About the editor: Spencer Noon is Co-founder & General Partner at Variant Fund. Web3 founder looking to connect? Reply back to this email.

Welcome to OurNetwork, a weekly newsletter where top analysts, investors, and communities share data-driven insights about the top networks in web3.

For this week’s milestone issue (can’t believe it…150 weeks❗) we’ve assembled an all-star lineup featuring:

• Some of our most prolific contributors ever (Derek, Nate, and Andrew!)
• Leaders from the top web3 data companies (Nansen, CoinMetrics, Dune, and Artemis!)
• Plus a few first-time contributors for good measure

I said this all the way back in Issue #1 back in 2019 and it still rings true today:

Thank you for being a subscriber. This has been and continues to be a ton of fun.

— Spencer

Announcements:

• Next issue (#151) won’t be until after the New Year. Happy holidays and see you on the other side!
• Be sure to mint a Members Club NFT using the link below to gain access to 7 bonus insights this week!

Coverage on Web3, DeFi, and Infra.

• Decentralized lending has struggled in the bear market amidst wide scale deleveraging. TVL (USD) has decreased ~75% across the entire category since January, partially driven by declining token prices. Nevertheless, the bear has seen the emergence of a new generation of decentralized lending protocols, which have actually seen steady increases in TVL since May. Looking at the top 4 protocols on mainnet by TVL, it’s notable that Euler - a new protocol that allows the permissionless creation of lending markets - and Morpho - a P2P lending aggregator - have seen TVL increase by ~80% and ~259%, respectively (although Morpho launched later).

• Rates have also collapsed across the sector, which is now competing with fixed income assets in TradFi. Stable yields for USDC and DAI on Aave and Compound are tracking ~1.5-1.8%, down ~30-40% from 2.1-3.1% earlier this year. For reference, the 10Y US Treasury rate - the “risk-free” rate - is now tracking ~3.6%.

• Finally, another notable development is the unwinding of token incentives. Daily token incentives on Aave and Compound have decreased ~99% and ~98% YoY, respectively. Even normalizing for percent of TVL (seen below), their unwinding is clear. This has made lending rates even less attractive.

• GMX has seen meaningful liquidity and user growth since the collapse of FTX, potentially a sign for greater demand for decentralized financial infrastructure in the next phase of blockchain ecosystem growth. The cumulative number of new users on Arbitrum hit ~165k as of December 15, with ~28k coming online after FTX's collapse in mid-November while Arbitrum open interest has almost doubled from ~$95m to ~$187m over the same time period.

• While GMX has seen an influx of new users, it still boasts healthy retention of existing users. Over the past two quarters, more than 50% of GMX's Arbitrum user base has consisted of returning users while new user figures have continued to grow. Today, 75% of total users are returning GMX users.

• Current open interest differs across Avalanche and Arbitrum users of GMX. Users on Avalanche are largely net short, with long open interest of ~8m and short open interest of ~$16m. Meanwhile, Arbitrum open interest is net long with ~$98m of open long interest and ~$65m open short interest.

• Similar to a previous NFT Segmentation analysis for OurNetwork, K-Means segmentation to DeFi users was applied. This analysis counted contract calls, such as Deposit, addLiquidty, Swap, etc to see how different addresses are using DeFi products. The segments are Degens - do everything; Airdrop Claimers - claim; Receivers - get streaming payments; Shiny Objects - chase what's hot; LP'ers - provide liquidity; and Loaners - use lending protocols (Values per address).

• These segments become quite obvious when looking at what type of contracts they have interacted with in the past 30 days. DeFi Degens use very degen crypto protocols, while shiny objects are just bridging to multiple chains in the hopes of getting an airdrop.

• Looking at the number of Ethereum transactions each group makes, DeFi Degens used to account for a significant amount of activity, but that has decreased since DeFi summer. Depending on airdrop rumors, we could see Shiny Object / Airdrop Claimers continue to increase their transactions.