pixabay.com
Blockchain use is steadily spreading across several industries and numerous real-world applications. Changes to the underlying protocol might usher in a new era of layer one blockchain networks.
Web3 is multi-chain, giving developers several alternatives for developing on smart contract blockchains.
Layer-1 smartchains have seen several developments, and it is time to assess their utility and future possibilities.
Layer-1 Smart Contract Blockchains
Snapshot
wheatstones
We going to analyze each blockchain based on following metrics:
Daily Transactions Count
Network’s daily transaction count is a great indicator of on-chain demand as it identifies times when network participants are particularly active or inactive.
Daily Active Addresses
Analyzing the number of active addresses per day can help identify network demand from existing and new market participants. A rising number of active addresses may indicate increasing demand among market participants and vice-versa.
Daily Fees
Transaction fees are a proxy for network demand because they represent the cost market participants are willing to pay to include a transaction on a protocol’s ledger. This will include analyzing popular dApps.
ETHEREUM
Ethereum is a proof-of-work blockchain that was founded in 2015 by Vitalik Buterin. Ethereum will eventually transition to another consensus protocol known as proof-of-stake, in which ETH owners “stake” their Ether to secure the network.
Ethereum is still the most popular blockchain, and its smart contracts power the majority of blockchain-based projects.
Daily Transactions Count
nansen.ai
Since January 2017, the amount of daily Ethereum transactions has gradually increased, reaching over 1.6 million in May 2021. Despite the market downturn, Ethereum transactions remained above 1 million and have shown resiliency thus far.
Transaction Metrics:
One Year Change -11%
Year To Date -2.4%
Daily Active Addresses
nansen.ai
Daily active addresses, or the number of active network users, have also been growing. In the previous 30 days, Ethereum saw over 5.8 million unique wallet users connect with its blockchain’s apps, according to nansen.ai.
Daily active users have dropped by 40% from over 600k in late 2021 to around 350k in May 2022. Although this is a considerable decline, it is still a huge improvement from the 78% drop that happened in the 2018 crypto crash.
Daily Fees
cryptofees.info; coinmetrics;
Ethereum’s fee model means that all transactions fees are partially burned and partially paid to miners.
Average daily fees on Ethereum network have average approximately $8.9 Million per day in the last week. At Ethereum’s current valuation, this represents a price to sales ratio (P/S) of around 65.
However, at the peak of the network’s activity daily fees averaged a staggering $70 Million per day, or around 22 P/S ratio.
nansen.ai
As we can see, Uniswap, a decentralized exchange, is the most popular dApp on Ethereum, clocking around 11% of all recorded interactions with the blockchain. Other popular popular applications are SushiSwap, a DeFi protocol, OpenSea, the largest NFT marketplace, as well as major stablecoins, USDC & USDT (Tether).
Overview & Potential
Ethereum continues to dominate the smart contract blockchain space. If we add all of Ethereum’s L2 scaling solutions, such as Arbitrum and Optimism, Ethereum would account for over 61%, or $63.5 billion, of all the value locked across all chains.
defillama.com
Ethereum accounts for 58%, or $93.42 billion, of the total market value of stablecoins, which is worth over $160 billion.
Ethereum is an inflationary asset, with a current inflation rate of approximately 3.7% per annum. However, when Ethereum will transition to Proof-of-Stake, the amount of Ether being issued will drop considerably to approximately 0.5 Mil ETH per year. This will bring the inflation rate to 0.54% and with fee burning mechanism on top of that, this would make Ethereum deflationary, approximately -1.1% per annum. This is assuming 10 Mil ETH in staking smart contracts and network activity staying at the same rate as it was recently.
SOLANA
Solana is a Proof-of-Stake blockchain with sub-second settlement times and low transaction costs founded by Anatoly Yakovenko. It features an innovative system called Proof-of-History (PoH) that enables automatically ordered transactions, making Solana one of the fastest blockchains in the sector with up to 65,000 TPS. Solana’s mainnet launched in March 2020 and currently operates in a beta stage.
