Blockchain appeared back in 2009 as a peer-to-peer payment system, but is it the only application? Ethereum extended blockchain boundaries by introducing smart contracts, with virtual and unlimited potential applications. Which of these applications are actually used and generate value? We analyzed smart contract calls’ statistics using indexed dataset, and found out which applications are most popular and valuable, and what are the current trends in development.
What Are Users Calling?
Smart contracts are growing in popularity. This is confirmed not just by media buzz, but by pure statistics. Here is a graph with the number of daily smart contracts calls in Ethereum mainnet:
Recently, on the 20th of June, 2019 we could celebrate an absolute record of daily calls, above 660 thousand calls per day. Let’s look and see, what are these methods, and which of them are the most frequently used…
We used Ethereum’s database, where all transactions and smart contract calls are recorded, so we could easily match the data with SQL language and present our findings in a simple graph.
The diagram shows the most popular smart contract methods, by ordering them according to the number of call counts during our time range. Apparently, ERC-20/ERC-721 token methods, such as transfer and approve, are far more popular than any other methods. We may jump to the fast conclusion, that tokens are by far the most popular «application» of Ethereum smart contracts.
Let’s group other methods from the list in categories to extract the other popular applications. We composed this by analyzing many smart contracts and grouping them using statistical methods:
Even if you do not know what the particular smart contract is, having the list of its methods and events will give you a good understanding about it. The same approach works also on higher levels of abstraction. Knowing the trends of different methods’ popularity, we can derive the popularity of various smart contract categories, using just smart contract names.
The next query shows the top 3 smart contract methods by the number of calls per month. To make it more informational, we removed the ER20 token interface methods, as they have to be considered more as «money transfer» operations rather than smart contract applications. As a result, we will see the popularity of methods with evolution over time. The methods are colored, and the areas of the same color mean that the particular method was in the top 3 list for a period of time:
The high level overview of this graph, annotated with the method names, gives us some immediate insight into which blockchain applications were popular during different time periods.
First of all, it is visible enough to see that these kind of applications significantly changed over time, especially compared with the early Ethereum development (2016- 2017 years) and the current stage.
During early stages, there are more utility methods, such as setBasePrice and changeDomain, which are found in the data and which tells us that there was no clear winner in the categories.
However, some things are still constant. For example, starting from early 2016, gambling on smart contracts played a significant part in overall transactions. And it still remains in the top applications, sometimes even getting the first place.
Then came along the ICO era in 2016-2017, visible through ownerTransfer and register. Starting from 2017, decentralized trading becomes predominant on the count of transactions, with trade, deposit, and withdraw methods clearly visible. These are all methods of DEX smart contract protocols. Multiple protocols exist now for DEX trading, but many of them have the same method names, so they are easily identifiable on this diagram due to aggregation.
Different kind of gaming still plays an important role in blockchain applications. The method of settleBet is still at the top up until 2019. There are multiple contracts using this method with the exact same signature.
We have not yet looked into this in detail, but a good part of these transactions are probably generated by bots and are not real activity…
Some other games are explicitly visible, such as Crypto Kitties with the createSaleAuction method during late 2017, and Fomo3D with buyXid method in September, 2018.
There are, however, limitations to this analysis, and the results must be considered with care. The count of calls is probably the easiest metric, but it has certain drawbacks:
- Firstly, all calls are different in complexity and value. That’s why we are getting lots of trivial «transfer» tokens compared to other more valuable and complex methods.
- Secondly, this metric is very easy to pump by artificial methods, such as bots.
Where Is All the Gas Spent?
There are other metrics, helping us understand not just «what is frequently used?», but also «what has more value?». The next metric we consider is the total gas cost spent on calling a specific method or smart contract. The Ethereum network calculates gas cost by multiplying the method’s execution complexity, measuring it against gas units and gas prices. In essence, we measure the value of a method called by seeing more people willing to pay more in crypto currency (ETH) for more advanced actions.
Gas cost is distributed more uniformly across different kind of methods as seen from the diagram. Ether transfer consumes just one forth of all gas cost. The other parts are distributed almost equally between different kinds of smart contract methods.
As a side note, the sum of ETH spent on gas for smart contracts is pretty low – around 300 ETH per day. This is nothing comparing to the overall ETH supply. Ethereum itself is not used on purpose!
Above is the list of the top smart contracts, where people spent most Ether on gas, giving us a hint on which applications are not only used actively, but which ones are also used on blockchain, and which ones are also valuable to users. If users set higher prices for gas, and call many methods, it means that the execution of a smart contract in a timely manner is important for them. They vote for applications using their wallet!
In addition to the categories outlined before, we are now getting some specifics in particular regarding contracts, protocols and projects:
- A number of decentralized exchanges are found at the top of the list: Oasis, IDEX, EtherDelta, Bancor, KyberNetwork. They appear at the top due to several factors:
– Relatively high gas prices, which traders are willing to pay to prioritize transactions.
Largenumber of calls (trades, withdrawals, deposits).
