Smart chips integrated in physical products enable enhanced interaction, and seamless connectivity between the physical and digital realms. Near-Field Communication (NFC) enabled items with programmable functionality opens up a realm of possibilities for both consumers and brands, allowing for real-time information retrieval, authenticity verification, and even digital ownership of physical goods.

Over the next decade, we will see more garments with NFC smart chip technology and programmable functionality, providing creators and brands with the resources to establish engaging and community-driven environments.

The History of Fashion

For centuries, clothing was primarily functional, designed to be worn without much emphasis on fashion or style. In ancient civilizations, clothing primarily denoted status and cultural identity, evolving to the draped styles of Greece and Rome, and later to the modesty enforced by the medieval church.

The 18th and 19th centuries were periods of significant change. Influenced by innovative designers, fashion houses, and socio-political movements, these eras marked transformative periods throughout the history of fashion. The French Revolution brought about simpler, more egalitarian fashions while The Industrial Revolution introduced technological innovations like the sewing machine, making clothing more accessible and affordable.

20th Century

The Roaring Twenties popularized flapper dresses and liberated silhouettes, while World Wars introduced trousers for women and military-inspired attire. The post-war era saw haute couture's boom, with designers like Christian Dior’s "New Look."

The '60s and '70s embraced youth culture, leading to mini-skirts, bell-bottoms, and countercultural style, before becoming influenced by pop culture, music, and globalization in the 80’s and 90’s.

21st Century

In the early 21st Century, globalization significantly transformed the fashion landscape. Fast fashion brands like GAP, Zara and H&M expanded worldwide, offering trendy, affordable styles and rapidly adapting to runway designs. Social media and web apps, accelerated trend adoption worldwide; however, this accessibility brought up sustainability and moral concerns. Discussions arose prompting environmental, social, and ethical impacts of fashion production and consumption, which forced brands to become more aware of their supply chain conditions.

A timeline of significant movements that helped shape the way fashion is today:

The acceleration of technology propelled typical walk-in stores to e-commerce powered shopping experiences following the COVID-19 pandemic in March 2020. Augmented websites and in-store experiences like virtual try-ons or smart chipped garments began to rise, allowing customers to “connect” with their garments or personalize their experiences.

The Digital Age

Digital marketing has played a critical role in the success of many online businesses.

• Projected E-commerce revenue from 2023 - 2027 is around $490B, a 53% increase

• In 2020, e-commerce sales accounted for over 14% of all retail sales in the United States and is forecast to rise to nearly 22% by 2025 (Statista).

• Global AR ad revenue is expected to increase from $1.36B to 6.37B by 2026 (Emodo).

• 2.64B consumers will complete at least one purchase online in 2023 (Adobe).

Web3

As e-commerce thrived, a new movement began as creators and designers look to capitalize on community building and exclusivity through programmable products via smart contracts and blockchain technology. Web3 and blockchain became a hot topic as luxury brands and lifestyle companies looked to digitize their products through NFTs, NFCs or QR codes.

NFTs

NFTs, or non-fungible tokens, that represent a distinctive digital asset that is indivisible and cryptographically secured through the blockchain. Each NFT serves as a record, allowing creators and collectors to establish ownership within a secure, immutable environment. This feature empowers creators to monetize their virtual creations, and collectors to own and trade digital assets within an inherently unique ecosystem.

In 2020, the NFT boom sparked tremendous interest towards digital ownership, provenance, and online representation through pfps (profile pictures), membership passes, and digital collectibles. Luxury brands and corporations entered Web3 through various NFT collections and NFC-connected experiences for buyers. Some of the most notable brands being, Nike, Gucci, Adidas, Porsche, Pepsi.

• Gucci unveils new luxury NFT collection 10KTF Gucci Grail, inspired by Gucci’s Creative Director, Alessandro Michele. (Featuring Bored Ape Yacht Club, Cool Cats, World of Women and 8 other collections)

• Adidas Originals launches virtual fashion line in collaboration with PUNKS comic, gmoney and Bored Ape Yacht Club.

• Nike acquires RTFKT, a leader in creating cutting-edge augmented experiences, and in game engines. RTFKT uses the latest in game engines, blockchain authentication and augmented reality combined with manufacturing expertise to create one of a kind sneakers and digital artifacts.

• Tiffany & Co. partners with Cryptopunks to offer 500 custom “punk” engravings for punk holders as they make their entrance into NFTs.

• Hugo Boss partners with Imaginary Ones to launch an exclusive NFT collection called ‘Embrace Your Emotions’ (EYE), with plans on integrating a 360-degrees metaverse experience experience for holders.

A list of 28 brands that have entered the NFT market

According to a report by Moonblock, over 161 brands have been associated with an NFT launch.

