Coin Metrics' State of the Network: Issue 132

Tuesday, December 7th, 2021

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Comparing Returns Across the Major ERC-20 Tokens

By Kyle Waters and Nate Maddrey

One of the primary use cases of Ethereum and other smart contract platforms is the creation of digital tokens. Tokens today represent assets like sovereign currencies (stablecoins), facilitate protocol governance, and broadly help create new incentive mechanisms. There are 389K smart contracts on Ethereum today that implement the ERC-20 standard for fungible tokens, a testament to the token boom.

While the vast majority of these ERC-20 tokens have been abandoned, there are multiple ERC-20 tokens today with multibillion-dollar market caps that trade on major centralized exchanges and have hundreds of thousands of holders while serving different use cases. Some close observers of the crypto markets will notice that many of these larger ERC-20 tokens tend to closely track the return of Ethereum’s native ether (ETH) token. But just how closely, and are there tokens that exhibit fundamentally different return profiles to ETH itself?

The chart below shows the distribution of daily returns in 2021 for ETH and a selection of major ERC-20 tokens broken out by category. The distributions for some ERC-20s, such as metaverse tokens Sandbox (SAND) and Decentraland (MANA), as well as Dogecoin-inspired Shiba Inu (SHIB), have much fatter tails compared to ETH, a sign of more regular large moves-both to the upside and downside.

Source: Coin Metrics Reference Rates

On any given day, the returns of the major ERC-20’s have tended to closely track ETH’s, but there are some tokens that have deviated more often. The chart below shows a scatter plot of each asset’s daily returns vs. ETH’s. Dots in the upper right represent days where both the token’s and ETH’s returns were high while dots closer to the bottom right of the graph show days where the token’s return was high and ETH’s return was negative (and vice versa). Each graph is fitted with a simple linear regression to gauge the strength and direction of the relationship.

Source: Coin Metrics Reference Rates

Most tokens, especially DeFi tokens, have moved in stride with ETH. But there are some weaker relationships. As narratives around the metaverse have accelerated following Facebook’s name change to Meta, the metaverse tokens SAND and MANA have been less correlated to ETH, for example.

The table below shows the correlation and beta between ETH’s return and a broader selection of ERC-20 tokens in the Coin Metrics Reference Rates Universe (excluding stablecoins). The beta is calculated by taking the covariance of daily ETH returns and the given ERC-20 returns divided by the variance of ETH returns ( Jan 1 to Dec 6):

beta = cov(erc20,eth)/var(eth) 

Source: Coin Metrics Reference Rates

While many of the top ERC-20 tokens are up this year, when priced in terms of ETH the story is very different. The chart below shows a selection of ERC-20s’ YTD price series in ETH terms. After a blockbuster 2020, many of the DeFi tokens in particular have underperformed ETH.

Source: Coin Metrics Reference Rates

Some tokens on Ethereum today seem to be garnering narratives that are less tied to ETH itself, demonstrating the continued evolution of use cases on Ethereum while also showing the potential benefits to diversification. Further analysis incorporating a crypto-specific CAPM (capital asset pricing model) might help shed light on the risk-reward profile of various tokens.

Open Interest Falls Amid Crypto’s Weekend Sell-Off

The global financial markets started December off in a tumultuous fashion last week. Volatility has appeared to pick up with the S&P 500 moving at least 1% up or down in the last six consecutive trading days, the longest such streak since October 2020. As the US equities markets closed on Friday it appeared crypto markets had fared alright, moving commensurate to broader markets. But then on early Saturday morning (EST), the crypto markets suddenly took a sharp turn downward. 

After falling from $57K to $51.7K over New York trading hours on Friday, BTC dropped precipitously from $51.7K to $47.3K (roughly -8.5%) around 1am EST Saturday, reaching as low as $46.7K. 

Source: Coin Metrics Reference Rates

BTC spot volume across Coin Metrics’ trusted exchanges totaled $26.6B on December 1st and $23.7B on December 4th, two of the highest totals since September 7th, but far from May 19th’s $47.7B.

