Glassnode: Tokens and TVL fly together, the rise of multi-chain ecology

Activities on the Ethereum chain continued to rise, and gas fees reached the highest level in three months, exceeding 80 gwei on average. This is mainly driven by on-chain activities driven by the use of cross-DEX and interest in NFTs. In this competition, OpenSea has won the crown. The company has steadily ahead of Uniswap and has taken the top spot in daily trading volume. The area that currently costs the most transaction fees is NFT.

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Source: Parsec Finance

What’s more interesting in the past few weeks is that user interest in alternative Layer 1 blockchains has surged, and the prices of platform tokens such as Avalanche and Solana have risen sharply within 30 days, heralding the rise of a multi-chain future.

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Recently, the price of ETH has remained in the range of US$2,900 to US$3,400, and a few alternative public chain projects have seen strong price increases in the past month. The main ones are: Solana (SOL), Avalanche (AVAX), Cosmos (ATOM) and Terra (LUNA), all rose above 85%. Most of the rest of the BTC and the simultaneous development of ETH, Polkadot and the BSC and other Layer 1 block chain also rebounded, but compared with the SOL, AVAX and LUNA, performance is still slightly inferior.

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The peak of DeFi activity on each chain is consistent with the original token. This is especially true for Avalanche, where the $180 million liquidity mining incentives triggered a parabolic trend in the chain’s TVL and native token prices, from almost zero to $1.8+ billion.

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Source: DeFi Llama

It is worth noting that Solana has the highest MC (market value) ratio in the DeFi-focused chain with the fifth largest TVL and the second largest market capitalization. For every $1 of TVL, the market value of the chain is about $8. And a high MC:TVL ratio indicates a relatively high speculative premium because the project valuation exceeds the capital deployed on the chain.

MC: TVL ratio

Ethereum: 3.3

BSC:4.0

Earth : 2.0

Polygon:2.0

Solana:8.3

Avalanche:4.6

This means that if we assume that the total value locked in DeFi is an important indicator for evaluating the blockchain, then Solana may be the most overestimated indicator.

US$180 million liquidity incentives promote the rapid rise of Avalanche

Avalanche is a proof-of-stake chain that claims to have the most validators and the fastest completion time in the smart contract platform.

So far, Avalanche’s growth has been quite slow, and until now, the liquidity attracted by its DeFi projects has been limited. Subsequently, the project announced that it would use its AVAX tokens to provide liquidity providers with US$180 million in incentives. The first batch of US$27 million has been allocated to Aave and Curve. This incentive has provided powerful incentives for increasing usage and migration of users to the network. Incentives, and since the announcement of the incentives, liquidity has been increasing.

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Source: DeFi Llama

The lending market BENQi is Avalanche’s first project with a liquidity of US$1 billion and one of the first projects to join the AVAX incentives.

The largest DEX in the chain is Pangolin, and the second largest DEX is Trader Joe. Due to increased user interest in the Avalanche ecosystem, Pangolin has achieved substantial growth. Its average daily DEX transaction volume has increased from US$4 million to US$300 million, an increase of 75 times.

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Source: info.pangolin.exchange

Can the rise of Avalanche last for a long time? At present, liquidity is still limited, because there are only 4 DeFi agreements on Avalanche with TVL exceeding 100 million U.S. dollars, of which BENQi dominates. The project on Avalanche is still a clone of the existing project on Ethereum. Through incentive measures, it may attract high-yield growth, but it will not achieve long-term effects.

Solana: Focus on scalability and ecosystem 

Compared with the token price, as the leader of Layer 1, the price of Solana token SOL has risen from US$30 to US$120 in the past 30 days. Solana’s focus on the implementation of the DeFi protocol before 2021 has promoted the growth of its ecosystem. This growth is largely supported by FTX and Alameda Research, the developers of Serum DEX, and important investors in the Solana ecosystem.

Currently, the CAPEX cost of the hardware required to run the verifier on the network is approximately $5,000. Solana designers expect that Moore’s Law will reduce computing costs and barriers to entry in the long term, allowing more validators to go online and protecting network security. They focus on optimizing advanced hardware so that the network can expand, increase throughput to 1,000 transactions per second, and bear more load. The smart contract in Solana is built using the Rust programming language.