There is strong belief that as Layer 2 solutions, such as rollups and side chains, continue to pursue scalable, environmentally friendly infrastructure for developers and creators, brands will launch their own digital collections and networked products.

The blockchain for digital consumer goods

Though there are certainly cheaper chains to use for transacting, Ethereum currently controls over 80% of NFT sales volume by blockchain. Generating 8x more users and volume than any other chain (According to CoinGecko). Since 2020, Opensea has done over $16B in sales volume since March 2021, having 15.5% of that coming from Yuga Labs, creators of the Bored Ape Yacht Club and buyers of LarvaLabs CryptoPunks.

Industries from Sports teams, A-list celebrities, lifestyle brands, leisure & travel have all ventured into this speculative mania. (See Steph Curry’s 2972 NFT collection and Etihad Airlines EY-ZERO1 collection).

According to Ycharts, the average amount spent for gas was around $120 during March - November 2021. Even with high gas fees, It’s quite clear that projects want to launch where there is demand, and the demand on Ethereum was through the roof.

Of the brands that launched on the Ethereum blockchain, Nike (RTFKT) had the most unique buyers with over 15,000+ combined across all releases, followed by Adidas at around 9000.

Crypto-native digiphysical products level up the interactive shopping experience by allowing consumers to actively engage with their purchases, rather than being passive recipients.

NFC integrated garments are part of the broader trend of blending physical and digital experiences. Engagements like, accessing exclusive content by tapping a garment’s NFC tag, or gamification through proof of participation. Sellers can leverage these features to offer distinctive shopping experiences and onboard customers.

When integrated with Ethereum’s native secp256k1, NFC or other smart chips, can securely store unique identifiers or private keys, allowing onchain programmability and authentication. We will discuss this more in the upcoming sections.

NFT Token Standards

Ethereum token standards provide a structured framework that ensures interoperability, security, and functionality for digital assets. Each standard has its own set of rules and specifications that dictate how the tokens behave and interact within the Ethereum ecosystem. These standards give power to brands and creators by allowing assets to evolve, adapt, and interact with other on-chain entities, promoting richer user experiences and more intricate digital ecosystems. Of course there are many more, but these are some of the token standards we found to be a progressive way for creators and brands embracing crypto-native consumer goods:

• ERC-721: This is the most common standard for NFTs. Each token is unique, making it ideal for representing one-of-a-kind assets like art, collectibles, or real estate. The uniqueness allows for specific utilization, such as accessing a particular virtual space or using a specific virtual item in a game.

• ERC-1155: A standard interface for contracts that manage multiple token types. This Multi-Token standard can represent both fungible and non-fungible tokens within a single contract.

• ERC-6551: Token bound accounts allow NFTs to own assets and interact with applications, without requiring changes to existing smart contracts or infrastructure. This includes the ability to self-custody assets, execute arbitrary operations, control multiple independent accounts, and use accounts across multiple chains.

• ERC-5791: The ERC-5791 standard, also known as Physically Backed Token (PBT) binds together a physical asset with an onchain NFT or digital asset via cryptographic chip. The chip generates an asymmetric key pair for the NFT, which can be publicly validated. This ensures a valid signature must follow the schemes established in EIP-191 and EIP-2 (s-value restrictions), where the data consists of the target recipient and the recent block hash.

• ERC-2981: Known as the royalty standard, ERC-2981 presents fresh rules for how royalty payments are distributed to creators every time their NFT is resold on a marketplace. This standard ensures creators and core contributors are compensated regardless of how many times the item is sold.

Network Product Features:

As described by Gmoney, networked products are garments with programmable utility that focus on retaining connection, value and control to holders. Features like digital wallets with classic email login authentication for boosted connectivity, gamified reward systems, on chain loyalty programs through proof-of-attendance protocols are all examples of utilities for physical interactions within an NFC-enabled item.

Creators and brands offering, immersive experiences or dynamic products with personalized accessibility and programmatic functionality will continue to thrive and attract a newer generation of consumers.

Tokenized products can incentivize owners to engage with their products through NFC interaction or QR code. Brands with physical locations or pop up shops can reward customers through Proof-of-Proximity or Proof-of-Location consensus protocols, ensuring two or more devices are physically close to each other at a given time. Unlike Proof-of-Location, Proof-of-Proximity doesn't necessarily provide the exact location but confirms the proximity. For instance, a real-life exhibit could use Proof-of-Proximity for interactive displays and Proof-of-Location for validation that garment production and supply chain tracing are authentic.

Tokenized garments with onchain programmability give owners the power to become more engaged customers and contributors. Each garment fulfills the same duty as any other digital asset, ensuring authentication, exclusivity, and accessibility within a robust ecosystem.

Accounts

The profile page was a monumental moment for social media, as platforms provided tools for users to curate online images and personas to build connections and network with friends and strangers.