While there wasn’t a clear catalyst behind the sudden downturn, the mechanics were familiar. Although events like this are always different given an ever-changing set of information and market conditions, liquidations of leveraged futures likely played a key role. There were roughly $2B worth of liquidations over the weekend across all crypto assets. As price pullbacks trigger further liquidations, the effect can be self-reinforcing, which can sometimes cause drastic movements in spot price. A similar event occurred during September’s rapid crypto pullback. Saturday’s drop might also have been exacerbated by the fact that it occurred on a weekend, when liquidity and order book depth tends to be lower. 

The effect of the liquidations can be seen in a drop in open interest. Open interest for BTC and ETH had hit all-time highs fairly recently. But after the drop in price over the weekend and subsequent liquidations, open interest has fallen with BTC open interest dropping to levels last seen in early October. 

Source: Coin Metrics Network Data Charts

ETH open interest also fell, but by a much smaller degree, with ETH open interest still nearing levels from just a few weeks ago. ETH price reached as low as $3.8K but has bounced back to $4.3K as of Monday afternoon. While BTC has also recovered back above $50K, ETH/BTC today stands at ~0.0867, the highest level since early 2018. 

In the short term, it seems crypto markets-like broader asset markets-are responding to uncertainty deriving from US Fed policy and mixed macroeconomic data, as well as continued unpredictability surrounding the Omicron COVID-19 variant. However, some on-chain data remains strong despite the volatility. For example, only 17.2% of BTC have moved in the last 90 days, suggesting that accumulators from earlier this year are holding through the market turmoil.

To follow the data used in this piece and explore our other on-chain metrics check out our free charting tool, formula builder, correlation tool, and mobile apps.

Network Data Insights

Summary Metrics

Source: Coin Metrics Network Data Pro

On-chain usage increased over the last week, both leading up to and during the weekend crash. BTC 7-day average active addresses topped 1 million for just the second time since June. ETH active addresses also spiked to some of the highest levels since the summer, peaking at 827.7K daily active addresses on December 5th. Fees also surged with the crash, reaching an average of $55M a day for ETH, and $896.3K for BTC, a 32.2% week-over-week increase.  

Network Highlights

Check out this week’s summary video showing developments on-chain such as daily active addresses for BTC and ETH, BTC transfer value, and stablecoin supply growth.

Coin Metrics Updates

This week’s updates from the Coin Metrics team:

As always, if you have any feedback or requests please let us know here.

Subscribe and Past Issues

Coin Metrics’ State of the Network, is an unbiased, weekly view of the crypto market informed by our own network (on-chain) and market data.

If you'd like to get State of the Network in your inbox, please subscribe here. You can see previous issues of State of the Network here.

Check out the Coin Metrics Blog for more in depth research and analysis.

© 2021 Coin Metrics Inc. All rights reserved. Redistribution is not permitted without consent. This newsletter does not constitute investment advice and is for informational purposes only and you should not make an investment decision on the basis of this information. The newsletter is provided “as is’ and Coin Metrics will not be liable for any loss or damage resulting from information obtained from the newsletter.

Coin Metrics' State of the Network: Issue 131

Tuesday, November 30th, 2021

Get the best data-driven crypto insights and analysis every week:

Explaining Some of Crypto’s Biggest Data Anomalies

By Kyle Waters and Nate Maddrey

The history of economics and finance is filled with examples of data oddities and irregularities. Numerous economic time series are marked by sudden spikes and abrupt trend reversals. Some better-known examples include fiat currency collapses, financial crises, flash crashes, and other exogenous shocks arising from commodity price increases (e.g. oil) or events like wars and (more pertinently) pandemics.

Although crypto is still in its relative infancy, there are already some well-known network/on-chain data and market data anomalies; some that are so exceptional that they may even appear to be bugs to the untrained crypto historian. But like most aberrations in economic history, there are explanations-whether they be benign or extraordinary. However, the novelty of crypto introduces new events to study such as network attacks and software quirks, intentional or otherwise.  