Daily Transactions Count
analytics.solscan.io
Solana has two types of daily transactions on chain: vote and non-vote.
Non-vote transactions are any transactions interacting with decentralized applications built on Solana. These transactions presently account for around 23% of all transactions on Solana.
Vote transactions are transactions done by Solana’s validator nodes that secure the network. In other words, all internal consensus messages are counted as transactions. Solana is the only blockchain that is designed that way, as all other blockchains only factor in “non-vote” transactions. The reason for that is because these vote transactions have to pay a fee and execute in a smart contract/program, competing for block space, just like all the other smart contracts.
For the purpose of comparison, we shall exclude vote transactions from transaction growth metrics.
analytics.solscan.io
Solana’s non-vote transactions have been steadily rising throughout 2021, from the daily average of 18 million in April 2021 to 55 million by Jan 2022 prior to a wide crypto market slump, which saw transactions drop back to the 2021 levels of 20 million by May 2022.
Non-vote transaction metrics:
One Year Change 33%
Year To Date -76%
Daily Active Addresses
nansen.ai
Daily active addresses on Solana have reached an average of a million users per day since the mainnet went live back in April 2020. Solana had one of the fastest growths in user adoption with its native Phantom wallet seeing a 4,400% increase from 40,000 users in July to 1.8 million unique users in December 2021.
Solana’s daily active users have peaked to around 1.25 million in May before dropping by 44% to around 700k by early June.
Daily Fees
analytics.solscan.io;
Solana’s fee model burns a fixed portion (initially 50%) of each transaction, with the remaining fee going to the current ‘leader’ processing the transaction.
Solana’s daily fees averaged $27k in the last 7 days, including both vote and non-vote transactions. For time being we’ll exclude fees generated from vote transactions. This will help us to judge network’s fee revenues generated from the use of decentralized apps.
Average daily fees on Solana from non-vote transactions averaged $5k per day over the last seven days. At the peak in November 2021, fees reached $60k per day, or $265k including non-vote transactions.
At its peak, Solana’s Price-to-Sales ratio was around 740. In case of Solana, we need to consider what those daily transactions actually represent. See below:
nansen.ai
Serum, a single decentralized app on Solana does over 27 million transactions per day, which is larger then all other blockchains combined. Serum is a permissionless decentralized exchange and blockchain ecosystem that is built on Solana, where market makers generate a ton of messages per trade. Serum’s ultimate vision is to drive forward the mass adoption of DeFi, and to become the go-to DEX, aiming to reach 1 billion active users and 10 trillion dollars of on-chain value across the world.
Another major protocol is Raydium (6.7 million transactions per day), which is Solana’s top automated market maker. In essence it gives the ability to traders on decentralized exchanges to create limit orders, i.e. to specify the price at which they’d like to trade their assets at, similar to the way they do it on the centralized exchanges today. This creates billions of ‘transactions’, as traders will often enter a limit order, cancel it, modify a few parameters, and reenter. In a decentralized environment, all of these actions are interactions with the blockchain that command a fee.
defillama.com
Solana has around $2.98 Billion locked in its DeFi ecosystem and $6.19 Billion in stablecoins. Furthermore, Solana is an official blockchain for Circle’s USDC, second largest (and most trusted) stablecoin issuer in the world.
Overview & Potential
Solana is an inflationary asset, with a current inflation rate of around 7% per annum. Since Solana’s circulating supply is 522 million, this would mean there is an annual issuance of approximately 36 million SOL. On the long run however, in 10 years, according Solana’s documentation, the inflation rate will decrease to 1.5% with the total circulating supply of Solana reaching around 750 Million SOL. see below:
docs.solana.com
Based on 750 Million circulating supply and inflation rate of 1.5%, this would mean annual issuance of around 11.25 million SOL.
By that point, the network would require 2.12 trillion transactions per year (or 5.8 Billion per day), to offset the staking emission of 11.25 million SOL, based on a single SOL transaction fee being at 0.0000053, just to break-even. At the peak, in November 2021, Solana averaged 200 million transactions per day.
