ON–051: DeFi

This is issue #51 of the on-chain analytics newsletter that reaches nearly 6500 crypto investors every week 📈

1inch, whose v2 offers the best rates by discovering the most efficient swapping routes across all DEXes—swap on the customizable new UI. And also Aave, where you can experience DeFi: Deposit, Earn, & Borrow on Aave.

In case you missed it, earlier this morning I announced on Twitter that I’m joining Variant as General Partner.

Founded by Jesse Walden, formerly of a16z Crypto, Variant is a new early-stage venture firm that invests in crypto networks and platforms building The Ownership Economy. In a short matter of time, Variant has already emerged as one of the leading early-stage crypto funds too, backing top projects like Uniswap, Cozy Finance, and Reflexer Labs.

People have asked me why I’m joining Variant, and the answer is rather straightforward: I couldn’t pass up the chance to build a next-generation crypto fund with Jesse, who for me is one of the visionary investors we have in this space. Jesse has a track record of not just being on the cutting edge, but literally creating it — as evidenced by his formative posts on composability, cooperative governance, and progressive decentralization.

Over the last two years, the two of us have collaborated on a number of investments as well as the a16z Crypto Startup School initiative Jesse headed up earlier this year. What I’ve found is that we share a deep conviction on the importance of community ownership, and that our respective thesis-driven and data-driven approaches are highly complementary to one another.

Most importantly, we are aligned on leveraging our respective strengths to build a firm that is centered around helping the next generation of crypto entrepreneurs solve the hardest problems they’ll face, at the earliest possible stages.

Together I’m hopeful we’ll build a firm that the entire crypto community can be proud of, and who knows, maybe even own alongside us someday as well…

—Spencer 🕛

This week our contributor analysts cover The Graph, Chainlink, Numerai, Livepeer, and ETH Front-Running.

• 2020 was the year Ethereum adoption went parabolic. Usage of The Graph hosted service grew 10x since June, processing over 10B queries in November. Applications are making 350M+ queries per day, with growth driven by AMMs, NFT marketplaces, DAOs and Defi summer. During that period the number of subgraphs deployed also doubled, totaling 3,400.

• Yesterday The Graph Network launched its mainnet, a decentralized indexing protocol for Web3. Over the last 6 months, 200+ Indexers deployed Graph Nodes on testnet to help improve and stress test the network; achieving ~1K queries per second with 99% reliability. Indexers are located in more than 40 different countries and gateways are globally distributed, that choose Indexers in real-time based on characteristics like their latency, performance and price.

• Indexers provide services to the network by processing queries for on-chain data, such as trade balances, NFT prices and DAO votes. They earn query fees and indexing rewards proportional to their work and can be slashed if they serve queries incorrectly. Fees are also split with Delegators, who delegate their stake to Indexers based on their performance, uptime and delegation parameters (fee and reward split). Delegators are currently receiving 10-20% of total fees and rewards earned from indexing.

• In the first 24 hours after launch, over 17% of total Indexer allocation has already been staked. PoolTogether is the first subgraph being indexed on The Graph Network mainnet, with over ~40M GRT already staked by indexers that are processing those queries. Indexers are also beginning to differentiate themselves in delegation parameters to entice new Delegators.

The growth of Chainlink network this past year was quite impressive, moving from 100k wallets at the beginning of the year to +300k in late December. That’s a staggering 200% growth in 2020, mainly fueled by Micro (1-100 tokens) and Little (100-1k tokens) Holders.

Since early August, LINK has experienced a highly volatile price pattern, but as of December prices have come back into range. The network, on the other hand, has experienced a 50% growth, moving from 200k to 300k wallets in less than 5 months. More info about our analytic methodology is available here.

The total balance held by Micro Holders (1-100 tokens in their wallets) moved from +600k tokens earlier this year to the current level of +3M tokens, representing +215k long-term investors (the year started at +40k wallets!).

Chainlink’s growth is definitely fueled by retail players, shown by the lack of growth from the other investor categories — a progression from 10 to 14M tokens held for Little [100 to 1k tokens] Holders, from 26 to 35M for Medium [1k to 10k tokens] Holders, and a small decrease from 938M to 910M for Big [< 10k tokens] Holders.

The buying pressure coming from incoming investors (Micro, Little, and Medium as shown on the graphs below) has been quite stable throughout the year, with interest peaking in the middle of the DeFi speculative summer.

From the sell-side of the market, the situation also seems to be quite stable, with a slow increase in selling behaviors lately due to the latest price increase.

• During the overall period, the Chainlink network has considerably increased its wealth concentration, with 90% of the supply being currently held by only 0.08% of all wallets; earlier this year this figure was above 0.3%.

• LINK network’s on-chain volume is mainly (at a 75% rate) caused by 600-1k wallets having a total on-chain volume between 80 to 160M tokens on a weekly basis. The network activity is highly concentrated around a few big players.