An increasing number of investors prefer to use Ether to generate returns, as Glassnode notes. About 5% of the ethers in the market are in the WETH token smart contract.
The utility of Ether has never been as marked as in 2020, according to the blockchain analytics firm Glassnode. An increasing number of investors prefer to use ETH to generate returns, not just as a tool to store value.
The researchers calculate that more than 15% of the total supply of ETH in the market is deposited in DeFi smart contracts. This represents almost 4% more than in 2019 when only 11.5% of Ethereum coins were in use on financial platforms.
According to Glassnode, the rise in the utility of Ether has occurred as a consequence of the explosion in popularity of the decentralized finance (DeFi) ecosystem. This market has grown impressively in recent months, reaching more than USD 8 billion in circulation between its platforms in September.
Glassnode experts say that most of these coins are distributed between the smart contracts of lending platforms, exchanges, and stablecoins. They also note that yield farming strategies have contributed to the increase in the amount of locked Ether.
Smart Contracts in which Ethers are Deposited
About 5% of these retained tokens are in the smart contract of the WETH initiative, a wrapped ether that expands the interactions of this currency with other DeFi tokens. Most of these WETHs are deposited on the decentralized exchanges (DeX) Uniswap and Balancer. Likewise, the lending platform Maker also owns a significant portion of these tokens.
A significant amount of Ether is also deposited in the smart contracts of multi-signature exchanges such as Bitfinex and Gemini, as Glassnode reports. Compound receives honorable mention for its mid-year surge in popularity, earning it first place in capitalizations of the entire DeFi market. However, reports from DeFiPulse indicate that the application has currently lost ground, and the lending platform Aave has claimed dominance.
The cryptocurrency community and professional researchers continue to turn their attention to Ethereum’s decentralized finance ecosystem. This market looks like an opportunity to change the financial world as people know it, opening the way toward an industry that works with programmable money. However, since it is a new and experimental ecosystem, users must be aware of the financial and technical risks that these platforms pose.
Few users have been able to receive returns of up to 100% by doing yield farming on DeFi platforms. However, most of them are exposed to the possibility of a smart contract error, hack, or insider trading. In this sense, investment in these platforms must be prudent and conscientious.
As some experts have previously warned, the user must do their research before making their investments. It is necessary that investors not let the popularity of a platform carry them away, but rather try to learn more about where they can invest their capital profitably.
By Alexander Salazar