The Beating Heart of Ethereum - The Daily Gwei #26
Quantifying the human and robot users of Ethereum.
This GIF is really fascinating - it’s basically showing net asset flows to Compound from Ethereum addresses (users). Though, what this GIF looks like to me is a sort of “beating heart” of Ethereum. Users deposit and withdraw crypto-assets from various places (DEXs, CEXs, Compound and others) based on market conditions. A healthy beating heart would be lots of activity across the Ethereum network and its apps whereas a dying heart would (obviously) be the opposite.
Source: https://twitter.com/BanklessHQ/status/1281300266080501760
Even though Ethereum has this beating heart of activity, it’s always been difficult to measure the active human users of Ethereum (or any blockchain) for many reasons including: people using multiple addresses, automated activity (bots), exchange address activity, miner activity and more. Most metrics that I’ve seen that try to measure “daily active users” for apps basically just count the number of Ethereum addresses that interacted with an app. This is obviously not an accurate way to measure usage because there is no distinction between a human user or a robot user.
This is why I like to look at other metrics to measure human users on Ethereum such as the infamous USD Locked in DeFi, total new capital inflows (harder to track as it usually comes from centralized exchanges), stablecoin growth and, to a lesser extent, fees paid on the network. Fees paid are generally a good metric to measure overall use of the network but, as I’ve explained in a previous post, a lot of that usage can come from ponzis/scams which tend to be very automated and spam the network with useless transactions.
There are also a bunch of metrics that are opaque that we can somewhat attempt to track such as new user signups to centralized exchanges, growth of Ethereum-based newsletters & podcasts, visits to Ethereum-based websites (Ethereum.org, EthHub), YouTube views and more. I’ve also personally noticed a shift to Ethereum over the last few months from all over crypto and I think this is mainly due to DeFi capturing everyone’s attention (especially since the COMP liquidity mining launch).
Since I have access to the EthHub analytics, I can give some insight here as well. Basically, all of EthHub’s metrics (visits, sessions, new users) are way up over the last few months. In addition to that, I’ve noticed stronger growth in both newsletter subscriptions and podcast listeners. This signals to me that there are new users entering the Ethereum space whether it’s from other crypto communities or they’re just brand new to crypto. I tend to believe that many of them are brand new users because the top 2 pages on EthHub are ‘Intro to Ethereum Wallets’ and ‘How to Buy Ether’.
In the end though, I don’t think it matters if the users are bots or humans. Bots are necessary for activities such as exchange arbitrage (which keeps asset prices in check), automated payouts (mining pools, liquidity mining programs), automated trading (like market making and Sets) and more. Humans are necessary for actually bringing in the new capital, creating the bots, building the apps, creating & maintaining the community and more.
The beating heart of Ethereum will always be its users - no matter if it’s a human or a bot.
Have a great weekend everyone,
Anthony Sassano
All information presented above is for educational purposes only and should not be taken as investment advice.
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