Since the beginning of the early social media era, profile accounts have aimed to enhance community engagement and provide a place for individual expression and personalization. Thanks to ERC-6551, NFTs have the capability of holding other NFT items, or even interact with dapps as if it were any other digital wallet. Holders can personalize their NFTs with digital garments like hats and tees, while showcasing their activity within the community on a profile or subdomain.

9dcc launches the new accounts feature for 9dcc garments.

https://twitter.com/9dccxyz/status/1668390797547393030

• Account subdomains for digital assets allows owners to personalize their journey with their associated garment through ERC-6551 functionality.

• Digital garments could unlock specific features and content, due to the owner’s on chain history or POAPs. whitelist, IRL exhibits, VIP access are some other potential utilities.

• Personalization and account management ensure that these interactions are tailored to the user's preferences and history. For instance, a digital garment might unlock specific features or content due to the owner’s on chain history or attendance. One example of this is 9dcc’s network points system which rewards users who interact with other products and consumers via account verification.

Redeemables

For redeemable assets, owners can burn/lock the NFT in order to claim the physical product or NFT. Like bundles, early “digital twin” products treat each counterpart as a secondary offering as opposed to product components that are deeply integral to one another. Digital twins are goods that exist in physical form, but also contain a cryptographic link to its digital record via NFC chip technology. This record can take various forms, such as onchain account IDs, NFTs, registry entries, digital passports or signatures.

In game assets like wearables with un-lockable characteristics and attributes will entice owners to hold their items for longer periods while increasing value for speculators.

Physically-backed-Tokens (PBT), however, are physical assets that are brought on-chain in the form of an NFT that acts as a digital certificate of the original asset. Protocols like 4K, Americana, and Courtyard are working on solutions for vaulting and escrow involving higher valuable, physically backed assets. Some brands have leveled up the way consumers interact with their products, allowing users to scan or connect with other users or products via NFC. As mentioned above, the ERC-6551 standard has become a popular choice for crypto-native brands wanting to engage in community building and interactive experiences.

Mntg.io showcasing their Fruits & Veggies collection featuring a mix of Levi’s denim styles.

https://twitter.com/mntge_io/status/1663624281929007106

Digital Experiences

The more time we spend consuming digital media, the more we start to use digital amenities and benefits like online shopping platforms, Interactive User Interfaces, digital payment solutions and delivery services. Luxury brands have leveled up their shopping experience by creating interactive virtual storefronts and exclusive benefits for certain holders of their released NFTs. Projects like IYK, and ARX provide solutions to bridging physical and virtual worlds through connective interactions via NFC.

Unlike traditional digital marketing where advertising mediums are videos, hyperlinks, or radio, virtual and augmented worlds allow brands and creators to personalize the experience for their customers. Open source tooling and user on-boarding will give sellers a chance to create their own advertising avenues while maintaining revenue share.

For example an Artist or designer can showcase their collections in a virtual fashion house or gallery, allowing virtual guests to interact in an engaging environment. OnCyber and Mona provide tooling for creators to build custom worlds, in high quality interactive 3D environments.

• RTFKT launches Augmented Reality (AR) NFC-enabled Hoodie in collaboration with Nike. The RTFKT x NIKE AR Hoodie acts as an NFT, allowing holders to scan the the QR unleashing Augemented effects.

• Lacoste sets sights on virtual shopping experiences with the UNDW3 collection, presenting a virtual shop where users can browse virtual products and purchase the digital twin or physical version. (Powered by Emperia)

  Lacoste immersive virtual shopping experience, including a scavenger hunt, exclusive perks and much more for UNDW3 holders.

https://mediabucket102.s3.amazonaws.com/lacoste_virtual_pool.mp4?height=480&width=640&autoplay=true&loop=true&muted=true

• Shopify partners with Doodles by launching an immersive tokengated experience for holders. Powered by easy-to-use POS technology, hodlers could partake in DoodlePutt, an exclusive mini-golf course with merch and NFT prizes.

Into the Metaverse

• About 25% of American adults under 40 own a virtual reality headset.

• Almost one in three (28%) have more than $1,000 in the metaverse.

• Nearly 40% of respondents have spent $100 or more on online artwork and online education. And 55% have spent $100 or more on metaverse purchases such as skins and NFTs. (Paypal Newsroom)

Value Chains

The current garment production process takes value from key contributors and creators, while rewarding those that are not on the front lines. Global supply chains face a variety challenges, from vendor overspend, lack of transparency, inventory mismanagement, ethics concerns to compliance regulations. The real benefit of using blockchain for fashion is that it enables the beginning of a transparent and verifiable design and production landscape.

