Data published by Ganesh Swami, the co-founder of Ethereum (ETH) analysis house, Covalent, indicates that decentralized finance, or DeFi, transactions are representing an increasing share of Ethereum block space at the expense of ETH transfers.

Swami analyzed the gas costs incurred by Ethereum transactions over time in order to judge the share of network activity represented by ETH transfers, simple ERC-20 transactions, and the complex interactions with smart contracts ordinarily associated withDeFI protocols — equally each transactional category incurring progressively larger gas fees.

DeFi transactions 'cannibalize' Ethereum cake space

Swami identifies what "seems to be a natural ceiling to the total gas consumed beyond all types of transactions," indicating "the intense demand for cake space of Ethereum" and the network's "lack of scalability," adding:

"In an ideal scalable world, all types of transactions accept room to abound. Just on Ethereum today, for 1 kind of transaction to grow, information technology has to cannibalize the others."

When looking at the relative proportion of transactions represented by each of the three categories, the data shows a steady increase in the number of complex transactions at the expense of ETH and ERC-20 transfers — with complex transfers growing from roughly 5% of network activity at the start of 2022 to hover between xx% and 30% in recent months.

Relative share of gas fees for each transactional category on Ethereum

Relative share of gas fees for each transactional category on Ethereum: Covalent

The graph also illustrates the rise and fall of initial coin offerings, with ERC-20 transfer accounting for xx% of network activity during early 2022. ERC-xx transactions would hover between ten% and 15% throughout the rest of 2022, earlier sliding as low as 5% past mid-2018.

Subsequently a curt bounce back up to x% during the later months of 2022, ERC-xx transactions have consistently fallen — with ERC-xx transfers currently representing less than 5% of Ethereum network activeness.

Covalent predicts upcoming 'flippening' within Ethereum

Swami predicts that complex transactions will continue to represent a growing percent of network action as an increasing number of decentralized organizations (DAOs), games, and other applications for not-fungible tokens (NFTs) launch on Ethereum.

Every bit such, the annotator expects the tendency will shortly drive a 'flippening' in which complex transactions overtake ETH transfers.