Are trillions of transactions possible in theory? Yes, as long as Solana achieve their vision of driving the mass adoption of their blockchain, be it in DeFi, gaming and etc. This is one major reason why Solana is so popular among institutional investors, such as FTX and Jump crypto. Considering that the derivatives market alone is worth to be over $1 quadrillion dollars in notional value, we can imagine Solana’s potential if it takes even a tiny fraction of that market.
Furthermore, worldwide crypto adoption is under 4% (Statista.com) and with the growth of blockchain gaming, DeFi, NFTs and other decentralized applications, with many more yet to be invented, it’s not unreasonable to determine that Solana could reach those transaction numbers. It will be challenging.
The main hurdles will be the competition, regulatory environment, as well as fixing Solana’s ongoing internal network issues.
AVALANCHE
Avalanche is a proof-of-stake blockchain first conceptualized in May 2018 by a pseudonymous group of software developers named “Team Rocket.” Later it was developed by a dedicated team of researchers from Cornell University led by Emin Gün Sirer, a professor of computer science and software engineer and launched in Sep 2020.
There are three primary aspects of its design that distinguish it from other blockchain projects:
Consensus mechanism — validators poll a sampling of other validators to determine whether a new transaction is valid. After a certain number of this repeated random subsampling, it’s statistically proven that it would be all but impossible for a transaction to be false. Each validator is a completely independent decision-maker and there is no leader election.
Three built-in different blockchains: x-chain (creation, management, and transactions of digital assets), c-chain (smart contracts), and p-chain (coordinates validators, creates subnets) in order to address the limitations of the blockchain trilemma.
Subnets — scaling solution for Avalanche, which allows projects to stake AVAX to create their own customized blockchains. These blockchains are then secured by a dynamic set of validators, working together to achieve a consensus. There’s no limit on the number of Subnets possible.
Daily Transactions Count
nansen.ai
Daily transactions on Avalanche have exploded in the second half of 2021, rising from 100k transactions in September to over a million by March 2022 and dropping down to daily transactions of 400k by June 2022.
Transaction Metrics:
One Year Change 2,766%
Year To Date -38%
Daily Active Addresses
stats.avax.network
Daily active addresses have spiked from an average of 10k in early September 2021 to upwards of 140k by January 2022.
Drop in active daily users (as well as transactions), in the case of Avalanche, isn’t black and white, as this is partly attributed to the creation of new subnets for DeFi Kingdoms and recently Crabada.
Crabada, a DeFi game, originally used the main Avalanche blockchain (C-chain) and was one of the most popular dApps on Avalanche, but has migrated to their own subnet to create dedicated infrastructure for their users to have the optimal experience. This has reduced the load on the main network, thereby reducing gas costs and thus daily fees.
Daily Fees
cryptofees.info; coinmetrics;
Avalanche’s fee model means that all transactions fees are burned.
Average daily fees on Avalanche network have reached an average of $1 million by April 2022, making Avalanches P/S ratio of around 55. Due to the crypto market downturn and new subnet, blockchain fees as a result have dropped down to $36k daily by June 2022.
nansen.ai
One of the largest decentralized apps on Avalanche is Trader Joe, which is a decentralized trading, lending, yielding and staking application. It’s currently the 6th largest application in DeFi by daily fees, averaging daily revenues of around $100k paid by its users. Considering the fact that it launched in August 2021 it’s quite an achievement.
Overview & Potential
Avalanche’s DeFi ecosystem has over $6.7 Billion of value locked in it with over 200 DeFi dApps, making it the third largest in DeFi.
defillama.com
Despite the crypto market slump, total amount of AVAX locked across its DeFi apps have been going up, reaching a record high.
Avalanche has a maximum supply cap of 720 Mil AVAX coins and will become deflationary in the long term as the network activity and adoption continue to grow. Furthermore, there are mechanisms that will drive down a decreasing supply, such as fee burning and AVAX being locked in validating subnets.
