to 1.6%. Likewise, Litecoin’s dominance dropped from 1.4% to 1.07%, according to CoinMarketCap.
The only exception to this trend is Bitcoin, the market dominance of which fell from 65.78% from March 31, to 62.46% at time of writing. This could be a result of the recent block reward halving, which resulted in half as many BTC being produced by Bitcoin miners.
The number of active Ethereum addresses has more than doubled since the start of 2020. Ethereum’s active address count is growing at nearly twice the rate of Bitcoin’s.
Data from the blockchain analytics website Messari shows that Ethereum’s active address count has increased by 118% since the turn of the year. Bitcoin’s active address count, by comparison, increased by 49%.
Ethereum’s DeFi boom
Why are more people turning to Ethereum than Bitcoin? One obvious answer—Ethereum is home to the top decentralized finance (DeFi) applications.
The rise of DeFi apps on Ethereum drove the blockchain’s total number of unique addresses to over 100 million by early June. A July report from Dapp.com estimated that DeFi applications accounted for over 97% of all Dapp volume on Ethereum.
The 100 million figure accounts for every unique address used in a transaction on Ethereum—both senders and recipients. This, obviously, doesn’t account for users who use multiple addresses, and so doesn’t entirely reflect the growth of Ethereum’s user base.
However, data from Bitinfocharts tracks transactions that go either from or to unique Ethereum addresses. Seen below, unique active Ethereum addresses rose 160% since January 1, climbing from 208,392, to 542,458 at time of writing.
Meanwhile, Bitcoin’s unique active address count rose 42% in the same time, climbing from 585,047 on January 1 to 832,751 by July 10. This aligns closely with the data from Messari, and lends credence to the notion that Ethereum is currently experiencing a groundswell of renewed interest and activity.
Securities, Ponzis hog network resources
But while the rise of DeFi has undoubtedly contributed to the rise in unique Ethereum addresses, another Ethereum-based Dapp could also be playing a major role.
As reported by Decrypt on July 5, Forsage, the most popular Dapp on activity by user count, was responsible for guzzling almost 13% of Ethereum’s gas. Gas is the “fuel” that runs Ethereum, and is used as a measurement of the price of performing computations on the network.
That means Forsage—which the Philippines SEC has denounced as an unregistered security—is hogging 13% of the entire Ethereum blockchain. The presence of a Russian Ponzi scheme known as MMM Global has also contributed to the hoarding of Ethereum’s computational power in recent times. These operations usually see funds transferred from address to address, adding to Ethereum’s total unique address count.
Today, Forsage accounts for 12.5% of Ethereum’s gas usage, according to Dune Analytics, while ETH Gas Station places the figure at 15.8%.
Either way, the presence of what Ethereum researcher and developer Philippe Castonguay told Decrypt were “inevitable and unstoppable” Ponzi schemes should also be considered when accounting for Ethereum’s increased usage.
Tokens associated with decentralized finance (DeFi) protocols exploded in value in the past three months, outperforming the wider cryptocurrency market by a wide margin.
Over $2 billion worth of Ethereum and Bitcoin has found its way into DeFi protocols already. The second billion of that sum flooded in during just three weeks in June. What’s more, DeFi platforms are now collectively handing out $25 million per month to their users.
As a result, the tokens used by these DeFi protocols have grown over 800% in value in the past three months alone. It may not be the heydays of 2017 but it’s a booming new sector.
DeFi token boom
Data provided by Messari, seen below, shows 10 DeFi tokens which recorded between 41% and 804% growth since April 8. For context, Bitcoin and the entire cryptocurrency market grew by 27% in the same timeframe.
The clear standout performer in Aave’s LEND token—the native token of the Aave lending protocol—which recorded 804% growth in that time. According to data from DeFi Pulse, Aave is currently the fourth largest DeFi protocol in existence, with over $150 million locked in at time of writing. That’s the total amount being lent and borrowed on Aave.
In the three months since April 8, the dollar value of LEND increased from $0.022 to $0.199. Yet that growth was only a continuation of LEND’s recent ascension which has seen it record 1,227% growth since January.
Next up in Messari’s list of top DeFi token performers is Bancor (BNT). Bancor is an Ethereum-based protocol which enables the non-custodial exchange of tokens using pooled liquidity. Since April 8, the BNT price soared from $0.191080 to $1.65, marking an incredible 761% growth.
Bancor pays interest to users who contribute to its liquidity pools. While Bancor does have its own website and DEX, its protocol is also employed by numerous other exchanges, including the most used DEX at time of writing, 1inch.exchange.
