Author | Kason Produced | Vernacular Blockchain (ID: hellobtc)

Ethereum, a revolutionary smart contract platform founded by Vitalik Buterin, a legend in the crypto field, has played a pivotal role in every important moment in the crypto industry since its birth in 2014.

Thanks to the first-mover advantage of smart contracts and its huge player base, Ethereum has always been the first choice for various projects. From the early ICO and mining boom to the DeFi, NFT and GameFi trends in recent years, Ethereum has always been at the forefront of the crypto world. This has not only spawned many hot projects to stand out on the Ethereum platform, but has also made Ethereum the underlying blockchain with the most abundant projects, the most fierce competition, and the most users in the encryption field.

What are the popular fried chicken projects on Ethereum? Let’s take stock together.

01 DeFi track

DeFi (decentralized finance), as an emerging financial model, is a core component of the blockchain industry. Its main feature is that it does not require a centralized organization and can directly realize asset management, transactions, borrowing and other finance through code and smart contracts. Serve. In the field of DeFi, there are many different subdivisions. Currently, among the DeFi subdivisions, Dex, decentralized borrowing, LSD (liquidity staking), and decentralized derivatives are the most noteworthy. The following is a further introduction to some leading projects in the corresponding subdivisions:

• DEX

DEXx refers to a platform that enables Token swaps without relying on the credit of CEX. Before Dex came out, everyone who wanted to buy and sell tokens had to go to CEXs like Binance and Coinbase. The balance sheets of CEX are often not transparent, which can lead to principal-agent problems. The FTX thunderstorm is a profound lesson. In addition, CEX also has some criticized shortcomings such as high operating costs, high risk of being attacked, difficulty in fully guaranteeing user privacy, and monopoly of the market. These circumstances have made people in the industry realize that a decentralized CEX should be created. , transparent, low-fee, low-risk, and anonymous transaction method.

Among them, Uniswap is an epoch-making DeFi protocol. It is built on the Ethereum main network, the first Dex to adopt the Automated Market Maker (AMM) trading model and has verified its feasibility. All its transactions are based on smart contracts and support exchanges between ERC20 Tokens. Users only need to link Uniswap with their wallets to participate in transactions without submitting identity information or trusting any third party, effectively solving the problem of centralized transactions. market deficiencies.

The working principle of Uniswap is to first establish a liquidity pool, and then users can trade in the liquidity pool. Users who provide liquidity to the liquidity pool are called liquidity providers (LP) and can obtain Token UNI issued by Uniswap. Users who hold UNI can participate in the governance of the protocol.

Currently, the total daily trading volume of UniSwap V3 exceeds US$500 million, and there are more than 900 tradable markets. It is the Dex with the largest trading volume and market size on Ethereum. If you include UniSwap V2 and transaction data on non-Ethereum chains, Uniswap’s transaction volume accounts for over 60% of the total global Dex transaction volume! This shows that UniSwap is not only the Dex leader on Ethereum, but also the Dex leader in the crypto world.

• Decentralized borrowing

Compared with the lending business centered on banks in the traditional financial industry, decentralized lending and borrowing refers to a kind of lending and borrowing that runs on the blockchain network and is implemented through smart contracts without the need for centralized financial institutions. Borrowing mode. In the traditional financial system, borrowing needs to be carried out through centralized financial institutions such as banks, while decentralized borrowing automatically executes the borrowing agreement through smart contracts on the blockchain.

Decentralized borrowing is usually based on Token (such as ERC-20 Token on Ethereum). Token is both the collateral and the object of borrowing. The borrower locks a certain number of Tokens in the smart contract as collateral, and can then borrow other tokens or legal currency. By lending tokens, the lender obtains the collateral provided by the borrower as a guarantee and obtains a certain interest income. The borrower should return the borrowed token and interest within the repayment period, otherwise the collateral will be recovered by the lender.

MakerDAO on Ethereum is the "originator" of the decentralized loan agreement. In 2016, MakerDAO launched a loan product, allowing users to mortgage Ethereum to lend out the stable currency DAI. The emergence of Aave in 2017 further promoted the development of decentralized lending.

