Editor's Note: This article comes fromUnitimes（ID：Uni-times）Editor's Note: This article comes from
, Author: TradeBlock, Editor: Summer, published with permission.
Within the broader digital currency ecosystem, decentralized finance (DeFi) has shown rapid growth and represents one of the most dominant use cases for the Ethereum network.
In the past year, several well-known DeFi platforms have launched and attracted a lot of market interest. Although each DeFi platform has its own characteristics, and in many cases has different business models and provides different financial services, most platforms have one thing in common, that is, use the native token ETH of the Ethereum network as the platform for these platforms. collateral on.
As the market demand for DeFi services increases, the demand for ETH on these DeFi platforms also increases accordingly. Given these DeFi's increasing demand for ETH, in this article we attempt to quantify the supply and demand dynamics of ETH over the next few years. Mainly, we will try to predict the relationship between DeFi and ETH supply and demand dynamics based on a conservative likely scenario.
In the chart below, we plot the ETH price trend (black line) and the change in ETH trading volume on several major US exchanges over the past few months:
Figure 1: ETH price and its trading volume trend chart on several exchanges in the United States, data source: TradeBlock Professional
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DeFi service background information
The DeFi platform provides financial services similar to traditional centralized enterprises, but the DeFi platform exists in a trustless ecosystem, so the dependence on intermediaries is greatly reduced. DeFi platforms integrate smart contract functions into transaction activities, which usually require users to mortgage digital assets, so as to ensure that users can participate well.
Similar to traditional financial companies, DeFi platforms provide debt-collateralized products (such as loans/bonds/derivatives/mortgage loans, etc.); but these products are mortgaged by digital currency (rather than other assets).
While many decentralized platforms offer different collateral types, most of the collateral locked in smart contracts is ETH.
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DeFi platforms see growing demand for ETH
The chart below shows that the amount of ETH staked across all DeFi platforms declined in the second quarter of this year after reaching an all-time high earlier this year, but has shown a trend of recovery in the third quarter.
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Compared with the same period last year, the monthly growth rate of new ETH collateral in DeFi platforms is about 17%. The figure below is a change chart of the monthly net inflow of ETH collateral into the DeFi platform (that is, the net value obtained by subtracting the decrease from the increase in ETH locked in DeFi).
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Figure 3: The monthly net inflow of ETH collateral on the DeFi platform, data source: DeFi Pluse
As can be seen from the graph above, the increase in new monthly inflows of ETH collateral has slowed down recently. The average daily net inflow of ETH collateral in July 2019 was 1,300 ETH.
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Estimated daily demand for ETH collateral in the future
In order to estimate the future demand for ETH collateral, we need to make some assumptions. We will take a conservative approach to analyze a possible scenario that assumes that the growth rate of ETH collateral demand declines as DeFi platforms and markets mature.
Based on this assumption, we expect an average monthly growth rate of 5% going forward, compared to the 17% monthly average growth rate of ETH collateral over the past year.
That is to say, considering that the growth rate of new ETH collateral on these DeFi platforms has accelerated in the past year, and the recent signs of slowing growth, it is assumed that as the market penetration rate of DeFi platforms approaches the saturation point, the future ETH collateral The growth rate will probably all slow down.
In terms of estimated future demand, we will make a forecast based on the average daily demand of 1,300 ETH in July 2019. Assuming that the average monthly growth rate of ETH collateral on the DeFi platform is about 5% in the future, then in the next year, this means that the average daily demand for ETH collateral will be about 3,000 ETH.
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Estimated daily issuance of ETH in the future
In the chart below, we plot the daily new supply of ETH since 2015.
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Figure 4: ETH daily incremental trend chart since 2015, data source: TradeBlock Professional
The Ethereum network is expected to start another network upgrade - Serenity (that is, Ethereum 2.0) in early 2020, at which time we are expected to witness a reduction in the issuance rate of ETH. Ethereum developers predict that after Serenity is successfully implemented (around 2021), the annual increase rate of ETH will drop to between 0.25% and 0.2%.
In our envisioned scenario, we assume that the annual increase rate of ETH will be lowered to a conservative estimate of 1% starting from February 2020. It is important to note, however, that delays in the Serenity development roadmap may cause this estimated release rate to change considerably.
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DeFi's ETH demand may exceed ETH's additional issuance
Assuming that starting from February 2020, the annual increase rate of ETH drops to 1%, which means that by November 2020, the daily new supply of ETH will be about 3,000 ETH.
Considering that we mentioned above that in the next year, the average daily demand for ETH collateral on the DeFi platform will be about 3,000 ETH, which means that the daily demand for ETH as collateral on the DeFi platform will be It will be close to the daily issuance of ETH.
That is to say, if the demand for ETH collateral on the DeFi platform is higher, or the annual increase rate of ETH drops more sharply, then by November 2020, the daily demand for ETH collateral on the DeFi platform will exceed the daily demand for ETH. Additional issuance.
However, it is also important to note that if the price of ETH increases significantly due to speculation or other reasons, this will reduce the amount of ETH that needs to be locked on the DeFi platform (ie the amount of ETH collateral will decrease).
Therefore, if the price of ETH rises significantly, and the demand for DeFi services grows slower than the price of ETH, the daily demand for ETH collateral used in DeFi platforms will decrease.
This is because when the price falls sharply, the ETH collateral of each DeFi platform will increase; and when the price rises, the amount of ETH collateral will decrease, and market participants may withdraw part of the ETH collateral from the DeFi platform . See sky map:
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epilogue
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We hope that this report sheds light on how DeFi services may have a tangible impact on ETH demand. Our conservative forecast shows that by November 2020, the demand for ETH from DeFi services will likely exceed the new addition of ETH. In addition, there may also be other decentralized applications (dApps) that increase the demand for ETH collateral, such as dApps in areas such as gaming or healthcare.