2016 Ethereum DoS Attacks

Daily active addresses is one of the most popular on-chain measures of network activity and proxy for the number of users on a blockchain. Tracking daily active addresses over time is often a crypto analyst’s starting point for gauging trends in network usage and adoption. But for Ethereum, a few puzzling days towards the end of 2016 invariably throw off newer observers’ analyses of Ethereum user growth since its 2015 genesis.

Source: Coin Metrics Network Data Charts 

On October 10, 2016 there were just about 52 thousand active Ethereum addresses. Just two days later on October 12th, there were just over 7 million. Surely the network’s users couldn’t have increased by over 100X in a matter of days? That intuition would be correct as the millions of new active accounts were empty and generated in connection with an adversarial denial of service (DoS) attack on the network. In a DoS attack, adversaries effectively overwhelm a network with superfluous operations in an attempt to slow or interrupt service for real users. 

The DoS attacks started in late September 2016 when the attacker(s) identified an operation that was relatively cheap to continually perform (in terms of gas fees) but computationally expensive for nodes in the network to process. The mass influx of contract calls flooded the network and introduced large delays in the processing time for transactions. Short-term fixes were implemented but another attack commenced shortly thereafter lasting for more than a month.  

The impact of the attack is also apparent in the daily number of smart contract calls on Ethereum which spiked abruptly as the attackers repeatedly spammed the network in September and October of 2016.

Source: Coin Metrics Network Data Charts 

In the end, the attacker’s low-cost transactions created close to 19M empty accounts on the Ethereum blockchain. Ethereum subsequently underwent two hard forks that helped end the attacks and secure the network. The first fork addressed the underpriced operations and the second removed the empty accounts that had bloated the state, or the data that nodes must store on things like Ethereum account balances (note that this wiping of empty accounts is the explanation behind the second anomalous spike in active addresses in November 2016). 

The 2016 DoS attacks were ultimately a resiliency test for Ethereum. Given the extreme nature of the event and the low likelihood of it happening again, it is recommended that analyses of Ethereum adoption and usage correct for or exclude this outlier time period.

On-chain Transfer Anomalies 

Another metric in crypto that is susceptible to abrupt outliers is daily transfers recorded on-chain. Recently, on an unadjusted basis in dollar terms, BTC transfer value skyrocketed on September 14th to over $350B.

Source: Coin Metrics Network Data Charts 

There’s certainly a level of intrigue with such a sudden increase, but oftentimes the cause itself is more innocuous. For example, this particular increase was likely associated with a reshuffling of bitcoin held by FTX. Exchanges are often the entities behind these transfer value outliers as they will occasionally move large sums of coins internally to meet withdrawal needs or to reshuffle cold wallets. For this reason, it is often better to look at adjusted transfer figures that remove economically insignificant activity and self-churn.

NFT transfers on Ethereum offer another example. Although NFTs have had a breakout year, the rise of NFTs in 2021 is overshadowed by a short-lived, extreme upward spike in daily NFT transfers in late 2019. 

Source: Coin Metrics Formula Builder

During the peak of this year’s NFT mania, there were ~240K transfers of ERC-721 tokens recorded on September 5th, which was more than 20X the daily average in January of this year. But moving back the data series to the beginning of the ERC-721 standard in 2017, there were ~3.8M transfers of NFTs on Ethereum on November 19, 2019.

The origin of this anomaly was the NFT trading card game Gods Unchained. The game’s cards were previously stored off-chain and were then “activated” (i.e. minted) all at once, causing a sudden wave of on-chain transfers. Given the scope of the project and the staggering number of NFTs, Gods Unchained has since transitioned to Immutable X, a L2 scaling solution that the team behind Gods Unchained has developed for NFTs on Ethereum.

Ethereum Difficulty Time Bomb

The transition from a Proof-of-Work (PoW) to Proof-of-Stake (PoS) consensus mechanism has long been a stated goal for Ethereum, even dating back prior to the network’s genesis. In an effort to hold developers, miners, and users accountable to a quick PoS timeline, an early 2015 update to the protocol introduced a (now infamous) feature known as the “difficulty bomb”.

