To Ethereum and Beyond: Why This $600 Breakthrough Differs From 2018

The price of Ether has surpassed $600 in the recent bull run, setting a new high since July 2018. This time, however, thriving in a significantly different ecosystem. Aside from increased decentralized finance (DeFi) activity and growing active users, Phase 0 of the Eth2 network upgrade has also laid the groundwork for future growth.

Partying Like It’s 2018 — With a Twist and a Turn 

During the last bull run in 2017, when the price of ETH peaked above $1,400, Ethereum co-creator Vitalik Buterin was one of the first to question the valuation of the entire cryptocurrency market. 

At the time, the total market cap of all cryptocurrencies achieved $500 billion, but Buterin had his doubts. In a November 2017 tweet, he said:

“So the total cryptocoin market cap just hit $0.5T today. But have we *earned* it? How many unbanked people have we banked? How much censorship-resistant commerce for the common people have we enabled? How many dapps have we created that have substantial usage? Low added value *per user* for using a blockchain is fine, but then you have to make up for it in volume…. The answer to all of these questions is definitely not zero, and in some cases it’s quite significant. But not enough to say it’s $0.5T levels of significance. Not enough.”

User Activity Is Much Higher

The difference in the level of user activity alone shows that Ethereum is more deserving of its $57 billion market cap than in 2018. The amount of gas — the transaction fees on the Ethereum blockchain network, the number of unique addresses, and the total value locked in DeFi — have all increased to unprecedented levels.

Gas refers to the cost necessary to perform a transaction on the Ethereum blockchain. The amount of gas is a practical gauge of user activities, because it reflects the total amount of fees users are paying on a daily basis. Every single data point on the Ethereum blockchain has to be processed as a transaction, be it sending capital into a DeFi protocol or using a decentralized application (DApp). 

The amount of daily gas used on Ethereum has increased exponentially since 2017. From 2018 onwards, it has nearly doubled from 40 billion to around 80 billion. This shows that the overall user activity on Ethereum, particularly across DApps and DeFi, has increased significantly in the past two years.

Source: Etherscan

The number of unique Ethereum addresses have also spiked substantially since 2018. In mid-2018, the figure was hovering around 42 million. Fast forward two years, the number of unique Ethereum addresses now exceed 120 million.

The growth of the number of addresses noticeably accelerated since early 2020, when DeFi started to gain more traction. The launch of Compound’s COMP token and’s YFI in late 2020 incited a new round of DeFi frenzy. More users started to utilize DeFi platforms, creating a “yield farming” and “liquidity mining” hype. 

The massive improvements in the network fundamentals, namely daily gas usage and the number of Ethereum unique addresses, are testament to how the Ethereum network has progressed thus far. 

Source: Etherscan

DeFi Barely Existed, It Was Only MakerDAO

In 2018, DeFi barely existed. The only major DeFi platform at the time was MakerDAO; Uniswap launched much later in November 2018.

Within two years, the total value locked across DeFi protocols has increased from $186 million in May 2018 to $12.76 billion as of Dec. 17, 2020.


Although Maker remains the dominant DeFi protocol with $2.4 billion in total value locked, more DeFi heavyweights have emerged over the years. Compound, Aave, and Uniswap all have over $1.2 billion in capital locked, demonstrating the competitiveness of the DeFi market and the real user demand for it.

Eth2 Upgrade — Beacon Chain

Atop the considerable increase in user activity and the number of DApps, the launch of Ethereum 2.0, or Eth2, has concluded the launch of Phase 0. 

The Eth2 network upgrade improves the scalability of the Ethereum blockchain by allowing it to process more transactions every second. It achieves scalability through two things: a shift from the proof-of-work (PoW) consensus algorithm to the proof-of-stake (PoS) algorithm and the integration of sharding.

In November, the Eth2 deposit contract addresses reached the 531,872 ETH threshold to launch the Eth2 mainnet. Industry executives, including former Coinbase president Asiff Hirji, praised the amount of progress on utility in crypto, pinpointing the Eth2 launch. He said:

“On a day when #bitcoin is nearing its all time high, it is great to see this rally does not have the over-hyped feel of 2017 and that there has been so much progress on real utility in crypto in the intervening years (including of course ETH2 launch)”

Eth2 would allow DeFi platforms and DApps to perform more seamlessly without undergoing issues of scalability. When the Ethereum blockchain network clogs due to an overload of pending transactions, it can cause transactions to get delayed and the price of gas costs to spike.

A Bedrock for Evolution 

When these problems emerge, it causes major DeFi cycles to become unsustainable as users find it too expensive and impractical to use DeFi platforms. Hence, when the Eth2 mainnet officially launches, it would provide a strong fundamental bedrock for DeFi and the Ethereum ecosystem as a whole to evolve.

This time, with the price of ETH over $600, Ethereum has the fundamentals to see a sustainable rally. The blockchain is poised to become more scalable, which would allow the user activity on Ethereum to grow even further in the medium to long term. 

To Ethereum and Beyond 

The confluence of all these factors puts ETH in a positive direction heading into 2021, especially as the circulating supply of ETH declines as more users stake their ETH into the Eth2 contract over time.