Aave, formerly known as ETHLend, is a point-to-point smart contract matching loan agreement on the Ethereum chain. It was renamed Aave in 2018. Due to the low efficiency of point-to-point matching, Aave launched a capital pool model in 2020. After depositing mortgage assets, users can borrow assets within the mortgage rate range without the need to match needs one by one. Since then, Aave has started a new chapter. In 2021, Aave launched the V2 version and Aave Pro for institutions, launched the AMM market and liquidity mining plan, and completed deployment on Polygon and Avalanche. In 2022, Aave launched the V3 version, GHO stable currency, and Lens Protocol, and further improved its deployment on multiple chains.

As a decentralized borrowing protocol, Aave supports users to deposit Tokens into the protocol. In exchange, depositors will receive an interest-bearing token - aToken. aToken is a token that accumulates interest over time and can be circulated within the ecosystem. When a depositor wants to withdraw money, he must return the aETH token in exchange for the ETH asset originally deposited and the interest charged. During the loan period, Tokens will be deposited into a pool, and borrowers can submit any other monetary assets as collateral and then borrow Tokens from the pool. And all loans are overcollateralized.

In addition, Aave has pioneered products such as flash loans, interest rate swaps and credit entrustment (loans) in the industry. Take flash loans as an example, a loan method that allows users to borrow millions of dollars in assets without collateral. The loan must be repaid in the same block in which it was borrowed; if the loan is not repaid, all transactions are cancelled. Flash loans can currently be used for arbitrage, collateral swaps and liquidation.

While the Aave team continues to update and upgrade its decentralized lending products, Aave's funding scale is also growing. As of now, Aave’s TVL has exceeded US$4.7 billion, making it the third largest protocol on the Ethereum chain after Lido and MakerDAO in terms of TVL.

Data source: https://defillama.com/chain/Ethereum

• Liquidity Stake (LSD)

Liquidity staking is a decentralized financial product based on staking. The project that launches this product supports users to lock tokens in a smart contract and rewards participating users. Since the blockchain using the PoS consensus mechanism distributes block power based on the number of node tokens pledged, and the more pledged tokens, the more conducive to the security of the network and the stability of the currency price, DeFi products such as liquidity staking often appear in PoS or similar projects. In a blockchain network with PoS as a consensus mechanism.

Lido is an Ethereum 2.0 staking service platform. Users can pledge any amount of ETH without setting up a node, and obtain the pledge token stETH at a 1:1 ratio. Users holding stETH Token can obtain the benefits of staking ETH, such as staking rewards, handling fee sharing, etc. At the same time, users can also use stETH Token for DeFi protocols that cooperate with Lido, such as liquidity mining and trading in Curve, Yearn and other platforms.

Since its establishment in 2020, the number of ETH pledged in Lido has been rising. It currently exceeds 5.6 million, with a market value of over 10 billion US dollars and a market share of over 31%, surpassing well-known centralized institutions and other decentralized institutions such as Coinbase and Kraken. The agreement has become the “Big Mac” agreement for pledging ETH.

There is also favorable information for Lido in terms of policy and market. Last month, Kraken was forced to stop providing staking services to US users, which marked the United States' tightening of controls on centralized staking institutions, and the decentralized protocol Lido will undoubtedly be the beneficiary of the policy. As the Ethereum Shanghai upgrade will allow users to withdraw funds from the beacon chain, allowing ETH validators to cancel their pledges and decide to sell or hold, this will release a large amount of ETH to the market and will also be conducive to the further expansion of the Lido protocol.

• Decentralized derivatives

Decentralized derivatives refer to financial derivatives based on blockchain that do not require CEX or intermediaries to manage and match transactions. They are automatically executed by smart contracts, and parties to the transaction can directly exchange assets or conduct transactions on the DEX. Decentralized derivatives include various financial derivatives, such as futures, options, and contracts. The price and value of these derivatives depend on the value of the underlying asset (often a token).

dydx is a DEX that supports perpetual contracts. It was established in 2017. The platform runs on the L2 blockchain and provides L1 spot, leverage, and borrowing services. Users can perform leveraged trading, hedging and arbitrage operations on digital assets through the dYdX platform.

