How Ethereum's 44% Price Drop in USD value Shocked the dapp Ecosystem [An Analysis]
Your most trusted source for dapp data
The Covid-19-fueled sell-off across financial and investment asset classes on 12 March 2020 resulted in the largest ever day fall in the Ethereum price – from $195 down to $110 – that‘s a 44% drop.
Investigating the 12 March 2020 - Covid-19 price dump.
But where does that leave the growing Ethereum dapp ecosystem? DappRadar investigates.
Up, up, up, down, down, down
This was especially notable with DeFi and exchange dapps, as users tried to reduce their financial risk.
A particular driver of activity was how the falling ETH price impacted the MakerDAO-DAI stablecoin dapp. People using this dapp lock their ETH
(and other cryptos) into a vault as collateral, generating some amount of DAI stablecoin (of smaller financial value) in return.
A typical example would be locking up $150-worth of ETH and generating $100 of DAI in return as a loan, which at some point needs to be repaid, including an additional small interest payment.
However, if the USD price of the ETH locked into the vault falls below the $100 value of the generated DAI, the loan will automatically be shut down unless more ETH is added to ensure the value of the collateral remains sufficiently high.
Obviously a 44% one-day decline in the price of ETH forced many MakerDAO users to recapitalize or pay back their loans.
Indeed, unique wallet activity on 12 March for MakerDAO was an all-time high of 1,458, up 243% compared to average activity over the past 30 days.
Other financial dapps experiencing all-time activity highs included:
- Liquidity protocol Kyber Network – 1,543 unique active wallets, up 70%
- Decentralized trading dapp dYdX – 569 unique active wallets, up 133%
- Decentralized exchange 1inch – 491 unique active wallets, up 77%
In total, across these six financial dapps, the accumulated daily active unique wallet total was up 84% compared to the average for the previous 30 days.
All this activity spiked the gas price that’s paid to get any transaction saved into the next Ethereum block. And this – in turn – had a knock-on impact on other dapps – notably games – running on the Ethereum blockchain as regular users declined to pay this higher gas costs.
Dapps running on the TRON and EOS blockchains, which because of their consensus mechanism don’t require a gas fee, experienced little change in daily activity.
Originally published here
Subscribe to get your daily round-up of top tech stories!