ON–210: L1s 🌐

Mar 01, 2024

L1s 🌐

The resurgence of Solana has caused many metrics, including stablecoin supply to grow at a significant pace. Stablecoins are a prime use case for Solana given low cost and fast transaction times and recent partnerships with Shopify and Visa validate this. Stablecoin suppy on Solana is up 50% to $2.34B since mid 2023 and ranks 5th among major blockchains.

When comparing which entities hold stablecoins on Solana to other blockchains, 70% of circulating supply is held on centralized exchanges, and ~25% is held in DeFi apps. This is quite different than other chains where between 20 - 30% of supply is held on exchanges.

Given the large supply on exchanges, Artemis examined what addresses did after receiving stablecoins from exchanges. Most transfers were to other exchanges with Backpack Exchange accounting for 15% of transactions and 5% of stablecoin value. Other DeFi protocols have ~$1k deposit amounts.

💦🔬 Tx-Level Alpha: In 2024 the largest stablecoin transaction originating from one exchange to a different exchange was Kraken (US Based) to Bitfinex (Hong Kong based) for $10M. The transaction cost less that $0.01, which continues to underscore how crypto is a remarkable improvement in speed and cost over the traditional banking sector.

NEAR Protocol, a L1 blockchain excelling at cost-efficient, high-speed transactions, is on its mission to onboard 1B users to the open web.
NEAR maintains its leading position in Daily Active Addresses (DAA), with DAA on a steady rise to 1.3M. The growth is fueled by the viral Telegram wallet HOT, and KaiKai's (a consumer app) impressive 1-day (approx. 40%) and 1-week retention rates (65%-85%).

4 of the top 10 consumer projects are hosted on NEAR. HOT Game leads with 915K DAA immediately followed by KaiKai with 683K DAA. Their success stems from delivering a seamless user experience, while capitalizing on NEAR's cost-effectiveness and scalability (up to 100,000 TPS) behind the scenes.

HOT, a Telegram based wallet built on NEAR, enables users to claim a NEAR address with one click and start mining in seconds. HOT went viral upon launch, garnering 0.9M DAA within one month. This surge resulted in a record load of 72k requests per second to RPC services.

💦🔬 Tx-Level Alpha: As part of its Chain Abstraction vision, NEAR aims to extend its cost-effectiveness and scalability to other chains. One focus involves reducing rollup data availability fees. A representative transaction shows 1 OP Blob costs 0.00072N ($0.0028 at NEAR's $3.9 price) to store on NEAR, significantly cheaper than on Ethereum, where it would cost approximately $153.16.

Activity on Ethereum has been revitalized, with the 7-day average of total transaction fees rising to $17M. Increased network traffic has meant higher costs borne by users, with average fees reaching $14. This makes EIP-4844 increasingly crucial, enhancing the economic feasibility of Ethereum dApps. As we enter the era of ‘proto-danksharding,’ Ethereum’s primary role is evolving into that of a settlement and data-availability layer, while L2s provide cost relief and handle increased throughput.

Renewed demand for block space has sparked a rise in ETH's burn rate, with approximately 186K ETH ($490M) burnt this so far in 2024 and over 4M ETH burnt cumulatively since EIP-1559. Following "The Merge," ETH supply has been mostly deflationary, balancing its scarcity with validator incentives.

Ethereum’s active validator set has grown to ~970K validators, with 31M ETH staked (~26% of total supply). As load on the consensus layer increases, EIP-7514 in the Dencun hard-fork, sets a max epoch churn limit to 8 validators, managing state size bloat by slowing down the rate of validator growth.

💦🔬 Tx-Level Alpha: On January 25th, 2024, a wallet labeled 'Celsius 7' transferred 443,961 ETH (about $984M at the time) to an undisclosed address, marking a notable step in Celsius' asset rebalancing amid bankruptcy proceedings. This was followed by 16 more outbound transactions believed to be moved to centralized exchanges (CEXs) for liquidation ahead of creditor repayments. This series of transfers occurred just days after Celsius unstaked ~200K ETH, triggering a rise in the validator exit queue.