Investment in protocols
From there, the scale of the gains drops off to some extent. Ren (REN) is the next strongest performer, showing 286% growth for the previous quarter. Ren is used as an open, permissionless protocol for the cross-chain transfer of cryptocurrencies.
Given Ren’s stated aim of bringing interoperability to DeFi, perhaps its growth is a telling sign that investors are grabbing up not just DeFi tokens themselves, but also those which are associated with how they function on a more technical level.
Tokens associated with Synthetix (SNX), Kyber Network (KNC) and Loopring (LRC) also recorded between 220% and 280% growth.
Synthetix is an Ethereum-based protocol for the creation of Synths—tokenized versions of real-world assets. Kyber Network is a decentralized exchange—the third most utilized in existence by transaction count, according to Etherscan. Loopring is also a DEX, one which drew attention lately for its successful implementation of ZK-rollups—a new Ethereum scaling technology.
The remaining DeFi tokens that outperformed the broader market in recent months are 0x (ZRX) and Augur (REP), which gained 169% and 102% respectively. Also, MakerDAO (MKR) and Ethereum (ETH) itself, to a lesser extent, with 43% and 45% growth respectively.
The rise of DeFi has been led by a huge surge in token rewards and a dose of leveraging positions, which means the booming sector also comes with growing risk.
A gas-guzzling Ethereum dapp that accounts for 25% of activity on Ethereum network has been denounced as a potential Ponzi scheme by the Philippines Securities and Exchange Commision.
An announcement from its SEC on June 30 advised users of the dapp in question, Forsage, to stop using it immediately, and demanded that the owner officially register with the commission.
Forsage describes itself as a “fully decentralized matrix marketing project,” and, “the most thought-out marketing of this type.” However, it features many of the typical hallmarks of a multi-level marketing scheme.
The dapp is classified by popular ranking site DappStats as a “High-Risk” application, where users profit by attracting more users to invest in multi-level “slots”. Each slot is twice as expensive as the previous, and returns twice as much profit back to the original referrer.
The SEC advisory notice stated: “Based on numerous reports and information gathered by the Commission, the entity operating under the name FORSAGE, headed by Lado Okhotnikov, is found to be engaging in investment-taking activities in the Philippines which is NOT AUTHORIZED by the Commission.”
According to the SEC: “Forsage’s so-called smart contract partakes of the nature of securities through an investment contract where investors need not exert any effort other than to invest or place money in its scheme in order to profit.”
Forsage refuses to comply
However, despite demands by the SEC that Forsage registers as a licensed security, the dapp’s operators do not appear willing to comply. The SEC states they have already been contacted by Forsage, and what they heard did not prove helpful to the commission’s efforts.
The SEC notice stated: “Forsage claims that its program will continue to function even if its website “www.forsage.io” is closed for any reason. It even implied that the Government cannot shut it down because it is decentralized and thus free from any authority.”
Decrypt spoke to Ethereum researcher and developer Philippe Castonguay, who examined the Forsage code and concluded that the smart contract “can’t be halted”. Even if the SEC dismantled the website, says Castonguay, the lack of a simple user interface would only slow the Dapp’s usage at best.
When asked if the SEC had any power whatsoever to close down Forsage, Castonguay seemed doubtful—such is the nature of Ethereum’s permissionless blockchain technology.
“Unless there is a currently unknown vulnerability, I don’t think [they could], no, said Castonguay.
“They could try to track down who the users are by asking information to exchanges they use and then reaching out to users directly,” he said, adding, “but that may well prove to be costly and inefficient.”
In the days since the SEC’s announcement, usage of the Forsage app hasn’t halted. At time of writing, Forsage is the most popular Ethereum-based Dapp in existence, with 4,341 users over the past 24 hours, according to DappStats. Data shows that $2.86 million passed through the Dapp in the past day alone, equating to over 12,000 ETH.
Gas-guzzling Forsage is slowing down Ethereum
Forsage has proven to be a major source of activity on the Ethereum network in recent times. As seen on Dune Analytics, the Forsage smart contract has been responsible for consuming 12.78%% of Ethereum’s gas over the past twenty-four hours.
Gas is a unit of measurement on Ethereum which represents how much computational power is required to perform an operation. By hogging 25% of the Ethereum network, the Forsage contract has pushed up Ethereum transaction fees in the process.
