Data & Insights Recap - Miner revenue after the halving, a drop in Ethereum DEX traders

So you halve a bad day

Source: The Block

• Perhaps the most significant moment of the past week was the bitcoin halving, which happened late in the day on Friday, April 19th.
  • As a reminder, the halving happens every 210,000 blocks, or roughly every 4 years, given that a block gets mined around every 10 minutes and decreases the reward for mining a bitcoin block by half, slowing bitcoin’s issuance.
  • Eventually, the block reward will become 0 once all 21 million bitcoin are mined, and the only reward for miners will be transaction fees. 
  • The most recent halving brought the block reward down to 3.125 BTC from 6.25 BTC. 
• Historically, the halving has been viewed as a bullish signal as, in a certain sense, it increases the scarcity of the asset. This year, predictions about the halving were spread far and wide, with some sticking by the sentiment that it would propel bitcoin upwards, some saying the event was already priced in, and some thinking the more depressed macro sentiment was going to be a main driver on bitcoin’s price going forward. 
  • But one group of people that the halving is not that great for is bitcoin miners. Bitcoin is, of course, up massively from when it first emerged. A block reward of 50 BTC back in 2009 pales in comparison to the 3.125 BTC reward at today’s prices. But regardless of whether bitcoin does make big moves over the next four years that make the current 3.125 BTC comparable to the previous 6.25 BTC valuation, that change doesn’t happen overnight. 
  • For miners, the bulk of their earnings have been cut by 50% in one day. During the previous halving in 2020, the 7-day moving average of total miner revenue fell from $18.3 million on May 10th to just $8.44 million on May 18th. 
  • However, miners seem to have been spared a similar trend this time, with unaveraged data showing April 20th was the highest day of miner revenue ever. While the revenue coming from the block subsidy dropped from $60 million on the 19th to $26 million the next day, transaction fees surged to $80 million on Saturday as Runes excitement drove block demand. While transaction fees calmed down a bit on April 21st, coming in at around $22 million, they are still very high. 
• The halving will impact miner profitability in the long run, since the cost of mining a bitcoin will not actually go unless energy prices drop or the hash power securing the network declines. But the run-up in bitcoin’s value over the past 6 months has helped miners prepare, since they could use the profits they secured earlier to help offset lower prospects in the short term.
  • However, many in the industry are expecting consolidation down the line as smaller, less- efficient miners struggle to keep up with the major players in an extremely competitive market.

A drawdown for DEXs

Source: The Block

• The number of DEX traders on Ethereum has fallen from over 95,000 at the beginning of the month to just 63,000 last week, marking the lowest number of traders since February. 
  • The number of traders picked up at the start of March amidst a broader crypto rally, with a particular emphasis on memecoins which helped decentralized exchanges across multiple chains.
  • Ethereum was actually challenged for dominance during a lot of this rally, as networks that offered cheaper trading attracted a lot of attention and hosted some of the most popular new tokens of the rally. 
  • But of course, Ethereum was still able to bask in the glory of the rally, with the number of DEX traders and DEX volumes reaching highs not seen since the memecoin mania that took place back in March 2023, which was primarily centered around the largest layer 1. 
• And it does seem like the trend on Ethereum is a sign of a broader slowdown in the decentralized exchange market.
  • For starters, while the GMCI MEME index still vastly outperforms its top 30, layer 1, and layer 2 counterparts, as well as bitcoin and ether themselves, it seems as though the majority of its gains are behind it. At the end of March, the index was up over 300% year-to-date but is now up only 200%, showing a sharp decline in April. 
  • And while spot volume on CEXs picked up in mid-April, primarily because of a sell-off in assets due to fears over Middle Eastern conflict, it seems that DEXs did not see the same rebound.  
  • A lot of the recent turnaround could be tied to more gloomy market sentiment. Not only are geopolitical tensions weighing on the market, but consistently higher-than-expected inflation data in the U.S. is also causing traders to expect fewer rate cuts from the Federal Reserve. 
  • But while sometimes market downturns cause more trading from panicked investors, it does not seem decentralized exchanges are seeing that. The decline in excitement around memecoins seems to be the primary reason for the recent drop off in DEX activity.