• Permet Labs, formerly known as Hibiscus, has introduced the first transparent, community-owned toolkit for the fashion creator economy. The project - which is as a public good - seeks to on-board current industry players onto the blockchain (designers & makers) and support the creation of new revenue streams for these players. The goal is to create a regenerative ecosystem where fabricants and the environmental impact of garment creation come before fashion conglomerate profits.

• 0xSplits, a set of composable, open source smart contracts for safe and efficient on-chain payments, allowing sellers to split revenues from NFTs, diversify future income streams, or handle repayments.

• Crowdmuse is a protocol for creators to collaborate on multiplayer products with brands, makers, and communities while maintaining ownership over their creative assets. Developing on-chain collaboration frameworks that simplify the process for creators to build digital consumer products across fashion, consumer goods, multi-media, and more.

The 0xTote by FWB X DSPTCH x Tropical Futures Institute uses the ERC-2981 royalty standard for distributing revenue to creators and contributors. When you collect, revenue on sales is split amongst each collaborator, and as a holder of the digital collectible, you can access gated creator artifacts post purchase.

Generative Art & Fashion

Technology continues to be an influence for artists and creators, reshaping how they conceptualize, produce, and distribute their work. Artists use technology to explore new realms of creativity by establishing techniques or design processes that could not be done by hand. Generative design is one example.

Generative design is the process of writing an algorithm that produces different outputs depending on the values of a set of variables. These variables could range from shape, size, position, color, etc. One of the most recognized generative projects to date is the Chromie Squiggle by Snowfro (Art Blocks), which uses a predefined algorithm to produce a squiggle, based on a variety of different variables (Shape, color, size, position, length, etc). While the algorithm provides the base, randomness ensures that each Squiggle is unique. When a Squiggle is minted, the Ethereum transaction hash, or other attributes, introduces randomness into the algorithm, leading to the creation of a one-of-a-kind piece.

Over 90% of the top 100 collections of all time on Opensea use generative minting, and consist of profile picture collections with unique traits and attributes. Art Blocks had generated a series of 8 curated collections of artworks representing contemporary generative art, further igniting the generative art movement.

Generative minting engines and creator tools have kickstarted the creator economy allowing designers and brands to power up their communities through interactive personalized experiences. On August, 29th 2022, Art Blocks launched Art Blocks Engine and Art Blocks Engine Flex, with a purpose to allow teams and brands to launch their own generative assets. Some other projects building in this sector include RTFKT, Tribute Labs, Draup, 9dcc, and many more.

ODDS are a generative sweaters collection by Tribute Brand x Chromie Squiggle

Tribute Brand is an innovative company that makes digital clothing which consumers can buy and "paste" onto themselves.

The source code or script behind ODD assets takes generative Chromie Squiggle code and uses a seed input to control a variety of different variables in each Squiggle, creating an on-chain token that contains instructions for producing physical sweaters and virtual experience in the form of digital skins. The main variable determining the sweater's appearance is the Squiggle type, along with color spread, steps between, and segments, which control color distribution across knitted panels. 9dcc also partnered with Snowfro’s Chromie Squiggle through its Iteration-02 NFT T-shirt Collection.

Gucci has embraced generative garment design and manufacturing by launching the Future Features Collection, comprising of 21 NFT artworks featuring a variety of generative artists and designers. These artists explored intersectional aspects of technology, fashion and art by using inspirations from generative textile design and garment production. Other projects or artists utilizing generative textile or garment design are Draup, The Fabricant, and WOVEN-CODES.

These products are just the surface of what could be possible with generative minting engines integrated with garment production.

Takeaways

We are only getting started on building the railways for the digital garment economy. The network effect of community-building creators and incentivized contributors will initiate a flywheel of consumer powered products while generating value to both creators and consumers. Tap-To-Garment interaction through NFC-enabled tags or labels show a promising path for creators looking to capitalize on building an active and engaged community through networked products. Some key takeaways and predictions from above:

• Generative minting engines will allow brands and creators with their own parameters and data points to create randomized outputs. For example, using geographical coordinates instead of hexcodes to create a generative NFT.

• Programmability within NFCs and other physical chips will continue to advance allowing brands to personalize the experience for their customers with simple interactions and proximity-based incentives.

• Brands and manufacturers will have more transparent supply chains verifying ethical means of production, quality of materials, royalty distribution and much more. An example would be: a brand selling garments with smart chip functionality allows customers to tap garments while in store to verify products were ethically manufactured and contributors are being fairly compensated.

• Crypto-native NFC chips, or other smart chip technology, will allow consumers to learn about the origins of the garments, while verifying authenticity and scarcity. This makes us believe that the value of properly executed limited edition campaigns will increase over time, with the help of backing protocols like 4K and Courtyard.