In PoW, the difficulty parameter sets how computationally hard it is for miners to add new blocks to the chain. The difficulty regularly adjusts to target a desired time between blocks (10 minutes for Bitcoin, ~13.5 seconds for Ethereum). With the difficulty bomb, the idea is that the mining difficulty on Ethereum will exponentially increase to the point where miners can no longer find new blocks thereby enforcing a move to PoS.

But as Ethereum’s timeline for PoS has shifted, the difficulty bomb has continually been disarmed-however not before leaving an imprint on historical block times. The chart below shows the mean block time over the course of Ethereum’s history, with ascents and steep declines as the difficulty bomb neared and was delayed via hard forks of the network.

Source: Compass Mining Memo 

While menacing, the difficulty bomb has now served more of a procedural role requiring ETH core developers to periodically kick the proverbial can down the road (for example, the bomb will be delayed again on December 8th until June 2022). Interestingly, it has also served an additional function of forcing those who want to keep running Ethereum to have to upgrade their nodes. But given the recent progress towards Ethereum’s PoS transition, the difficulty bomb on the Ropsten test network will notably not be delayed as developers intend to try and run PoS on the testnet before the bomb goes off.

Stellar Inflation Bug

Software bugs are another source of crypto data anomalies. In 2017, Stellar suffered an inflation bug in which 2.2B XLM were created in an exploit resulting in a clear deviation from the XLM supply schedule.

Source: Coin Metrics Network Data Charts 

The Stellar Development Foundation publicly disclosed and patched the bug and took the additional step of burning XLM it held in reserve to return supply to its predetermined schedule.

Conclusion

The examples above are some of the largest data anomalies crypto analysts often encounter but this list is not meant to be exhaustive. Other data anomalies can arise from crypto-native mechanisms like flash loans in DeFi; a recent example being the CryptoPunk that “sold” for $532M. Much like the traditional financial markets (e.g. May 2010 Flash Crash), crypto markets have also featured their fair share of mispricings and dislocations. Ultimately, crypto markets and blockchains are producing data nonstop and are bound to emit statistical outliers-sometimes these figures will carry signals but many times they will simply be noise.

To follow the data used in this piece and explore our other on-chain metrics check out our free charting tool, formula builder, correlation tool, and mobile apps

Network Data Insights

Summary Metrics

Source: Coin Metrics Network Data Pro

It was a tumultuous Thanksgiving break for BTC and the rest of the crypto market. On Friday, November 26th BTC market cap dropped by over $1B as the stock market had one of its worst days of the year due to uncertainty over the Omicron COVID-19 variant. But by Monday the market began to rebound as panic subsided. Overall, BTC’s market cap dropped by 5.2% week-over-week, while ETH’s dropped by 1.3%. On-chain usage also dropped for both networks, with BTC down 4% and ETH down by 6.4%. 

Network Highlights

Although it might be too early to call a definite trend, Bitcoin’s hash rate has fallen slightly in the last few weeks. However, hash rate is still far above this year’s trough induced from the miner crackdown in China. See more in our weekly summary video below:

Coin Metrics Updates

This week’s updates from the Coin Metrics team:

As always, if you have any feedback or requests please let us know here.

Subscribe and Past Issues

Coin Metrics’ State of the Network, is an unbiased, weekly view of the crypto market informed by our own network (on-chain) and market data.

If you'd like to get State of the Network in your inbox, please subscribe here. You can see previous issues of State of the Network here.

Check out the Coin Metrics Blog for more in depth research and analysis.

© 2021 Coin Metrics Inc. All rights reserved. Redistribution is not permitted without consent. This newsletter does not constitute investment advice and is for informational purposes only and you should not make an investment decision on the basis of this information. The newsletter is provided “as is’ and Coin Metrics will not be liable for any loss or damage resulting from information obtained from the newsletter.

Coin Metrics' State of the Network: Issue 130

Tuesday, November 23rd, 2021

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Do Ethereum Gas Fees Vary by Time and Day of Week?

