Layer 1’s have been a trending narrative for 2021 and understanding the space has led to huge gains for many crypto participants.
Today we are going to examine how you can use Nansen to keep up to date with the hottest layer 1s, allowing you to profit from the market.
To do so we will be diving into one blockchain that has been showing strength in recent weeks: Avalanche.
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.
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🔥 Track The Biggest NFT Traders. See what the most profitable NFT wallets are investing in
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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.
❄️ Avalanche: The Hottest Layer 1 Right Now?
Step 1: Establishing the Strength of the Layer 1 Chain
Nansen’s multichain dashboards (free for anyone to use) give us access to key indicators that we can use to assess the strength of a layer 1 blockchain.
(1) Transactions vs Ethereum
One of Ethereum’s biggest problems has been its ability to scale due to expensive transaction fees. Comparing Avalanche’s transaction numbers to those on Ethereum can show us how much activity is happening on the blockchain and how well it has managed to scale.
Nansen.ai: 05/01/2022 Avalanche Transactions vs Ethereum
We can see that adoption (shown by number of transactions), has grown exponentially since August 2021 with Avalanche processing around 60% of the number that Ethereum is currently achieving.
(2) Top Bridges by Volume
To start using another layer 1 blockchain - you must first move assets onto that blockchain and avalanche has an official bridge that allows you to do so. We can compare the volumes being transacted through the bridge to other layer 1s to illustrate where capital is flowing right now.
Nansen.ai: 05/01/2022: Top Bridges by Volume
The Avalanche bridge has had almost $360m of volume in the last 7 days. This is the most of any bridge by over $200m - showing that a large amount of capital is flowing into the ecosystem.
Step 2: Diving Deep into Opportunities within Avalanche
The key indicators in step 1 have clearly shown that there is a huge amount of network adoption for Avalanche - being one of the hottest layer 1 chains. We can now dive deeper into the opportunities within the ecosystem, allowing us to generate insights that could lead to profit.
Most Used Protocols
Nansen.ai: 05/01/2022: Most used protocols on Avalanche by number of users
Trader Joe: This currently has the most number of users on any protocol on Avalanche. It is a decentralized exchange that allows you trade crypto assets and a lending protocol.
Wonderland: This is a reserve currency protocol aimed at making a non-dollar denominated stable asset and is part of a growing narrative referred to as DeFi2.0.
Abracadabra Money: This protocol has received a lot of attention as is also affiliated with the DeFi2.0 narrative.
Pangolin: This is a decentralized exchange - similar in functionality to Trader Joe.
✅ Tip: We can use Nansen’s hot contract feature to dive into the hottest opportunities right now. The feature allows us to see which smart contracts are receiving the most amount of capital and how many smart money wallets are interacting with that contract. Of course these kinds of projects have a huge amount of risk and we do not endorse interacting with such projects without a large amount of due diligence.
Alternate layer 1 blockchains have already caused major disruption to the crypto space - with huge price increases for native tokens and huge gains for those that caught the trend early. Using Nansen, we are able to understand not only how adoption is progressing but the exact protocols within the ecosystem to pay attention to.
This week we have dove into Avalanche, one of the hottest layer 1’s right now. For the next 3 weeks we will be doing the same for other top layer 1 blockchains - so you can understand where to find the next big opportunity.
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🌐 NEARly There
In the world of Layer 1 blockchains, there are a number of well-known celebrities jostling for space with Ethereum, such as Solana, Avalanche and Terra. They arrived on the scene to great fanfare and experienced big runs in 2021. But one you may not have heard so much about is NEAR protocol – is that about to change?
NEAR is a Proof of Stake Layer 1 blockchain that already does sharding (like Ethereum plans to do), allowing thousand of transactions per second and with limitless scaling potential
The transaction count has been steadily growing over the last six months and to stimulate growth further the NEAR foundation announced $800 million in grants in December for developers to build
The preferred smart contract language on NEAR is Rust, but Ethereum compatibility is provided by a spin-off company called Aurora, who also maintain a bridge between the blockchains
NEAR tokens are used to transact on the blockchain, which had an ICO in Q3 2020. Steady growth over 18 months has resulted in a market cap of ~$10 billion, but transaction fees are still extremely cheap (~$0.001)
The company has been bolstered by the arrival of a new CEO from the banking world, Marieke Flament, who brings executive experience from Circle as well as a FinTech company in London.
If you’d like to learn more about the NEAR blockchain, check out their website or explore the chain here. To understand how it compares to other L1s, take a read of Tascha’s informative tweet thread here.
💰A Penny For Your Thoughts
Eyal Hertzog, the creator of Metacafe (an early competitor to Youtube), and creator of the Bancor protocol (which touts itself as the first AMM) is behind the decentralized BBS, a Reddit style message board which is titled after the nostalgic Bulletin Board System from the early days of the internet.
The system runs on blockchain technology and turns every post into an NFT which users can buy and sell.
Owning your post as an NFT allows you to earn any advertising revenue that may be associated with it now or in the future unless someone else purchases the post as an NFT.
You can create your own community and custom policies within it and users never need to know they are using blockchain technology.
This is a very different take on the social media platforms of today.
While you will have to abide by the policies of the forums/communities that you belong to, there will be no centralized entity to choose which users should be banned, a recent issue that has arisen on centralized platforms.
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.