References:

Huge thanks to gmoney, 9dcc, Crowdmuse, Nichanan Kesonpat, Peter (@pet3rpan_) and the 1kx team, for the inspiration on Networked Products. Other mentions, Vogue, Fashion-Era, Permet Labs, Economist, Tribute Brand, Lacoste. Brands and projects mentioned are tagged in the article.

https://medium.com/collab-currency/being-onboard-onchain-4d0f78e4bfc7

https://mirror.xyz/1kx.eth/k5lbpB155Tz_pH7B-7vbtDTTRKrco3u_y5QYUX1YhZs

One thing we can all agree on, Since August, 2021, spending on fees has never felt better. Ethereum began burning ETH in August when it implemented EIP-1559 which burns a portion of fees generated through transactions instead of going to miners, thus decreasing the supply. There are other places to watch the burn, but for now we captured yearly and daily ETH burned along with total transactions. We’ll cover more below! In the meantime, Watch the Burn:

https://watchtheburn.com/

Methodology

The Ethereum network has become almost unusable for those without the proper capital. Many of this stemming from memecoin season as memecoin weekly trading volume reached $2B on May 5th (2). As NFT season reaches near lows, traders are flocking over to Uniswap trying to find the next $PEPE. In this analysis we will cover the effect of high gas fees and how it affects users and protocols on all chains. Our objective is to observe user behavior across all events over the past year to see if they are leaving the chain or biting the bullet on costs.

We are going to use Dune Analytics DuneSQL to run the queries and display the charts on a dashboard. You can find the tables used in the sources below. Key topics this report will cover:

• Ethereum Gas Usage

• Network Activity

• Effect on L2s

Ethereum Gas Usage ⛽️

At this this current rate of 4,000 ETH Burned and current price of $1821 per ETH, we can conclude that the Ethereum network is burning roughly $8 Million daily, and annualized at over $2B in ETH burned. As long as users continue to swap, bridge, or buy anything on the mainnet, gas fees will remain high.

Network Activity 🐝

Uniswap capitalizes on it’s dominance after the launch of the UniversalRouter and Permit2 contracts. The UniversalRouter unified ERC20 and NFT swapping into a single swap router. Integrated with Permit2, users can swap multiple tokens and NFTs in one swap while saving on gas fees. (3).

Looking at the pie charts below, we can notice that the UniversalRouter contract had consumed the most gas, whereas the Flashbots contract used the most gas per transaction. The two charts make it easy to see the comparison between top gas consuming contracts and contracts that consume the most gas per transaction. Such as the case for Flashbots and MEV contracts, which can reduce the competition for inclusion in blocks and potentially lead to lower gas fees for those transactions.

A couple assumptions we can make are:

1. Uniswap is the lead contributor for the recent gas spike

2. Uniswap traders are not that affected by the high gas

Furthermore, let’s get a closer look on how much gas fees are affecting the Ethereum ecosystem and other L2s. As mentioned above, gas fees are at yearly highs resulting in users having to spend more than average to use the network. Below we will observe NFT, DEX and Bridge activity in comparison to the median gas rate. Between NFT and DEX activity it is quite clear that high gas fees have nearly wiped out 90% of NFT transactions, as DEX transactions are at yearly highs.

Effect on L2s

Though bridge volume across major L2s have dropped substantially, Starknet has increased its bridge share by nearly 50% and now owns a majority of the bridge volume market share. Are users trying to sybil the potential airdrop or are they looking for a cheap escape from Ethereum? We only know as much as our data gives us. Our observation also shows that bridge activity reached a yearly high in March 2023, lead by the Arbitrum airdrop and Incentivized LPs on the Arbitrum network. Since then all Polygon, Optimism, and Arbitrum bridges have seen yearly low bridge volume and transactions. In the end, it's quite clear that high gas fees have affected bridge volume.

Conclusion

There are plenty of key takeaways that support our research. Our objective was to analyze the Ethereum network gas usage across projects and chains to see how users were effected by the high gas fees. Other findings show that NFT trading dropped by over 90% as Blur and Opensea’s share of gas usage dropped below 2% from a March high of 28%.

The impact of gas on NFTs can really be seen in the NFT Gas Comparison chart, where gas is 50 gwei and the total trades are around 17,000 from the March high of 120,000. In fact, the DEX Gas Comparison chart shows a clear contrast of the NFT chart, as DEX transactions are reaching yearly highs. Users are feeling the heat and many are taking the loss.

Based on the data we have provided, our best prediction suggests that gas fees are correlated to high Uniswap transactions and will not slow down until the trading volume and transactions decrease. We can only assume that once gas drops, Uniswap trades will be below range levels. With that being said use MEV protection for your swaps until gas cools down! NFA!