Compared with CEX, dYdX adopts the design of off-chain matching + on-chain settlement, which solves the security and transparency problems of CEX and ensures higher performance and response speed, which is enough to support large user traffic.

According to Messari data, as of the end of 2022, although CEXs such as Binance and OKX still occupy the mainstream of crypto derivatives trading, dydx’s ETH perpetual contract has also occupied a place in the market, with trading volume accounting for 2.5% of the market. The derivatives circuit on the chain is also a leader.

In order to improve transaction throughput and decentralization, dYdX announced the V4 plan, which will use the Cosmos SDK and Tendermint consensus protocol to develop its own application chain. Part of the work has been completed.

As of March 16, 2023, dYdX’s TVL exceeded US$300 million, and it is still the derivatives agreement with the largest pledge amount on the Ethereum chain.

02 Stablecoin

Since the price of general cryptocurrency fluctuates too much and is not suitable as a medium of transaction and a means of storing value, pioneers in the crypto community have launched stablecoin (Stablecoin), whose value is more stable than ordinary tokens.

Common stablecoins include fiat currency stablecoins and cryptocurrency stablecoins. Among them, the value of legal currency stablecoins is linked to legal currencies (such as US dollars, euros, renminbi, etc.). The value of cryptocurrency stablecoins is pegged to cryptocurrencies (such as Bitcoin, Ethereum, etc.).

In the field of cryptocurrency stablecoins, DAI is unique. DAI is a decentralized stablecoin based on the Ethereum blockchain and issued by MakerDAO. The value of DAI is pegged to the U.S. dollar at a 1:1 ratio. Its issuance and management do not rely on centralized financial institutions, but are controlled by smart contracts and DAOs (Decentralized Autonomous Organizations).

In order to maintain the stability of DAI value, MakerDAO has introduced special mechanisms in the issuance, trading and repurchase of DAI, and also supports holders of governance token MKR to directly manage risks.

DAI is mainly used in the crypto world for hedging risks, lending, decentralized leverage, payment, and building trading pairs. In the real world, it can also be used by institutions that accept DAI, such as supply chain finance in international trade. This helps reduce transaction costs.

Currently, the total market value of DAI issued in the entire chain exceeds 5 billion US dollars, and the total market value of DAI issued in a single Ethereum chain is close to 4.5 billion US dollars. It is second only to USDT, USDC and BUSD in the stablecoin market value rankings. It is the first Ethereum chain to be listed. The largest stablecoin with Token as collateral.

 03  NFT

NFT is translated as non-fungible token, which means that each token is unique and indivisible. Combining this characteristic with artwork, songs, music, etc., various types of NFT can be generated. With the help of the blockchain network, NFT can be circulated globally.

CryptoPunks, a typical example of NFT artwork, was launched by Larva Labs in New York. The project started in 2017 and is built on the Ethereum blockchain. There are a total of 10,000 8-bit pixel style punk villains in the entire series, and each villain is unique and has its own unique characteristics.

CryptoPunks is now one of the NFT projects with the highest market value on the Ethereum chain. Users can purchase it through Larva Lab’s official website. Its#5822NFT sells for 8,000 ETH, with a single value of more than $1.4 million (based on the current ETH price).

 04  GameFi

GameFi is an emerging game paradigm that combines DeFi and NFT technologies into games, as well as P2E and other mechanisms, allowing players to make money and have fun by playing games.

Ethereum’s poor scalability has been criticized, which is not conducive to the development of applications with large-scale transaction volumes. Solutions include designing a general-purpose Layer1 high-speed public chain, or Layer2 Rollup designed for DeFi applications, and developing dedicated blockchains, i.e. application chains, for the specific needs of applications.

