What a crazy way to end the week: Su Zhu of Three Arrows Capital has been apprehended while trying to leave Singapore and sentenced to four months in prison, per Bloomberg. I'm not sure about you, but seeing Kyle and Su run around untouched for the past year without any punishment, with the audacity to create an exchange of their own, has irked me beyond belief. Finally, we are seeing some justice being served. I will wait a bit to get more details, but for now, I am celebrating. OX is also down over 30% on the news. The SEC continues to kick the can down the road for spot ETF applications, delaying the decision on the Valkyrie, Bitwise, Invesco, and Blackrock ETF applications far before the deadline. This is likely due to the potential government shutdown that would result if there is no deal reached with respect to the recent government spending bill. We must wait for the January deadline for more on this topic. A ETH futures ETF, on the other hand, was just recently approved for Valkyrie with the ticker EFUT. This went from a rumor just a month or so ago to now being slated to go live next Tuesday, which is an odd contrast to the BTC spot ETF decision, which seems to be taking as long as possible. As we saw with the BTC futures ETF decision in 2022, marking the local top in the market, I'm not convinced this ETH futures ETF will be a large market catalyst, but it certainly doesn't hurt and is one step closer to a spot ETF at some point in the future. Google also continues to show its involvement in the ecosystem, as they are a validator for the current Polygon PoS chain! This is after adding blockchain data across many different chains earlier this month, as well as now providing the default oracle for LayerZero. It's clear that they want to be a big player in this ecosystem and are a great sign of institutional adoption that gives legitimacy to the industry. I'm sure this will not be their last initiative in the near term. I hope you all had a great week. Until next time. – Westie |
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Today's chart is somewhat perplexing, please bear with me here. We're diving back into activity on Base, Coinbase's L2, which received a lot of attention around its official launch at the beginning of August 2023. Following a meme coin mania, initially driving users to the blockchain, Friend.Tech emerged and has been the main driver for activity on Base. Friend.Tech's share of contract activity is marked as the light green area in the middle of the above chart, accounting for ~38% of activity at the beginning of the week, but has since dropped to only ~5%. Is this the beginning of the end for Friend.Tech as the driver for Base activity? Another project of interest here is Aerodrome, a DEX that is a fork of the Velodrome V2 code base, created in partnership with the Base and Velodrome development teams. Aerodrome was deployed with the goal of becoming the main DEX on Base, which, based on TVL, seems to have been successful, Aerodrome being a clear leader based on the metric, having a TVL of ~$107M. In comparison, the second largest protocol by TVL on Base is Friend.Tech at ~$48M, while the second largest DEX on Base is Curve at ~$22M. However, Aerodrome hasn't been able to maintain transaction volume since its launch. During epoch one, ~$45M of volume was traded on the platform, while in epoch four, the volume traded was at ~$10M. Epoch five began on September 28 and will last until October 5. This is visible in the graph above, Aerodrome having accounted for up to ~21% of contract activity at the end of August, currently making up ~3% of total activity, marked as the light yellow area in the middle of the above graph. Aerodrome being the main DEX on Base, but swap volume being low indicates that the blockchain doesn't yet have "real" usage. This makes sense as, thus far, Base doesn't have any novel dApps to offer, with the exception of Friend.Tech, which doesn't require users to swap tokens. |
Any Arbinauts around here? The application period for Arbitrum's Short-Term Incentive Plan ("STIP") ended on September 27, with the plan looking to distribute 50M ARB from the DAO treasury across Arbitrum projects. The STIP review period began yesterday and will end on October 4, whereafter a voting period will commence, lasting until October 12. 105 proposals were submitted during the application period, the top five largest allocation requests comprising GMX (14M), MUX Protocol (9M), Gains Network (7M), Lido (5M), and Vertex (4.5M). Smaller projects that are asking for relatively large allocations saw their token prices jump through the roof. For example, Ramses Exchange, a DEX, is asking for 1.5M ARB, which was ~4.8x larger than its market cap in dollar terms on September 23, when the application was submitted. Consequently, the token price has increased by ~185% in the past 7 days as investors are flocking to the token. It's important to note that across all projects that have sent an application, the total amount of ARB requested is ~127M, meaning that most of the applications will be denied. Therefore, more opportunities will likely arise in the coming weeks as the market gets more visibility on which applications are likely to be accepted and which are not, and it might be worth monitoring how the process develops. (Hey, Brick's lawyer here. Just to remind all of you readers that this is definitely not investment advice). The BWR boys have once again been in the trenches and were kind enough to cook up a list of all the applications, including critical information such as the grant size, project description, and grant duration. If you're interested, the list can be found here. |
This analysis focuses on financial metrics for general-purpose L1 blockchains. In many ways, L1s should be viewed as an entirely new asset class more comparable to digital economies than traditional businesses. L1s are the core infrastructure enabling the creation of new-age businesses like onchain protocols. |
Base has doubled-down on its commitment to the Superchain vision, has shown early signs of success with nearly $400M in TVL, and has become home to novel dapps such as friend.tech which has seen significant traction. |
Liquidator Teneo in a statement said that Zhu had been arrested and charged |
Steven Goldfeder believes that interoperability between Ethereum layer-2s is key |
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The insights, views and outlooks presented in the report are not to be taken as financial advice. Blockworks Research analysts are not registered broker/dealers or financial advisors. Blockworks Research analysts may hold assets mentioned in this report, further outlined in the Firm's Financial Disclosures. |
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