Thanks for viewing. ✌️

Sources:

Tables Used:

• ethereum.transactions

• ethereum.blocks

• labels.all

• dex.trades

• nft.trades

Links Used:

Image: Canva

https://ethereum.org/en/developers/docs/gas/

https://www.coindesk.com/markets/2023/05/08/meme-coin-trading-volume-surges-to-two-year-highs-signals-caution-for-bitcoin-bulls/

https://blog.uniswap.org/permit2-and-universal-router

The battle for Aggregation market share is heating up as Sushiswap recently unveiled its roadmap for 2023. The plans include launching a DEX aggregator in Q1 and a “decentralized Incubator” throughout the year. In a recent post by CTO Jared Grey, he mentions the goal for Sushi is to “become a market-leading DEX by improving our product stack & delivering feature parity to provide a firm foundation enabling innovation…“. Some of the features highlighted include new tokenomics, improved governance, educational resources i.e Sushi Academy, and much more.

As it stands, Sushiswap only commands ~2% of the AMM market and 0% of the DEX aggregation market, according to CoinTelegraph, Dropping well over 80% from its all time high in July 2021. As a result, Sushi redesigned its business model to promote sustainability in all areas of its business & focus on optimizing user experience while significantly increasing market share among competitors. However, gaining market share will be more difficult than expected as the competition gets sharper by the day.

Full post:

https://jared-grey.medium.com/sushi-revitalized-f2e9161d293f

Methodology

One significant problem DEXs face, is lack of liquidity. When large transactions occur, liquidity on DEXs are diminished, directly impacting the price. This happens when the AMM is forced to execute at a different price than the initial quote, leaving some traders with a loss. Aggregators address this issue by allowing users to access liquidity across multiple DEXs at a time. With more liquidity, DEX aggregators offer better pricing and reduce the risk of slippage and unnecessary fees.

In this analysis we will covering Sushiswap’s potential impact on the aggregator market following their revitalization. I used Dune Analytics Ethereum V1 schema to run queries. You can find the tables used in the sources below. Queries will run using PostgresQL.

This is a submission for @MetricsDAO Sushiswap - 2. DEX Aggregator

Analysis

We will be taking a look at the top 5 liquidity pools on Sushiswap to see how the metrics have changed over the past 6 months compared to the first 6 months. Our objective will then be to analyze what Sushi's competition will look like as it enters the aggregator market. To do this we must answer the following questions:

• Have Daily Active Users and Daily Volume in Liquidity Pools been increasing?

• Which dex aggregator(s) have gained the most market share over the past 6 months and why is that the case?

• How does volume compare to other aggregators like 1inch and Matcha?

Lets break down our analysis in 3 main parts:

1. Sushiswap Pools

2. DEX Comparative Analysis

3. Aggregator Market Share Over Time

Sushiswap Pools

Ever since the beginning days of DeFi summer in 2021, Sushiswap has been a key player in introducing Liquidity Pools and Yield Farms to crypto market participants. Below we’re going to analyze the state of Sushiswap’s top 5 pools over the last 6 months. We are also going to The top 5 pairs on Sushiswap are the following:

• USDC-WETH

• SYN-WETH

• USD-WETH

• ILV-WETH

• SUSHI-WETH

Since the spread between the top 5 and the rest of the pool are so wide, we retrieved the aggregate volume, Trades, Users, and Fees for the pairs listed above.

It is quite clear that the USDC-WETH and USDT-WETH pools are where a majority of the volume and trading activity has been. One obvious reason for this could be that it is less volatile than the other pools.

When observing the daily volume & active users 6-month chart, we can see a few key events starting with the November Contagion & collapse of FTX. Shortly after there is a grind down due to dried-up volume; however, leading into 2023, there was

DEX Comparative Analysis

Since the fall of FTX and Celsius, interest in Decentralized exchanges (DEXs) have skyrocketed. Daily active users and volume are up nearly 2-3x across all DEXs, with Uniswap continuing to hold it’s spot as king DEX by a large margin.

In this section we’re going to be comparing DEX market share over time from the first 6 months to the last 6 months. The start time will be at August 28th, a few days before the launch of Sushiswap V1 and end 6 months later. As we can see, Uniswap captures over 75% of users and liquidity across all DEXs; however, according to the data below, Sushiswap controlled around 19% of user market share and up to 36% DEX market share in the first 6 months after launch.

*Since then we can see that Sushiswap controls roughly 2.6% of DEX market share, down close to 88%.

Aggregator Market Share

To answer some of our questions from above, let’s break down some metrics from the leading aggregators. Taking a look below, it is quite clear that 1inch is the leading Aggregator and has been for the past 6 months. Matcha and Cow protocol are lagging, but 0x API gaining traction. Overall Aggregator volume is up 2x from September 2021.