Fee Burn — all gas fees are burned, lowering the effective supply. C-Chain has burned nearly 1.8 million AVAX since the mainnet launch in 2021.
Validating Subnets — any validator must stake a minimum of 2,000 AVAX per validator. As more subnets launch more AVAX will be staked. Staking AVAX is a measurable metric for the minimum security of the subnet.
Avalanche has several subnets currently created/in process of creation.
twitter.com/swimmer network
Avalanche’s architecture incentivizes creation of subnets. As adoption of Avalanche grows with number of daily user transactions increasing, it drives up fees on main network (c-chain). This incentivizes decentralized applications to migrate onto a subnet in order to lower fees and enhance user experiences. As more subnets are created, more AVAX is locked up, thus lowering supply, while on the main network, which now gets cheaper again, the fee burning mechanism continues as before.
Currently the burn rate is approximately 1,100 AVAX per day versus daily issuance rate of 67,782 based on staked 267 Mil AVAX. Since 720 M cap has not been reached yet AVAX is experiencing a rate of 9% inflation.
FANTOM
Fantom, founded in 2018 by Dr. Ahn Byung Ik, a computer scientist, (who eventually stepped away and the CIO, Michael Kong, became CEO), is a proof-of-stake Layer-1 blockchain that uses a single consensus layer to support the creation of multiple execution chains. FTM, the project’s native token, is used for payments, governance, and ongoing block rewards sent to validators and delegators who stake FTM.
Fantom intends to distinguish itself from the traditional block ledger-based storage infrastructure by attempting to employ an improved version of existing DAG-based protocols.
Daily Transactions Count
ftmscan.com
Daily transactions on Fantom have been steadily rising, peaking 1.7 million and settling at an average of 900k, despite the recent crypto downturn. Fantom has been one of the only layer one blockchains, which saw an increase in daily transactions since start of the year, which is an important fundamental metric.
Transaction Metrics:
One Year Change 203%
Year To Date 53%
Daily Active Addresses
nansen.ai
Daily active addresses on Fantom have been rising since May 2021 with network activity peaking at over 110k in Sep and dropping down to an average of 49k.
Fantom has reached over 3 million unique addresses created on its network since Aug 2020.
Daily Fees
cryptofees.info; coinmetrics;
Fantom’s fee model sees 70% of the fees paid to the validators and the remaining 30% are burnt forever.
Average daily fees on Fantom have averaged of $70k-80k throughout the year, excluding the spikes in Jan, March and May, where at its peak the daily fees reached $350-$450k, giving Fantom a P/S ratio between 30 to 45.
nansen.ai
Fantom’s most popular dApp is SpookySwap, which is a decentralized exchange. SpookySwap is largest protocol on Fantom by TVL (total value locked) and a top 5 DEX by daily trading volume.
Overview & Potential
Fantom’s DeFi ecosystem has maintained value locked despite the recent crypto crash, showing resilience and trust in its ecosystem, even as FTM token price fell from $3 to $0.35 cent. Fantom remains one of the largest blockchain protocols in DeFi.
defillama.com
Fantom has a maximum supply cap of 3.175 Billion FTM coins and will become deflationary in the long term as network activity and adoption continue to grow.
Fantom’s current inflation rate is approximately 8.50% annually to incentivize staking and thus protocol’s security. This is based on the initial new circulating supply of 2,392,807,708 FTM, leaving 782,192,292 FTM in the unminted staking rewards pool. At this moment in time 49% of FTM is staked.
messari.io
As mentioned earlier Fantom’s outstanding supply is fixed. The liquid supply increase displayed on the curve is the consequence of the vesting schedules as well as the distribution of pre-mined staking rewards. Those rewards are set to be distributed continuously to validators and delegators and are forecast to end in 2024. Once the allocated source is depleted, given the project’s fixed supply as well as 30% of all the fees being burned, it will benefit Fantom’s future market value.
DISCLAIMER: The information contained in this article is for educational purposes only and does not constitute any form of advice or recommendation by Wheatstones, and is not intended to be relied upon by users in making (or refraining from making) any investment decisions.