After Bitcoin, Ethereum has been the hottest cryptocurrency in the market, especially off-late, with its growth driven by Decentralized Finance [DeFi]. In fact, DeFi’s growth has become synonymous with the growth of Ethereum due to the latter’s heavy utilization in DeFi protocols. Today, investors have moved on from simply holding on to the second-largest crypto-asset passively, to locking them up in various smart contracts in a bid to generate returns, especially during a period of low volatility.
Such behavior has resulted in over 15% of Ethereum being locked up in smart contracts on the Ethereum blockchain – up from 11.5% a year ago.
Source: Glassnode
According to data collected by Glassnode, over 5% of ETH is locked up in the wrapped Ether [WETH] smart contract, enabling easy interaction with other tokens. However, most WETH remains locked up in DeFi contracts including Maker, Uniswap, and Balancer. Interestingly, the contract calls on Ethereum have also surged to a high over the past few months. Any transaction on the ETH blockchain, apart from simple ETH transfers, will interact with one or more smart contracts, which is commonly referred to as a contract call.
Further, Glassnode also reported that External contract calls were up by more than 80% in 2020, climbing to an ATH of over 900,000 calls in a single day in August. This was 3x the average call volume of 300,000 per day in late-2017.
Apart from DeFi, ETH also holds large balances in smart contracts for exchange multi-sigs and Compound’s ETH pool. Exchanges like Bitfinex and Gemini have offered a smart contract for multi-sigs, while simply representing custodial passive holding.
It can be thus argued that other contracts like WETH and Compound have highlighted the use case of ETH beyond just a store of value. ETH’s booming presence seems to be underlining the digital asset’s growing utility as not only a currency, but also as a hedge.