Highcomplexity of trade methods, which check cryptographic signatures and which undergo order clearance.
- financial pyramids and gambling:
coToken, Dice2Win, Etheroll, Lastwinner
- games: CryptoKitties
- tokens: Tether stablecoin, Pundi NPXS, Status SNT
How Many Users?
The next metric is stolen shamelessly from web analytics. The daily active users (DAU) and monthly active users (MAU) are common metrics, showing the popularity of websites and the activity of users. Applying these findings to the blockchain, we can count the users that are making transactions as «active».
If we would get this metric in total including all smart contracts in the Ethereum network, we would get millions of addresses. This does not exactly measure unique users and real people, as one person can use many addresses and vice versa.
However, it’s important to point out that June, 2019 had the maximum number of MAU addresses ever, calling smart contracts: 1.89 million unique users, which is pretty large when measuring the blockchain adoption:
So, which are the applications with most unique users? We can use the same type of examination as we used for our gas cost analysis and get the top smart contracts with the highest user base:
It appears that there aren’t so many smart contracts with a large user base:
- Decentralized exchanges: EtherDelta, IDEX
- Token sale support: EOS
- Utility smart contracts, used by exchanges: Kraken, ReplaySafeSplit
- Games: CryptoKitties, HyperSnakes
- Money pyramid and gambling: coToken, Lastwinner
- MakerDAO project WETH
The list is not so long, there are just 60 smart contracts, that can be proud of as many as 10K unique active addresses calling them. Comparing this with the rest of the internet world, this is equivalent to a relatively small website.
Remember that we count users making transactions as «active». That’s why this measure shows a much smaller MAU count. It would have more meaning to consider them as «active users», as they are actively interacting and spending money on gas and making transactions. Comparing these users to website visitors, it’s more like having «subscribers» or «shoppers».
What Is the Current Trend?
When looking at all the analytical results we obtained, the apparent trend is leaning towards different kind of tradings on smart contracts and decentralized exchanges.
In addition to the popularity and value, decentralized trading (DEX) has significantly grown in complexity and areas of application.
As an example, this is just one (!) transaction of a token exchange:
This is one extremely complicated transaction, including inter-calls between multiple smart contracts. Actually, this transaction was used to convert Ethereum into stable coin when paying for the conference ticket on EthParis using the KyberNetwork payment protocol.
To make this payment happen, multiple smart contracts from several companies took part, each playing a part in the conversion problem. DEX smart contracts are now used as components, and more complicated constructs are built on top of them.
The number of these complicated transactions has grown significantly in recent periods. The primary reason for this is the appearance of the new type of blockchain application – decentralized finance (DeFi).
This is the structural high level diagram of the typical component and the DeFi services on top of them:
The complexity of services based on the DeFi model increased from simple token exchanges to margin trading and collateralized loans. Currently, special smart contracts are built, that work in coordination with oracles and DEXes. The collateralized balance is stored on the smart contract, controlled by the owners of the assets.
Examples of DeFi projects are dYdX, Dharma, Compound, MakerDAO. The trend of amounts locked on these contracts by participants has been growing fast in the last 6 months, hitting more than $500M in value:
Collateralized Lending and margin trading protocols are also gaining popularity, which is clearly seen from the unique monthly users (MAU) graph:
We are expecting to see even more examples of the DeFi applications very soon. The components are developing fast, and the interest from the community to have these kind of applications is growing fast.
Possible DeFi applications may include:
- DEX + Securitized Assets => Stock Exchange
- DEX + CDP => Derivatives (Secondary) Market
- Stable Coin + DEX => Universal Payments
- Stable Coin + DEX => Currency Change
- DEX + CDP + Securitized Assets => Stock Margin Trading
- Stable Coin + CDP + DEX => De – Forex
Here are the reasons why DeFi applications are gaining popularity and why they can become the perfect application for blockchain in general, by:
- Targeting audiences of people who are already
- Proposing clear well-known financial models that can generate revenue just from lending
an amountof assets, that people own anyway and store in the blockchain.
- Building services on top of existing, well-tested protocols and projects.
- Utilizing the most important blockchain features, such as decentralization, security guarantees and the principle of ownership, based on private keys.
- Blockchain applications can be analyzed by on-chain data using different metrics. This data is objective, verified and trusted, and it is not subject to manipulations and sentiments.
- The most popular categories of blockchain applications on smart contracts
are:decentralized trading (DEX), gambling, financial pyramids, games, collectibles.
- Decentralized trading (DEX) protocols have grown in popularity and continue to be in the top of the blockchain usage patterns.
- The complexity of smart contract interactions has grown significantly over the last months. Many transactions include the interaction of many smart contracts. The new approach to build new blockchain applications is based on
Decentralized Finance (
DeFi) protocols isthe new step in DEX development with more complexity and additionalvalue for end users. Traditional banking services, such as loans, savings, margin trading andother activities can be modelledusing smart contracts, combined using modular architecture.
- We expect to see more applications of blockchain in the area of financial services, well beyond simple trading or peer-to-peer money transfers.