By Kyle Waters and Nate Maddrey

With network activity rising and ETH’s price above $4K, twenty-two days into November there has yet to be a day with sub-$30 mean transaction fee on Ethereum. With fees on the rise some users might be wondering if it makes sense to delay time insensitive transactions. Just as flights at 5am are generally cheaper than at noon, should Ethereum users expect to pay less on off hours? Examining the data on Ethereum’s base fee on a block-by-block basis suggests there might be some merit to setting an early weekend alarm in the US, or pre-scheduling transactions. 

Post EIP-1559, Ethereum’s transaction fee mechanism includes a fixed-per-block network fee called a base fee that must be paid to be included in a block. The base fee fluctuates with demand for block space, moving up or down by a maximum 12.5% block-to-block based on the capacity of the previous block. During times of higher network traffic, demand for block space more often outstrips supply, leading to higher base fees. 

Despite Ethereum being a 24/7, 365 network that is accessible globally, since EIP-1559’s launch in August base fees have tended to be higher during US business hours. The chart below shows the average base fee (measured in GWEI) by minute and day of week, in New York/Eastern Time. Brighter yellows represent higher typical base fees while darker blues represent lower average base fees (Note that this analysis only considers base fees while Ethereum users now tend to also pay a priority fee or miner tip to incentivize a tx’s inclusion in a block).

Source: Coin Metrics Network Data Pro

Interestingly, the morning period of midnight to 8am ET tends to have cheaper base fees vs. US business hours (9am-5pm). Additionally, weekends have been associated with lower fees, with the period of Sunday morning being especially quiet with the base fee less than 50% vs. the average during noon ET on a Wednesday.

This pattern is also apparent looking at a median, rather than mean for each minute and day of week. 

Source: Coin Metrics Network Data Pro

Time-sensitive activity might be a driver of higher traffic. One such type of activity might be trading on decentralized exchanges, as traders react to new economic information and other signals. However, there isn't much of a pattern looking at the distribution of Uniswap (v2/v3) trades. 

Source: Coin Metrics Network Data Pro

Another recent source of network activity has been NFTs. Sales on OpenSea have tended to be during US working hours but if anything, are more clustered on the weekend. 

Source: Coin Metrics Network Data Pro

Stablecoins might be another culprit. Tether and USDC usage, for example, is increasingly concentrated during US business hours. 

Regardless of the cause, this might present an interesting opportunity for scheduling non-time sensitive transactions. There are already solutions to automate smart contract executions and adoption of such protocols might help smooth out network traffic.

Crypto Markets Wobble as Macroeconomic Conditions Fluctuate

After breaking past all-time highs earlier this month, bitcoin and many of the largest crypto assets have retreated a bit amid a market shakeout. There are a few potential factors at play including a shifting macro outlook and crypto market conditions.

Regarding the latter, for the last couple of months open interest for BTC and ETH have been steadily increasing with open interest reaching fresh highs for both BTC and ETH last week. Open interest measures the total number of active futures contracts and an increase in open interest implies more contracts being opened while signaling additional money entering the market. 

Source: Coin Metrics' Formula Builder

Open interest often serves as a good proxy for leverage (borrowing to increase exposure) as many contracts are usually opened using leverage. Part of the growth in BTC’s open interest can be explained by the launch of BTC CME futures-based ETFs, though it is likely leverage picked up amidst the bullish sentiment around the ETF launch. Higher leverage in the market means that small price movements can amplify volatility and lead to liquidations of leveraged futures. As prices have moved downward in the last week, open interest has started to decrease as pressure is placed on existing long positions.

Short-term market pressure might be rising due to changing macroeconomic conditions. US bond yields, especially treasuries with shorter-duration maturities, have been rising sharply over the last few weeks. The yield on the 2-year note has risen from 0.24% on 9/22 to near 0.60% today, as expectations for possible interest-rate hikes increase. The nomination of Fed Chair Jerome Powell for a second term has also jolted yields higher. Because crypto assets, like high-growth tech stocks, are generally perceived as riskier assets, a higher “risk-free” rate of return might reshuffle capital in financial markets.