According to data from Bitinfocharts, Ethereum’s average and median transaction fees have been on the rise since January 2020. Average fees rose 915% in that time, from $0.06 to $0.67—with a brief spike to $4 early June. Meanwhile, median fees rose an incredible 2,564% in the same time frame, from $0.02 to $0.73.
Not the only Ponzi on Ethereum
Yet it’s not just Forsage that’s responsible for the current Ethereum stress-test. According to Eth Gas Station, the Ethereum-based Tether (USDT) contract accounts for 26% of the network’s gas usage.
Interestingly, the third highest gas-guzzler on Ethereum is another multi-level marketing scheme known as MMM Global, which has accrued over $5 million in ill-gotten Paxos (PAX) stablecoins.
Despite the presence of gas-guzzling Ponzi schemes on Ethereum, Castonguay, who works in blockchain gaming, doesn’t expect such scams to disappear any time soon. He said it was unfortunate that Ethereum was used in this way, but added:
“It’s inevitable due to the unstoppable and permissionless nature of the technology. I suspect that even with strong regulation, Ponzi schemes on Ethereum will still be common, especially as privacy tools available on Ethereum get better,” he said.
So if you have money to lose, there’s no need to rush over to Forsage. It’s probably not going away any time soon.
Transaction volumes for decentralized applications (dapps) hit $12 billion in Q2 of 2020—a $4.5 billion (37%) increase from Q1 of the same year. That’s according to the latest figures from DappRadar, which also show Ethereum’s sustained dominance in the space.
Ethereum dapps accounted for 82% of that $12 billion figure, with the majority of value coming from the use of decentralized finance (DeFi) apps. Unsurprisingly, the much-talked-about Compound (COMP) is the most valuable dapp by transaction volume, with $1.2 billion having passed through the lending protocol alone.
Not all aspects of the Ethereum dapp space are thriving, however. Due to the increase in Ethereum gas prices and transaction fees, gaming dapps saw an 80% drop quarter-on-quarter. According to DappRadar, high gas prices are “killing the activity of games” on Ethereum.
EOS and Tron dapp activity on the rise
Despite Ethereum’s dominance of dapp transaction volume, both EOS (EOS) and Tron (TRX) have shown increased daily dapp activity in 2020. In fact, in the three months between Q1 and Q2, Tron transaction volume increased by 17,210%. The sudden spike in the use of Tron Dapps can be largely attributed to Oikos.cash—a Tron version of Ethereum’s Compound lending app.
Although Tron’s move into DeFi has proved successful, Dappradar notes that the majority of Tron dapp activity still originates from apps in the “Gambing” and “High Risk” categories.
EOS dapp wallet activity suffered a 53% drop moving from 2019 into 2020, thanks to network congestion caused by the EIDOS token airdrop. “The airdrop triggered massive congestion on the network by sucking up the majority of the EOS blockchain’s resources,” said the report, adding that it proved to be “catastrophic” for the wider EOS dapp ecosystem.
DappRadar describes EOS’s current position in the dapp space as “fragile”. While EOS dapp volume currently stands at $1.9 billion for 2020, the majority of that sum originated from just two gaming Dapps: Upland, and Crypto Dynasty.
A Hive of activity
Data from DappRadar also shows that the recently launched Hive—which hardforked from Tron in early 2020—has already taken over its ancestor chain in terms of daily dapp volume. Most of the activity comes from the Hive-based blockchain game, Splinterlands.
The overall picture painted by DappRadar shows a blockchain sector largely dominated by one platform. However, both Tron and EOS—while some way behind Ethereum in dapp volume—are growing too.
Ultimately, with $4.5 billion entering the dapp space in the past three months alone, it seems safe to say that interest in the dapp space is on the rise.
Ethereum co-founder Vitalik Buterin said, on June 30, that the next major Ethereum upgrade will have to lean on current scaling methods for at least a couple of years, until developers finish the multi-phase project.
On Twitter, Vitalik Buterin said that ZK-rollups may become “the dominant scaling paradigm for at least a couple of years”—until the upgrade is complete.
Ethereum 2.0 is the much anticipated evolution of the now five-year-old Ethereum blockchain. The vision for Ethereum 2.0 introduces a proof-of-stake method of blockchain governance. Proof-of-stake blockchains allow users to lock up a bunch of their coins and get paid for helping to secure the network.
When complete, Ethereum 2.0 is expected to expand the network’s transaction speed to 100,000 transactions per second (TPS). But there will be at least a two-year delay before the new blockchain will be able to hit those numbers.
