The preceding year was unquestionably a watershed moment for the Ethereum network. Not just in terms of development activity, but also in terms of adoption as the leading smart contract platform in the market.
The large-scale emergence of both the DeFi and NFT industries can be credited for this growth. This resulted in billions of dollars in transactions as well as thousands of new users.
The NFT marketplace OpenSea, for example, surpassed the $3.5 billion barrier in monthly Ethereum trading volume on January 17th, setting a new all-time high.
Similarly, the total value locked (TVL) in Ethereum smart contracts has also jumped from $27 billion to over $144 billion in the previous year, according to DeFiLlama.
Quite expectedly, the network has reaped the benefits of this increased adoption. Notably, it collected $4.34 billion in revenue in Q4 2021, a spike of 1,777% from Q4 2020, according to the State of Ethereum report.
This huge spike in network revenue is not necessarily a positive indicator. However, as it means users are paying exorbitantly increasing gas fees to use the platform.
The average gas fee itself rose by 577% during the time, up from around $4.09 to $26.89.
Notably, the Ethereum community has tried to bypass these issues by using Layer 2 protocols such as Polygon, which gives the network scaling capabilities required to host the increasing traffic. This resulted in an over 11,000% rise in the amount of value bridged from Etheruem into L2 scaling solutions, which stood at over $6.8 billion at the time of writing.
The previous year also witnessed the much anticipated London hard fork, which implemented a fee-burning mechanism within the network.
According to Bankless, EIP-1559 burnt up to 87 percent of the total $4.34 billion in gas surcharges received in Q4 2021. The value of Ether has increased as a result of the burning; the inflation rate has decreased by 64%, from 1.13 percent to 0.46 %.
While the year 2021 was momentous for the network, the current one would be even more significant in terms of ecosystem-centric advancements, according to the paper. The ‘Unite,’ which will merge Ethereum’s Beacon chain, which already
includes staking capabilities, with the current chain to make the network fully Proof-of-Stake, is slated to happen this year.
As of the conclusion of Q4 2021, 8,818,933 dollars had been staked in anticipation of this, a 471 percent rise year over year. However, this may not have the desired effect.