Source: FRED

However, inflation continues to surge and BTC’s price is reacting to new inflation information coming out of the US. Even though BTC’s price has broken a recent upward trend, teams continue to build on, including Square’s decentralized bitcoin exchange which recently released its white paper.

Although markets might appear turbulent, volatility (using daily log returns on a 90-day rolling window) is relatively low for BTC and ETH on a historical basis, and far from highs measured earlier this year. 

Source: Coin Metrics’ Formula Builder

Bitcoin’s Taproot Upgrade Goes Live

On November 14th Bitcoin’s Taproot upgrade officially activated at block 709,632. Taproot introduces new scripting possibilities and lays the foundation for new smart contract functionality, while improving Bitcoin’s security and privacy. Among other upgrades, Taproot introduces a technique called “key aggregation” which allows multi-sig transactions and smart contract interactions to commit the same amount of data as regular transactions, helping save on space for complex transactions. Taproot also increases Bitcoin’s maximum script size, paving the way for more complex smart contracts. For a deep-dive into Taproot’s technical updates see Taproot: Explaining Bitcoin’s Biggest Upgrade in Four Years.

So far a little over 20 BTC has been stored in Taproot P2TR outputs. To track Taproot activity see txstats.io.

Source: txstats.io

To follow the data used in this piece and explore our other on-chain metrics check out our free charting tool, formula builder, correlation tool, and mobile apps.

Network Data Insights

Summary Metrics

Source: Coin Metrics Network Data Pro

On-chain transfer value increased for both BTC and ETH this past week, despite a decline in market cap for both assets. BTC averaged $20.5B in daily adjusted transfer value over the last week compared to $11.2B for ETH. However, the number of transfers for both assets declined week-over-week, signaling an increase in average transfer size. Meanwhile, stablecoin activity continued to grow, with a 1.6% increase in the number of Tether (USDT) transfers and 8.0% increase in USDC transfers. But unlike BTC and ETH, USDT adjusted transfer value dropped by 15.5% week-over-week as average transfer size dipped.

Network Highlights

This week’s video update features an updated look at the NFT market on Ethereum which appears to be rebounding after a recent drop in activity.

Coin Metrics Updates

This week’s updates from the Coin Metrics team:

  • Check out our market-data focused newsletter State of the Market, featuring weekly updates on market conditions.

As always, if you have any feedback or requests please let us know here.

Subscribe and Past Issues

Coin Metrics’ State of the Network, is an unbiased, weekly view of the crypto market informed by our own network (on-chain) and market data.

If you'd like to get State of the Network in your inbox, please subscribe here. You can see previous issues of State of the Network here.

Check out the Coin Metrics Blog for more in depth research and analysis.

© 2021 Coin Metrics Inc. All rights reserved. Redistribution is not permitted without consent. This newsletter does not constitute investment advice and is for informational purposes only and you should not make an investment decision on the basis of this information. The newsletter is provided “as is’ and Coin Metrics will not be liable for any loss or damage resulting from information obtained from the newsletter.

Coin Metrics' State of the Network: Issue 129

Tuesday, November 16th, 2021

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Bitcoin & CPI Hit New Highs

By Nate Maddrey and Kyle Waters

Bitcoin price jumped to a new all-time high of $68,998 on November 10th after Consumer Price Index (CPI) data showed inflation to be at a 30 year high. Price began to climb shortly after 8:30 AM EST (13:30 UTC) when the news was initially released. The price spike was short-lived, however - BTC fell back down below $65K amidst a wider selloff as the stock market dropped in response to the news

Source: Coin Metrics Reference Rates

Bitcoin’s correlation with equities has been increasing over the past few months (after falling to close to 0 earlier in 2021) as bitcoin increasingly responds to news from the Fed and other policy markers. The following chart shows BTC’s 90-day rolling correlation with S&P 500 (SPY) as a proxy for the stock market. Historically, BTC has been mostly uncorrelated with the S&P 500. The correlation jumped to an all-time high in 2020 following the global onset of COVID-19, but never grew particularly strong - at its peak it was 0.48.