Conclusion

Based on our findings, there are plenty of key takeaways that support our research. Our objective was to measure the state of Sushiswap’s top 5 pools, as well as analyze the competition for aggregator market share. When observing the top 5 pools, there was clear signs of growth since the start of 2023, with 2 of the 5 pools reaching the top 5 within the last 6 months (SYN-WETH, ILV-WETH). Furthermore, we break down the DEX aggregator market to compare differences between the first 6 months of Sushi launch and the last 6 months. Looking back at the early DeFi days in 2020, incentives were an essential tool to bootstrap liquidity and users. Giving that new tokenomics design and potential incentives could play a role in pool growth, we can only assume that more liquidity will be poured into Sushiswap’s pools prior to the aggregator launch. Our prediction for Sushiswap is to grab around 5-6% of the aggregator market share out of the gate.

Sources

• The following tables were used from Flipside Crypto for this analysis:

  • dex.trades

  • sushi.Factory_evt_PairCreated

  • prices.usd

• You can find the corresponding Dune Analytics dashboard with queries and all: Here

The Ethereum ecosystem has experienced significant growth over the last few years. With growing demand for dApps, NFTs, and block space, users are paying hefty fees to use the congested network. In 2021, when the price of $ETH was settling around $3,000, users were spending $100+ on gas fees for one transaction alone. Along come Layer 2s (L2), Layer 2 refers to a network that runs on top of L1s to improve scalability and efficiency while reducing bottlenecks of transaction costs from the underlying L1 chain. Layer 2 protocols aim to solve the problems of high fees and slow transactions by finding ways to ease the network load. To learn more about Layer 2s and Optimistic Roll-ups see the sources section at the bottom.

In this analysis, we will be breaking down three Layer 2 neworks. Our goal is to analyze user on-chain activity to track, measure and predict the growth of Layer 2 networks throughout 2023.

Methodology

• We will be taking a look at five layer 2 networks (Polygon, Arbitrum, Optimism, zkSync, StarkNet) to observe active users, transactions, volume and bridge activity on the chains. First we will be breaking down bridge transfers from each chains native-bridge. Then we will take a look at crosschain bridges to see if there is increased growth in multi-chain bridging. We will also be using the information found to answer the following questions:

  1. Does the outlook of the crypto market forecast a bullish or bearish trend for Layer 2 Networks?

  2. Will this growth continue into the new year? Or will L2 growth stagnate as 2023 continues to progress?

I used Flipside Crypto to retrieve the data and run queries. You can find the tables used in the sources below.

Analysis:

Ethereum is scaling, and with Layer 2 scaling solutions like Polygon, Arbitrum and Optimism it’s happening quicker than ever. Observe and measure the growth across the Layer 2 blockchains / protocols mentioned. Results could be

Below we will be breaking down user metrics and bridge activity within the last 6 months, followed by aggregated stable coin holdings across L2 chains.

Lets break down our analysis in 2 main parts:

1. L2 User Metrics

   - Increase in Daily Active Users (DAU), transactions and volume

2. Bridge Volume (ETH)

   - Increase in Bridge activity (Native + Crosschain)

L2 User Metrics

Below we will be looking at user metrics from the chains mentioned above. As we can see, leading into the new year there was a spike in active users across all chains before cooling down. With users growing slowly, but steadily, it is still clear that growth has nearly doubled since last year.

6 month highs:

• Polygon: 730,000

• Arbitrum: 77,000

• Optimism: 111,000

• zkSync: 7,500

• StarkNet: 3,500

Bridge Volume (ETH)

Below we will be looking at user metrics from the chains mentioned above. As we can see, leading into the new year there was a spike in active users across all chains before cooling down. With users growing slowly, but steadily, it is still clear that there is growth.

We can also see that the amount of $ETH bridged is also reaching 43 month highs.

When taking a look at crosschain bridge we can also see that the most popular bridges are Hop and Synapse, with Across being the next most active.

Since October 2022, there has been significant growth across all layer 2s. With daily active users reaching 4x what they were previously were in September 2022. Most of this could be speculation with Arbitrum and ZkSync expected to launch throughout the 2023 year, but with the ETH bridged reaching record high numbers, it’s safe to say the breakout of L2s have just begun.

Conclusion:

Based on our analysis, It is quite clear that L2s have become the main attraction when exposed to the Ethereum ecosystem. We can now make the assumption that L2s have had significant growth and will continue to have growth as long as users continue to bridge and be active. It is also obvious that users are more willing to bridge their $ETH over to other chains than ever before. We came to this conclusion by looking at the significant growth across all layer 2 chains.

