🧘♂️ALERT: This Crypto Is Hot
Market Meditations | December 29, 2021
Here’s How To Analyse It
Dear Meditators
Today we are going to explore another solution to scalability; layer 2 solutions. These enable the scaling of a layer 1 blockchain by allowing large numbers of transactions to be stored as one record.
Why navigate the crypto markets alone when you can get free resources and analysis sent straight to your mailbox? Make sure you’re on our free email list where we are helping over 40,000 people build life changing wealth?
Our Market Meditations are longer format educational segments. Each letter features a Market Meditation which will deep dive and analyse a relevant crypto event, theme or tool.
Arbitrum – The Answer to Ethereum’s Problems?
Ethereum’s expensive gas fees have played a pivotal role in the 2021 crypto market. As adoption of NFTs and DeFi exploded, the network struggled to remain affordable, leading to huge demand for alternatives. As such, alternate layer 1 blockchains (such as Solana), have seen exponential growth in adoption and price during 2021.
Today we are going to explore another solution to scalability; layer 2 solutions. These enable the scaling of a layer 1 blockchain by allowing large numbers of transactions to be stored as one record.
The biggest category of these on Ethereum is optimistic rollups and the biggest of these is Aribtrum. We can use data providers, such as Nansen, to dive into exactly what on-chain activity is happening – helping us find opportunities before the rest of the market.
Total Value Locked of Ethereum Optimistic Rollups
Source: The Block: Value Locked of Ethereum Optimistic Rollups: 29/12/2021
Total value locked (TVL) represents the value of all cryptocurrency staked within an ecosystem. Currently TVL for Arbitrum is $1bn, meaning it has gained over 50% dominance of all optimistic rollups.
Transactions vs Ethereum
The number of transactions can be used as a metric to understand the adoption of a network.
Nansen.ai: 29/12/2021 – Arbitrum Users by Entity
As shown by the dark blue bars, the adoption of Arbitrium spiked just after September peaking with transaction numbers over 20% of those on Ethereum.
Since then this has continued to trend downwards and currently only represents around 2% of all transactions on the Ethereum blockchain.
Most Used Platforms On Arbitrum Over 7 Days
We can also use Nansen to explore the biggest protocols on Arbirtrum by number of users. Doing so allows us to dive deeper into the ecosystem and find out how we can start using it ourselves.
Nansen.ai: 29/12/2021 – Arbitrum Users by Entity
The largest number of users are currently using platforms that have not yet been labeled by Nansen. This shows the amount of opportunity to get ahead of the market.
Sushiswap is the largest known platform. This is a decentralized platform and allows you to trade and earn yield.
Arbitrum itself is the second largest platform due to their bridge from Ethereum. Only 4,000 people have used the bridge this week with over 200,000 since launch.
Conclusion
Arbitrum represents a potential solution to Ethereum’s scaling problems, a narrative that made significant profits in 2021 through alternate layer 1s. Whilst data shows us that adoption has yet to lift off, the TVL indicates that it is one of the biggest solutions right now. As such we will be keeping a close eye on Nansen’s dashboards to find projects within the ecosystem that are gaining significant traction, before the rest of the market.
Next week, we still start diving deeper into alternate layer 1 blockchains, reviewing not only their adoption but exactly how much value is flowing into the ecosystem and the hottest projects that anyone exploring that layer 1 should check out.
With Nansen’s On-Chain data, you can secure an edge in the crypto and NFT markets:
? Exciting New Opportunities. See where funds are moving their money.
? Perform Due Diligence. Get more information on projects or tokens.
? Defend Your Positions. Create smart alerts to track over 100 million ETH wallets.
? Track The Biggest NFT Traders. See what the most profitable NFT wallets are investing in
To grow your crypto portfolio today check out the Nansen website. Currently, they are running a 7 day trial for just $9. Link here ?
? Missing Link
Like all good marine animals, Chainlink has been underwater compared to Ethereum for quite some time, plumbing the depths since mid-August.
But before yesterday’s market-wide dip there were some signs of light overhead. Could it be preparing for its ascent?
Despite strong fundamentals LINK has been steadily bleeding away against ETH, but recently had a 15% reversal, regaining the $23 mark.
Behavioural analytics website Santiment suggests a predominantly negative sentiment towards LINK since the summer may be starting to flip net positive.
Three factors potentially contributing to this recent surge are:
Google’s ex-CEO Eric Schmidt joining the team as a new strategic advisor
A new partnership with IoTeX, a blockchain platform with more advanced smart contract capabilities
The integration of Chainlink price feeds into Lido, an Ethereum staking pool protocol that allows users to stake less than the required 32 ETH.
For some price analytics on Chainlink visit intotheblock and for more information about the Chainlink product check out their website.
Will Sushi Get Froggy?
There are plenty of people in the defi community who want to see the fork of Uniswap succeed. A joint proposal has been submitted by Daniel Sesta and Alex Woodard to the Sushi community to restructure the organization.
Elements of the proposal include:
Establishing a new service collective, for which Daniel Sesta will serve as Head Visionary and Omakase will serve as Head of Operations & Business Development.
Establish further checks, balances & community oversight over the Sushi roadmap, leadership & transparency.
Establish a clearer mandate of what decisions go through governance votes and which are left to the service collective.
The Sushi community seems to predominantly support the proposal, apart from the role assignments in the service collective. Many would prefer to see these roles defined in the proposal and allow candidates to apply for said positions. Some also fear that this role would cause a conflict for Sesta, who is the developer behind Spell, Time, and Ice.
? Did you enjoy today’s newsletter? This survey is your chance to tell us how we can improve the product for you. Link here.
??♂️✍️ Stories in this newsletter were written by D. Beverly, Isambard FA, Nick T., Max P., Kimia K., Ellen B. and Koroush AK. Graphics were produced by Gerasimos P.
Not financial or tax advice. The content in this newsletter is for informational purposes only. Nothing in this email is intended to serve as financial advice. We are not financial advisors. Every investment and trading move involves risk. Do your own research when making a decision. See our important security disclaimers here.
Disclosure. Some of the links we’ve included are affiliate, they give you rewards and discounts and earn us a commission. Additionally, the Market Meditator writers hold crypto assets. See our investment disclosures here.
