Where is the total circulation of over 120 million Ethereum?

Where are the 120+ million Ethereum coins?

The total amount of Ethereum on all Layer 2 networks (excluding WETH) is only about half of the balance in Binance cold wallets.

Written by: Babywhale, Foresight News

The current total circulating supply of Ethereum is about 120 million more than 233,000. These more than 100 million tokens are now scattered in various corners of the Web3 world, including exchanges, DeFi, cross-chain bridges, Layer 2, non-EVM ecosystems, and many wallets lying dormant in fear of being targeted by hackers.

We are bombarded with various data every day, such as Ethereum reaching new highs on a certain new L2, exchange reserves hitting new lows. But has anyone ever considered how these Ethereum tokens are distributed and where they love to go?

• GPT-4 is too costly, Microsoft can’t sustain it anymore, and it is reported to have quietly initiated Plan B.
• Cooperating with TON, Tencent wants to help Telegram create an ‘international WeChat’?
• Uniswap Foundation plans to raise 60 million to develop its ecosystem. What are the plans of the DEX Planner?

A user named Eth Wave (@TrueWaveBreak) on platform X, who is obsessed with Ethereum, has compiled some incomplete statistics that reveal a rough picture of Ethereum distribution.

There are many interesting data worth discussing separately in this chart.

ETH on L2 accounts for less than 2% of the total

According to the data in the chart, ETH on all L2 accounts for only about 1.66% of the total circulating supply of ETH, which is about 1.992 million tokens. At the time of writing, with the Ethereum price, the total value is calculated to be $3.223 billion, accounting for 30.87% of L2 TVL of $10.44 billion.

The ranking of L2 based on ETH reserves in this chart is almost the same as the ranking in L2BEAT based on TVL. In addition to the two giants Arbitrum and OP Mainnet, the recent growth of Base has caught many people off guard, with its TVL surpassing zkSync Era and Starknet, which launched their mainnets earlier.

However, even though L2 is performing well, the comparison reveals that the ETH reserves on all L2 networks are only slightly higher than the reserves in Bitfinex cold wallets, and even only about half of the reserves in Binance cold wallets.

Based on this, we can also conclude that as an Ethereum scaling solution that significantly reduces transaction costs, L2 currently shows no signs of challenging Ethereum’s dominance. This may be due to the relatively low number of users who are proficient in transferring assets between different chains, and also because there are still many irreplaceable applications on the Ethereum mainnet.

CEX remains the main battlefield for ETH liquidity

According to the calculated data listed in the chart, identified exchange reserves of ETH exceed 7%. Including small exchanges around the world and potentially unidentified exchange addresses, the reserves of centralized exchanges, although declining in recent years, may still be close to or even exceed 10%.

This means that CEX is still the main gathering place for ETH liquidity, and the so-called “lack of liquidity” that we currently observe on the market is likely just a decrease in users’ willingness to trade frequently, most likely due to their wait-and-see attitude.

In addition, institutions such as Robinhood, which are not cryptocurrency exchanges but have cryptocurrency trading businesses, should not be overlooked. For example, Grayscale, which is not mentioned in the graph, has been identified by the blockchain data analysis platform Arkham to hold 3.03 million ETH, accounting for more than 2.5% of the total circulation.

The chips in the hands of hackers should not be ignored

The graph also lists the holdings of some hackers, such as the hackers who attacked Polkadot multi-signature wallets, Mixin, and Gatecoin, as well as the infamous North Korean hacker group Lazarus Group, although the ones not listed may have already deposited the stolen assets into mixers like Tornado.Cash, or stored them in different addresses, making it difficult to identify them all in a short period of time.

Staked Ethereum

Staked Ethereum already accounts for more than 25% of the total circulation of Ethereum, and this number may continue to rise in the visible future. Among the staked ETH, one-third is deposited into liquidity staking protocols, and more than 86% of this one-third is in Lido. In the staking field, although centralized exchanges have also launched liquidity staking tokens (LST) and have had some success, they are currently not as popular as decentralized protocols, with staking amounts only half of the LSD protocol.

Liquidity staking is a race that is likely much more complex than it appears. It is not just about staking and obtaining tokens representing the staked shares, but also about how to decentralize to mitigate risks, reduce the amount of ETH deposited by users, and use LST to maintain the security of other networks (re-staking), etc. These are all areas worthy of in-depth research.

However, on the other hand, liquidity staking is essentially a leveraged behavior. Currently, using LST as collateral for borrowing and the issuance of decentralized stablecoins by many LSD protocols further amplify leverage. In the future, if the scale becomes large enough and extreme market conditions reappear, whether there will be enough liquidity to liquidate these assets is a question that we need to plan for in advance.

As the author himself said, this chart is not perfect, as it does not include exchanges, WETH on L2, DEX, etc. In the DeFi field, the graph only shows the proportion of Compound’s cETH and DAI (MakerDAO) minted by collateralizing WETH, and other large DeFi protocols such as Aave, Curve, and Uniswap are not included. The author states that this chart will be continuously improved, and looks forward to more valuable information to be discovered through an improved chart.

We will continue to update Blocking; if you have any questions or suggestions, please contact us!