Review and Outlook of Ethereum Development in 2023

In 2023, the development of Ethereum mainly revolves around two main lines: liquid staking and Layer 2 (L2).

In April, Ethereum completed the Shanghai upgrade, opening up staking withdrawals and entering the "interest rate control" era. Contrary to market expectations, the upgrade did not lead to massive selling pressure; instead, it attracted more deposits, making liquid staking the hottest DeFi track.

The L2 sector is developing rapidly. The Arbitrum airdrop continues the "wealth creation myth" while raising the airdrop expectations for other L2 projects. With the success of Base and the upcoming Cancun upgrade, concepts such as modularity, parallel EVM, data availability (DA), and decentralized sequencers are becoming increasingly popular. The rapid development of L2 has driven up the prices of related tokens, making it one of the most notable sectors in 2024.

The following are the main data performances of liquid staking and L2 in 2023:

1. After the Shanghai upgrade until the end of the year, the total amount of Ethereum deposits is approximately 17.3061 million ETH, and the total amount redeemed is about 8.1135 million ETH. The cumulative staking total has increased by 10.8242 million ETH, an increase of about 60%, but the growth rate has明显放缓. This indicates that the attractiveness of staking deposits has decreased.

2. The analysis of the relationship between Ethereum staking deposits and other DeFi activities shows that in the short term, when prices drop significantly, funds tend to flow from DeFi to staking deposits; when prices rise significantly, funds flow out of both staking and DeFi activities.

3. In 2023, Ethereum has burned a total of approximately 1.0935 million ETH in transaction fees. The supply has decreased by about 341,800 ETH, a reduction of approximately 0.28%. Overall, a slight deflation has been achieved, but the degree and trend of deflation are not obvious.

4. Among the 34 L2s, Optimistic Rollup and ZK Rollup each account for 11. Most are in the early stages of technology, with 17 only implementing state submission functionality (STAGE 0), including popular ones like OP Mainnet, Base, zkSync Era, Starknet, etc.

5. The highest TVL in L2 is Arbitrum One ($9.37 billion) and OP Mainnet ($6.05 billion). The ones with significant TVL growth this year include Manta Pacific, Starknet, and Polygon zk EVM.

6. The most traded networks in 2023 were Arbitrum One (over 275 million transactions) and zkSync Era (over 218 million transactions). By the end of the year, both had TPS that briefly surpassed Ethereum.

7. The number of independent addresses and daily active addresses for L2 has increased significantly. The highest year-on-year growth in independent addresses is Base (over 7166% growth), while the highest year-on-year growth in daily active addresses is Mantle (over 886% growth).

8. Among the main Rollup-type L2s, zkSync Era has the highest annual revenue ($22.26 million), followed by Arbitrum ($16.53 million). Both Base and Optimism have revenues of less than $6 million.

9. The cryptocurrency with the highest price increase in 2023 is IMX (up over 454%), followed by METIS and OP (both up over 300%). ARB performed moderately, with a total increase of only 14.81% for the year.

Looking ahead to 2024, more L2 projects may issue tokens. Balancing fee income and DA costs, as well as providing value support for tokens, will be important issues that need to be addressed in the development of L2.