Based on the latter concept, Axie Infinity developed Ronin, its exclusive Ethereum sidechain for its blockchain games. As a decentralized game in the form of a digital pet world, it uses NFT and cryptocurrency economic models to allow players to earn currency through the game and collect rare virtual creatures to earn income.

Since 2020, Axie Infinity has experienced explosive growth in the number of users and transaction volume. In the second half of 2021, the highest daily active users exceeded 1 million, and the transaction volume reached hundreds of millions of dollars, becoming one of the most popular dApps in the world in 2021 .

However, since the beginning of 2022, the number of users and transaction volume of Axie Infinity has experienced a cliff-like decline. So far, daily active users have dropped to 300,000+, and the transaction volume is only about 20 million+ US dollars.

05 Oracle

Since smart contracts cannot call external APIs, the oracle mechanism was born to help smart contracts obtain external data. In addition to the most widely used price data, it also includes some weather data, sports game data, and stock market data. Traffic data, etc. Simply put, oracles can transmit data from external data sources to smart contracts in order to trigger automated events.

ChainLink is currently the leader in the oracle field and is committed to providing high-quality external data for Dapps. Chainlink ensures the security and accuracy of data by using multiple data sources and algorithms to provide services for price-sensitive scenarios such as borrowing, mortgage, asset synthesis, and derivatives trading.

As the largest oracle provider in the market, ChainLink has been providing price feeding services to well-known DeFi protocols such as Aave and Compound. According to data from DefiLlama, Chainlink serves more than 200 oracles, the most among all oracles. The TVL of the top three protocols it provides services has exceeded US$6 billion, which is also the highest among all oracles.

As of March 16, 2023, the total market value of ChainLink’s official Token LINK exceeded US$6 billion, ranking 22nd in the world.

06 Layer2

Layer2 is a second-layer scaling solution on Ethereum, designed to improve the throughput and performance of the Ethereum network. It does this by migrating transactions from the main chain into smaller, faster "sidechains" or "channels" to reduce the load and transaction costs of the main chain. Currently, there are several solutions for Layer 2, mainly including five solutions: state channel, side chain, Plasma, Rollup, and Validium. Rollup is currently the most popular Layer 2 solution and is most likely to be implemented. The number of transactions that can be included in each block of the Ethereum network is limited, and Rollup improves TPS by packaging and compressing thousands of transactions, and then synchronizing the processed concise data to the Ethereum main network to solve the problem of network The problem of limited transaction processing capacity. Rollup can be divided into zk Rollup and Optimistic Rollup.

ZK Rollup ensures security through the cryptographic technology of zero-knowledge proof zk-SNARKs. ZK is the abbreviation of zero knowledge. In zero-knowledge proof, the prover can convince the verifier that a certain assertion is correct without providing any useful information to the verifier. Since zk Rollup cannot support smart contracts well and it takes a long time to generate zero-knowledge proofs, in June 2019, the Optimistic Rollup plan was proposed. In this plan, the zero-knowledge proofs were removed and a penalty mechanism was added, making it more convenient. Support universal smart contracts.

The star project of Optimistic Rollup is Arbitrum. Two weeks after Arbitrum went online, its TVL soared to US$2.5 billion. Its current TVL is close to US$6 billion, accounting for more than 60% of the market value. It is the largest Layer 2 protocol in TVL.

From an ecological perspective, it is currently connected to hundreds of applications, including many well-known applications such as Uniswap, Sushiswap, Balancer, MetaMask, and Chainlink. The ecological construction on Arbitrum has reached considerable scale.

07 Summary

There is no doubt that the entire crypto industry has changed dramatically since the advent of Bitcoin in 2008. From the number and type of underlying infrastructure such as public chains to application protocols and transaction volume, they have all experienced explosive growth.

Ethereum has become the core carrier of these changes, witnessing breakthroughs in the Web3 world again and again. With the higher scalability and lower fees brought by the Ethereum upgrade, we have reason to believe that based on this increasingly mature Web3 infrastructure, a more complete new world full of infinite possibilities will gradually unfold.

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