Just one day after the launch, with $0.5B of total value locked in the protocol, a critical bug in the rebase mechanism was found. The bug affected only a portion of liquidity providers in one of the pools — yCRV-YAM — but this was enough for people to lose interest in Yam despite their later attempts to relaunch the protocol.
Then comes SushiSwap. Launched at the end of August 2020 by an anonymous team, the protocol introduced a new concept of a vampire attack that aimed at siphoning liquidity out of Uniswap. By incentivizing liquidity providers of Uniswap with Sushi tokens, SushiSwap was able to attract as much as $1B of liquidity.
After some drama with the main SushiSwap developer ChefNomi selling his entire stake of SUSHI tokens, the protocol was eventually able to migrate a lot of Uniswap’s liquidity onto their new platform.
During the DeFi Summer, there were a lot of other projects of varying quality being launched. Most of them were just iterations of existing open-source projects trying to benefit from the over-exuberance in a completely new industry.
One of the last major events of DeFi Summer was the launch of the Uniswap token — UNI. All the previous users and liquidity providers of Uniswap were rewarded with a retrospective airdrop worth well over $1k. On top of that, Uniswap started its liquidity mining program across 4 different liquidity pools and attracted more than $2B in liquidity. Most of which was taken back from SushiSwap.
During DeFi Summer, all of the key DeFi metrics improved dramatically. Total value locked in DeFi went from $800M in April to $10B in September. An over 10x increase.
2020: Bridges
Since cripto’s fabled “DeFi summer” of 2020, cross-chain bridges on Ethereum have exploded in popularity. Fueled by the growing number of DeFi options across various Layer 1 networks and the rising costs of using Ethereum mainnet, the use of bridges to move assets from one network to another has soared.
Bridges are permissionless applications that allow users to send tokens and arbitrary data between networks. By deploying bridge connections, various competing or complementary networks have attempted to capture a portion of the value generated on Ethereum, the most used for DeFi and NFTs.
Ethereum bridges offer a way to send assets to EVM-compatible networks like Binance Smart Chain, Avalanche, and Fantom, as well as non-EVM-compatible networks like Solana and Terra. Ethereum Layer 2 solutions and sidechains also boast interoperability with Ethereum via several bridges.
To bridge tokens from Ethereum to other networks, users deposit assets into a bridge contract deployed on the Ethereum mainnet. The same amount of the asset is then minted on the other network. The tokens get burned when the assets are moved back to mainnet, and are then made available on the network.
In theory, all Layer 1 and Layer 2 networks could have a mechanism to send and receive assets from Ethereum to other networks. Sending funds to an EVM-compatible network is a simpler process; users can connect through an Ethereum-based wallet like MetaMask.
When migrating Ethereum-native assets to a non-EVM-compatible chain like Solana, the bridge connecting the two networks uses two different wallet addresses and token standards. This means that users have to connect both an Ethereum and Solana-compatible wallet, such as MetaMask and Phantom.
As the race to capture DeFi and NFT activity has intensified, multi-chain bridges have begun to play a crucial role in the cripto ecosystem. Solutions like Hop Protocol and Celer Network have proven popular by deploying Ethereum smart contracts that let users transfer assets from mainnet multiple Layer 1 and 2s.
2021: Interest in NFTs exploded
When Mike Winkelmann, the artist known as Beeple, sold his piece called “Everydays: The First 5000 Days” as an NFT in March, it was historic for a number of reasons.
For one, the sale made Christie’s the first major auction house to sell a fully digital, NFT-based piece of artwork. Also for the first time, Christie’s allowed ether as payment for the artwork’s principal price. And the $69.3 million sale price for the NFT was record-breaking at the time.
This sale prompted mainstream coverage of NFTs that wasn’t seen before.
Overall in 2021, the NFT market had its “best year yet” with over $23 billion in trading volume, a report by analytics platform DappRadar found. -based metaverses had over $500 million in trading volume and in-game assets represented as NFTs garnered $4.5 billion in trading volume.
2021: The prosperity of Layer 2
The capacity limitation problem of Ethereum was talked about before 2021, as a matter of fact, quite a few public chain projects were initiated specifically to address this drawback — solutions such as sharding were brought up as early as 2019. But the year of 2021 saw the boom of an off-chain SCALING solution layer 2.
A layer 2 is a separate that extends Ethereum and inherits the security guarantees of Ethereum. Think about the Lightning Network on top of Bitcoin. It is a set of solutions designed to take the transactions and handle them off the Layer 1 (Ethereum Mainnet), and then roll up the transactions into a single transaction to the Ethereum Mainnet. In this way, users are able to enjoy higher transaction speed and lower gas fee, while without compromising the robust decentralized security model of Ethereum Mainnet.
To be specific, the solutions diverge to Plasma and Rollups, and furthermore for the latter, there are zk-Rollup and optimistic Rollup. Well known projects include Matic (previous Polygon), Optimism, Arbitrum, Loopering and many others.
2021: Ethereum upgrade
In August, a major upgrade to Ethereum went live. The upgrade, called London, included Ethereum Improvement Proposal (EIP) 1559, which changed the way transaction fees, or “gas fees,” are estimated. It also started the reduction of ether’s supply.
Additionally, Ethereum developers prepared for the network’s upcoming shift to a proof of stake model through a number of upgrades throughout the year.
In 2022, Ethereum plans to shift to a proof of stake model, where users can only validate transactions according to how many coins they hold, rather than the energy-intensive mining rigs used now. This move is part of the merge to Ethereum 2.0, or Eth2.
2021: DAOs enter the mainstream
DAO is a Web3-native idea that many cripto-ers believe to be the future replacement of companies or any other type of collective organization (even government). It allows such organizations to be administered and governed without centralized leadership. DAO members do not really need to trust each other when funding or money being involved, since DAO’s code is 100% transparent and verifiable by anyone.
In November 2022, DAOs, or decentralized autonomous organizations, caught the attention of mainstream media after ConstitutionDAO raised over $40 million to buy a rare copy of the U.S. Constitution at auction. The result of course was not a successful bid — and the refunding probably was a disaster to many — rather, the whole move seemed to be pretty good storytelling. However, it indeed showed that people (interestingly enough ConstitutionDAO’s token is called PEOPLE) can be grouped and willing to pool funds into a DAO for even less realistic things without the traditional form of trust. And guess what, trustlessness is a core element of .
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