The developer activity on the Ethereum blockchain network has soared to a 7-month high. The data shows a healthy trend for ETH, as price consolidates while developer activity rises.
Historically, the developer activity of a blockchain network has been a reliable indicator of the medium-term trend of the underlying cryptocurrency.
The high level of developer activity on Ethereum demonstrates an optimistic medium-term trend for ETH.
Why active development is critical for Ethereum
JP Vergne, a professor at the UCL School of Management, found in a 2017 study that developer activity is the best predictor of a cryptocurrency’s price. He said three years ago:
"We found that the best predictor of a cryptocurrency's exchange rate is the amount of developer activity around it."
According to the data from Santiment, Ethereum Github’s development rates reached a 7-month high. The researchers at Santiment wrote:
“Santiment is indicating that #Ethereum is reaching #Github development rates not seen since February (a 7-month high)! $ETH continues to make its case as the most highly innovative network in #crypto, including the many ERC-20's under its umbrella.”
The rising developer activity on Ethereum coincides with a noticeable spike in user activity. Fueled by decentralized finance (DeFi), Ethereum user activity rose to levels unseen since 2017 across many areas.
DeFi still at an early stage, so is ETH
A cryptocurrency quant trader Qiao Wang said many people are still trying to reason about DeFi in an abstract manner.
It shows that both mainstream and existing cryptocurrency users are new to DeFi and its underlying concepts. The decentralized nature of DeFi platforms makes it difficult for new users to navigate various platforms.
But the DeFi space is at an early phase of growth, as it has risen from $1 billion to $8 billion within the past four months.
Wang said that as more people experiment with DeFi products, they could understand their fundamental aspects better. He said:
“Lotta people try to reason about DeFi on abstract level. I had made this mistake myself. But reality is the only way to truly appreciate what's going on is to use the products. Spend a week to trade/lend/asset-manage, and you'll get why this stuff is fundamentally interesting.”
Eventually, as more individuals begin to use DeFi, it is likely to cause the developer activity on Ethereum to further increase.
Throughout the next 12 months, the Ethereum developer community is expected to focus on gradually releasing ETH 2.0.
Since DeFi started to gain popularity, the Ethereum blockchain network has become increasingly clogged. To offset rising user activity, developers would likely release new scalability solutions, including ETH 2.0.