Sources:

• The following tables were used from Flipside Crypto for this analysis:

  • ethereum.core.fact_transactions

  • polygon.core.fact_transactions

  • arbitrum.core.fact_transactions

  • optimism.core.fact_transactions

  • erc20.ERC20_evt_Transfer

• This is a submission for @MetricsDAO EVM 6. - Continued Growth:

• You can find the corresponding Flipside Crypto dashboard with queries and all:

Overview

The cryptocurrency market has seen tremendous growth over the past few years, with the total market capitalization rising from about $10 billion in January 2016 to over $1.3 trillion in January 2021 (according to coinmarketcap). Despite this overall growth, there are still several challenges facing the crypto market following the aftermath of Celsius, FTX and many others collapse. Some of these challenges include regulatory uncertainty, lack of transparency, market manipulation and much more. With all this negative news and price movement, one would think 2021 - 2022 entrants have given up and see no light at the end of the tunnel. In this analysis, our goal is to analyze user on-chain activity to find bullish or bearish trends heading towards the end of the first month of the new year.

Methodology

Our objective will be to measure on-chain metrics from 8 major blockchains to track growth or slowdown in user activity. (Bitcoin, Ethereum, BNB, Polygon, Arbitrum, Optimism, Solana, Avalanche) We will also be looking at aggregated transactions, trading volume, active users, gas usage, token prices and much more to answer the following questions:

• Does the outlook of the crypto market forecast a bullish or bearish trend?

• Are users leaving the space after the FTX collapse or has the contagion faded away? Support your thesis.

I used Dune Analytics V2 query engine to write and run my queries. You can find the tables used in the sources below.

Analysis

Since the collapse of FTX, crypto markets have struggled to get back to normal. With funds going insolvent, protocols winding down, and layoffs reaching yearly highs, what other reasons would users and investors want to stay? We’ve made sure to highlight a few promising trends.

Below we will be breaking down withdrawals since November 8th, followed by daily aggregated cross chain activity. We can usually tell the strength of an ecosystem from a variety of factors, to name a few:

• Decrease in deposits to Centralized Exchanges (CEX)

• Increase in Daily Active Users (DAU) and transactions

• Increase in network usage (gas consumption)

Lets break down our analysis in 3 main parts:

1. CEX Withdrawals since FTX

2. Active Users Per Chain

3. Contracts Created Per EVM Chain

CEX Withdrawals

The following chart only contains the labeled CEX wallet addresses on Etherscan. (Possibly missing some other wallet addresses)

Exchanges Listed:

• Coinbase

• FTX

• Gate.io

• Kraken

• Kucoin

(Data from January 18th, 2023)

Taking a look 120 days back we can clearly see the build up of withdrawals from Centralized exchanges leading up to November 7-8th when FTX started to freeze withdrawals. However, looking past November, withdrawals reached 6 month lows and have since stabilized. We can even see an uptick in withdrawals leading up to 12th of January…

Cross Chain User Activity

Cross chain transactions have also seen noticeable declines, especially from Solana who seems to carry over 70% of the blockchain transaction market share (According to Dune Analytics).

Next we will be looking at daily active users and transactions per chain. This will give us an idea of how active each chain is, and which chains are thriving more than others. The data is only going back 120 days, so we can see 2 months before FTX up to now.

(Data from January 18th, 2023)

Our data shows that there is a small lag in activity towards the end of December, but immediately picks back up around the first of the year as the market began its next leg up. We can also make the assumption that there are over 250,000 active blockchain users in 2023.

Contracts Created

Another important metric we will be taking a look at is the number of smart contracts created by EVM chains (Yes, this will exclude Bitcoin and other non-EVM chains). Contract creation is an important metric because it shows that the blockchain is being used and that there is a strong developer community building decentralized applications on it. Lets take a look below:

It seems that Binance Chain, and Polygon have the most contract creations daily. This is a tremendous increase from September 2022, up nearly 400% and shows that buildoors will stay building no matter the environment. Keep in mind also that I am missing plenty of very active blockchains and L2 protocols..

Conclusion

Overall, there are lots of opportunities in all ecosystems. Some current trends that have been hot for a few months are Liquid Staking Derivatives, while other innovative technologies like Zero-Knowledge proof tech are yet to be released on mainnet. Even with uncertain macroeconomic conditions and regulations ensuing, the crypto community is still active and developers are continuing to contribute.

Key Takeaways:

1. CEX withdrawals have stabilized since the FTX contagion.

2. There is a significant decrease in on-chain trading activity since the collapse of FTX in November 2022 but lots of blockchain usage.

3. Users seem to keep there money on-chain entering the new year, as L2 chains begin to pick up momentum.

Disclaimer:

Of course I must mention that this content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.

Sources:

• The following tables were used from Dune for this analysis:

  • ethereum.transaction

  • bitcoin.transactions

  • bitcoin.inputs

  • bnb.transactions

  • optimism.transactions

  • arbitrum.transactions

  • polygon.transactions

  • solana.transactions

  • avalanche.transactions

• This is a submission for @MetricsDAO In the News - 12:

• You can find the corresponding Dune dashboard with queries and all: Dune Dashboard

• Thanks for viewing! Buy me a coffee at biffbuster.eth 🤝