The largest DeFi project in the Solana ecosystem is DEX Raydium, which has about $1 billion in TVL, mainly SOL pools, and there are also some liquid pools for key Ethereum projects.

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Source: Raydium Info

Raydium has a trading volume of approximately US$150 million in the days when the trading momentum is strong, ranking 7th among the DEX trading volumes of all chains.

At present, the major liquidity mining pools have high returns to liquidity providers and pledgers, and they use DEX tokens RAY to pay the pledgers as rewards. In the largest/lowest risk pools, APR hovered in the 70-100% range; in higher-risk mining pools, APR often exceeded 200%.

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Source: Raydium Info

To date, the Solana ecosystem has funded many lending agreements, but has not yet succeeded in attracting any large amounts of liquidity. The Solana ecosystem is mainly composed of similar projects in the Ethereum project: Sabre (TVL: $600 million) is equivalent to Curve, and SolFarm is a revenue aggregator, similar to Yearn and other aggregators, and the current TVL is $260 million.

Solana has 5 projects with TVLs exceeding US$100 million, but in contrast, Ethereum has more than 60 projects with TVLs exceeding US$100 million.

For projects that need to be expanded, Solana is undoubtedly a powerful alternative, although for now, it has hardly changed in terms of competing with Ethereum for total liquidity.

Terra: Leader of the Cosmos Ecosystem

Terra is a Tendermint blockchain based on Cosmos IBC. The blockchain built using Tendermint has the advantage of interoperability with any other IBC blockchain in Cosmos IBC. When Agoric, Tendermint blockchains enable secure JavaScript smart contracts and other Cosmos IBC projects continue to go live, they will be able to easily interoperate, because all of these are built on the Tendermint consensus.

Currently, Terra is the leader of the Cosmos ecosystem. The pillar of Terra is Luna, which supports the UST stablecoin of the ecosystem and protects Terra. Its growth is stimulated by its two main protocols-Anchor and Mirror. The UST token of the leading lending protocol Anchor is the second largest in the crypto field. Centralized mortgage stable currency.

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Anchor is Terra’s largest DeFi agreement, with TVL exceeding US$3.4 billion, UST deposits of US$1.3 billion, and Luna and ETH of US$21. At present, the APY of lenders’ deposits with UST is 19%, and the utilization rate of UST is 60%. Of UST’s 1.3 billion US dollars in deposits, approximately 769 million US dollars have been lent.

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Another agreement with significant liquidity growth is Mirror. Similar to Synthetix’s mirroring function, it generates real-world synthetic assets such as currency and stocks. The agreement locks up $1.84 billion of UST, and its synthetic assets have a daily trading volume of more than $10 million. Synthetix’s actual synthetic assets daily trading volume is usually less than 10 million US dollars, SNX locked in 2.2 billion US dollars.

summary

Although the native tokens of some alternative Layer 1 smart contract platforms have risen sharply in recent weeks, compared to Ethereum, the actual liquidity on the remaining chains is still limited. And among the three of Solana, Avalanche and Terra, there are currently no more than 5 projects with a liquidity of over 100 million U.S. dollars.

Liquidity mining incentives can indeed attract capital inflows, especially the growth of Avalanche’s TVL, mainly due to its $180 million incentive policy. Another observation is that cross-chain interoperability is still limited, which means that every dollar deployed in the DeFi protocol on different chains will cause liquidity fragmentation.

As some users flow to newer and more experimental blockchains, developers will have to evaluate the feasibility and longevity of additional users and funds in and out of Ethereum. As competition for users, attention, and capital intensifies, many developers and protocols may find these trade-offs worthwhile, and even find untapped value and opportunities in protocol design. If the second layer of Ethereum is still difficult to expand the network, or the user experience is not good, then users will naturally turn to alternative chains such as Solana, Avalanche, and Terra.

Source: Glassnode

Author: LUKE POSEY

 

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/glassnode-tokens-and-tvl-fly-together-the-rise-of-multi-chain-ecology/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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