ETH2 scaling for data will be available *before* ETH2 scaling for general computation. This implies that rollups will be the dominant scaling paradigm for at least a couple of years: first ~2-3k TPS with eth1 as data layer, then ~100k TPS with eth2 (phase 1). Adjust accordingly.
As Buterin explained on Twitter, Ethereum 2.0’s data capacity will be upgraded before its computational power. This means it will be able to store more data—but not process far more transactions.
This is due to the outline of the Ethereum 2.0 roadmap, which will see the Ethereum you know eventually become one of 64 “shards” in Ethereum 2.0. These shards, which can be thought of as horizontal expansions, will initially be able to hold and move data. However, the process of harnessing their shared computing power to increase Ethereum 2.0’s transaction output will be a multi-year effort.
This leaves a gap, which, in the meantime, will be filled by a novel scaling solution known as ZK-rollups.
What are ZK-rollups?
ZK-rollups can work with the current Ethereum network and allow it to process more transactions. They process the transactions off the actual blockchain, and then upload them every so often. It’s a way of rapidly increasing the number of Ethereum transactions—without causing a huge bloat on the network.
The Loopring decentralized exchange (DEX) has successfully used this scaling method in recent months, enabling it to process far more transactions—at a lower cost. The DEX claims to be able to handle over 2,000 TPS thanks to the technology.
But there is a potential flaw to using ZK-rollups, which centers around the notion of trust. According to the Ethereum 2.0 roadmap, setting up a ZK-rollup relies on a centralized party—usually a developer. The roadmap states, “This undermines decentralization and opens the risk of social engineering hacking attacks by convincing a developer to manipulate code or provide vulnerability information.” So it’s not a perfect solution, by all means.
The roadmap also pinpoints another potential threat in the form of quantum computing. The increased computational power delivered by quantum computers would likely break the encryption used by ZK-rollups, meaning an attacker could potentially hack the blockchain. However, every blockchain shares that same weak point.
ZK-rollups look like the best Ethereum scaling method in the short-term, and are already being used in Ethereum 2.0 test networks. However, over the next couple of years, any problems encountered by ZK-rollups will also be shared by Ethereum.
0x (ZRX) gained 143% against the dollar leading into Friday, May 8. The price surge comes after announcing weekly staking payouts, and potentially getting a fortuitous ‘Ethereum rub’ from Vitalik Buterin.
Notably, on May 7, the 0x community voted in favor of a proposal that would cut the regularity of staking payouts from 10 days to 7 days. 0x users who opt to become liquidity providers will now receive payouts weekly.
Meanwhile, Ethereum creator Vitalik Buterin mentioned 0x as “one of the projects he wants to try out,” when he spoke at the Ethereal Virtual Summit on May 7. All eyes seem to be on 0x right now.
0x (ZRX) Jumps 143%
ZRX opened May 7 trading at a coin price of $0.213485. Around 36 hours later, the coin surged to a brief peak of $0.520408. That briefly marked 143% gains before an eventual fallback to the $0.44 range at the time of writing.
When ZRX peaked on Friday afternoon, it briefly marked a monthly upturn of 218%. The cooldown to the $0.44 range still leaves ZRX with over 150% for the month, and 89% for the week, according to data from CoinGecko.
The sudden surge by 0x pushed the ERC-20 based altcoin up among the top 40 cryptocurrencies by market cap, while CoinGecko reported an all-time high influx of trade volume.
Staking Payouts Come Weekly
0x is an open-source protocol for the decentralized exchange of ETH-based tokens. ZRX holders can act as protocol liquidity providers by staking their coins with market makers. In return, they receive payouts in the form of ETH.
The token may have been the beneficiary of some increased attention this week, after a community vote to shorten the length of staking epochs was passed. ‘Epochs’ refer to the period stakers need to wait to receive their payouts.
As per the improvement proposal ZEIP 77, 10 million ZRX was staked on the community vote, and the decision to shorten epoch lengths to 7 days was passed.
Ethereum Creator Namechecks 0x at Ethereal
Ethereum creator Vitalik Buterin appeared at the Ethereal Virtual Summit on May 7, where he named 0x as one of the projects he wanted to try out.
Speaking to The Defiant’s Camila Russo, Buterin discussed some of the apps he’s used or intends to use:
“I have a bit of money in being a uniswap liquidity provider. I have used the DAI in a lot of cases. Uniswap is nice because it’s really simple for feeding into a lot of things. I’ve tried Loopring,” he said, adding, “I still want to try out 0x at some point.”
Buterin also revealed he’s been hitting the treadmill and listening to Dan Carlin’s Hardcore History podcast.