Balancing act

Source: Chainalysis

• Exchanges are holding more USDT. The 7-day moving average of the change in USDT held by exchanges reached $568 million earlier this month, the highest it's been in a year. The moving average has remained positive since the start of February, indicating consistent growth of exchanges’ USDT holdings. 
  • Exchanges’ USDT balances tend to grow either when more people are holding the asset on the exchange or if more traders want to sell the asset than buy it. 
  • It is likely that, in this case, many users are holding USDT in their accounts after selling during the turbulent past few weeks in the market. These traders might not have withdrawn their USDT yet, figuring out whether the market slowdown was short term and whether or not they would want to buy in again. 
  • It does seem like in the tail end of last week we got some reprieve from the dip, as bitcoin climbed back to $65,000 on Friday after dropping below $60,000 earlier. 
• The moving average of the change in BTC held by exchanges has been climbing slowly after hitting a relative low earlier this month, which, in this case, could be caused by increased selling, with balances growing by over 6,000 BTC per day. On the ETH side of things, the change in balance has been dropping after peaking at the end of March but still remains largely positive, growing by over 40,000 ETH per day, and again, can likely be explained by the more recent slowdown in the bullish crypto rally.
  • While the exact reason for the more minuscule fluctuations in the changes of how much BTC and ETH is being added to exchange balances is hard to track, the huge surge in the growth of exchanges’ USDT balances does seem to fall in line with the end of many crypto assets’ strong upwards momentum.

Hot and Scroll-d

Source: The Block

• We have talked a bit before about some of the layer 2 networks on Ethereum that have been the most successful in the wake of the Dencun upgrade. In short, most rollups that have switched over to using blobs to store data on the mainnet as opposed to calldata are seeing a lot of savings. The big three major optimistic rollups have made this conversion, and popular ZK rollups like zkSync Era and Starknet have also moved over.
  • But there is some technical overhead to switching how you are posting data, so if it did not cost that much to publish data to Ethereum in the first place, you might not be in such a rush to convert over to blobs. 
  • One network that was on the slower side to convert to blobs was Scroll, a ZK rollup that launched back in October of last year. Scroll is one of the larger ZK rollup players, being the fifth largest by TVL and third largest by daily activity, but in the overall scaling network space, it was not that popular. 
  • Scroll did announce on April 16th plans to start supporting blob data with its Bernoulli upgrade, scheduled to go live on mainnet on April 29th, but for now, it has become the rollup with the most expensive data publishing costs.
• Prior to February of this year, Scroll accounted for less than 10% of the fees across rollups to publish data on Ethereum, but now it accounts for roughly 50%. So far in April, Scroll has spent 837.6 ETH publishing data on Ethereum, while all other rollups combined have spent around 820 ETH.  
  • The primary reason for this shift is that the biggest spenders have now slashed their spending, but Scroll also seems to have gotten more popular. March was the highest month on record for Scroll spending at 2,510 ETH, indicating the rollup had to publish more data. 
  • In March, there were 11 days in a row where the network had over 400,000 transactions, a new record for sustained activity at that level. While the number of transactions has come down now, it still remains elevated compared to earlier in 2024. 
  • Of course, when Scroll does launch its new upgrade, it will no longer be the layer 2 spending the most to publish Ethereum data, which is maybe not such a good title to have anyway. However, its recent growth has become more noticeable since it is still continuing to use calldata to post transaction summaries. 

Rolling the DAI-ce

Source: The Block

• If you are a close follower of the stablecoin market, then you might have noticed a significant uptick in DAI activity on Ethereum over the last few days. 
  • On both April 17th and 18th DAI did over $50 billion in transfers on-chain, with the $86 billion of volume on the 17th marking the highest day of volume for the stablecoin ever. 
  • It was a sharp jump compared to the often less than $10 billion of activity we had seen earlier in the month. 
  • But we have talked about DAI before in this newsletter in the context of its on-chain volumes growing. From December 2022 through October 2023, it was more common to see at most $5 billion of DAI activity a day, but DAI volumes then began to pick up as the stablecoin was increasingly being used in complex MEV transactions.
  • That MEV activity seems to be the main driver of the surge here, too. Take, for example, transaction 0x447. In this transaction, just under $200 million worth of DAI was minted, sent to Aave, taken out of Aave, sent to the Maker Flash contract, and then burned, resulting in almost $1 billion worth of DAI volume in a single transaction. 
  • The flash mint module from Maker allows users to mint DAI (up to a certain limit) on the condition that they pay it all back within the same transaction and also provide a small fee. Usage of this module has become extremely popular since it allows arbitrageurs and MEV bots to gain access to large amounts of money without much cost. 
  • Another example of one of these transactions is 0x160, which was also done by the same MEV bot, 0x5ed...a9f. Looking at the activity on this address, we can see that they really picked up in action on the 17th and 18th, engaging in 254 and 256 transactions on each of those days, respectively, compared to the previous high in daily transactions of 63 set earlier in April. 
  • According to EigenPhi, a tool for tracking MEV data, the bot made just under $20,000 on both days but actually made over $20,000 on the 19th, despite the bot’s activity slowing down.