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Ethereum DeFi DeFi Digest OKEx Insights

DeFi market surpasses $20 billion as Ethereum transaction fees skyrocket

2021.01.10 Matthew Lam

OKEx Insights' DeFi Digest is a weekly examination of the decentralized finance industry.

Coinciding with BTC's dramatic price increase, the decentralized finance market reached a new milestone this week after its total value locked surged past $20 billion, reaching almost $24 billion by press time. Additionally, the weekly average trading volume of decentralized exchanges surged by 88%, thanks to traders' growing interest in altcoins.

The total borrowing volume in the DeFi lending sphere rose by 10% as Compound maintained its market dominance in this sector with a 47% share. 

The total value locked in the DeFi market rose by 36% this week. Source: DeFi Pulse and DeBank

ETH price surge leads to spike in transaction fees

ETH has seen increased interest from traders following strong demand for BTC, the anticipated launch of ETH futures on CME and the growing decentralized finance sector. As the price of the leading altcoin smashed past $1,200 per coin, the Ethereum blockchain suffered severe network congestion — and, as a result, high transaction fees. On Jan. 4, the total transaction fees neared $1 million and the average transaction fee reached an all-time high of $17.43 per transaction.

Transaction fees on Ethereum peaked on Jan. 4 at 13:00 UTC. Source: Glassnode

Leading decentralized exchange Uniswap and leading stablecoin USDT are ranked as the highest gas spenders on the Ethereum network — with 34,7000 ETH and 24,800 ETH spent over the past 30 days, respectively. Data in Uniswap suggests that ETH trading pairs are among the most popular and most actively traded among users. USDC/ETH, DAI/ETH and ETH/USDT recorded weekly volumes of $911,000,000, $811,000,000 and $783,000,000, respectively. 

Traders poured liquidity into ETH in Uniswap in the past week. Source: Uniswap Info

Aavegotchi delayed its launch on Ethereum

On Jan. 4, the Aavegotchi team decided to delay the platform's launch, citing high gas costs and the extreme volatility of the Ethereum network.

Powered by decentralized lending platform Aave, Aavegotchi integrates decentralized finance into its non-fungible tokens. Users can stake DeFi tokens as collateral to earn different Aavegotchi avatars. The staked DeFi tokens in the Aave protocol generate additional yield for users.

The Aavegotchi team later announced that it would launch directly on Matic Network, a blockchain scalability platform that enables a second-layer scaling solution for decentralized applications — essentially taking transactions off the main Ethereum blockchain to achieve faster transaction confirmations and lower transaction fees.

Layer 2 solutions are in the spotlight

With the recent spike in Ethereum transaction fees, some traders are seeking second-layer scaling platforms as alternatives. For instance, Loopring — a DEX that adopts zkRollups — saw a spike in volume to $11.18 million on Jan. 3. The price of its token, LRC, has also tripled since the beginning of 2021. 

Meanwhile, second-layer scaling solution developer Optimism plans to release its preliminary mainnet on Jan. 15. Optimism will partner with Synthetix for the trial run.

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Disclaimer: This material should not be taken as the basis for making investment decisions, nor be construed as a recommendation to engage in investment transactions. Trading digital assets involve significant risk and can result in the loss of your invested capital. You should ensure that you fully understand the risk involved and take into consideration your level of experience, investment objectives and seek independent financial advice if necessary.

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