Source: Coin Metrics Correlation Charts

Even though BTC is breaking new all-time highs, its free float market value to realized value (MVRV) ratio is currently relatively low. Market value to realized value (MVRV) has historically been one of the most reliable on-chain indicators of bitcoin market tops and bottoms. During previous cycles a free float MVRV of 3.0 or above has indicated a local top, while an MVRV of below 1.0 has indicated the bottom of the cycle. Free float MVRV is currently about 2.1. For more information about MVRV and an in-depth explanation of how it's calculated check out our On-Chain Indicators Primer

Source: Coin Metrics Network Data Pro

Ethereum Name Service Launches $ENS Token

Last week, Ethereum Name Service (ENS) launched its $ENS governance token as part of a broader push to decentralize ownership of the protocol via the creation of a DAO and token. ENS is an open-source naming system that allows users to map human-readable names to hard-to-remember crypto identifiers such as a 42-character hexadecimal public Ethereum address (0x000…). 

Like many protocols that have launched tokens, a portion of the token supply was given to early adopters via an airdrop. While $ENS is by no means the first protocol to allocate a percentage of tokens to users via an airdrop, the specific economics around the $ENS token are interesting because unlike many other projects, ENS never received any outside investment or funding. Twenty-five million or one quarter of all $ENS tokens were airdropped to the ~137K eligible addresses holding a .ETH name. 

Although eligible addresses have until next May to claim, many addresses have quickly moved to claim their tokens despite the recent rise in gas prices on Ethereum. Out of the 25M $ENS tokens airdropped to the community, ~15.6M have been claimed (~62%) as of 2pm ET on November 15th.  Of the roughly 137K total eligible addresses, about 80.2K (~58.5%) have claimed their $ENS thus far.

Each eligible address received an amount of $ENS tokens proportional to the number of days owning at least one ENS name and the number of days until the expiration of the last name on the account. From an incentives standpoint, early adopters and more involved users are thought to be more invested in the future of the protocol and therefore should receive more voting power. Interestingly, the allocation formula did not directly take into account the number of ENS names held by an address, likely to emphasize ENS users over ENS name “collectors”.

The histograms below show the distribution of $ENS claimed so far by address in native units and in USD (at a price of $50/token). The average address has claimed 194.7 tokens valued at $9,248 at a price of $50. A total of 40 addresses have received the max 1,143 $ENS (a cap was added to the formula because some addresses have registered ENS names out thousands of years, the current longest being until the year 4271).

The ENS airdrop was one of the largest on Ethereum to-date ranking amongst the now famous launch of Uniswap’s governance token UNI in September 2020. In the retroactive UNI airdrop, any address that had ever called Uniswap v1 or v2 contracts (~250K addresses) was given 400 UNI, now worth ~$10K. 

Front End to Popular Tezos NFT Platform Hic et Nunc (HEN) Unexpectedly “Discontinued” 

Last Thursday, the main front end to the Tezos-based NFT platform Hic et Nunc (HEN) unexpectedly went down while the official Twitter account for the platform simply read “discontinued.” After the dust settled, it became clear that the creator of the platform suddenly decided to walk away from the project, shutting down the website in the process. 

This was a surprising move to a growing community of over 60K unique users and 500K+ total NFTs. Although decentralized applications (dApps) can help to limit the influence of specific parties or people, the HEN incident is an interesting case study that shows how restricting access to the “official” front end (i.e., how users interact with the underlying smart contracts) of a dApp can cause immediate disruption. For example, the daily number of NFTs (called OBJKT’s on HEN) minted on the platform fell from ~3,300 on November 11th to ~1,300 on November 12th. 

Source: hen-utils

Similarly, the number of HEN NFTs being transferred (swapped) on the Tezos blockchain also fell following the shut down, from ~8,600 on 11/11 to ~3,500 on 11/12.

Source: hen-utils

The sudden shutdown has seemingly impacted macro-level statistics on Tezos, as NFTs have become a significant driver of traffic on the network. The daily number of active addresses (on the sending side of a ledger change, to remove the noise of addresses receiving staking rewards roughly every 3 days) increased closely with HEN activity in August and September. But in the days since the HEN website shut down, active addresses on the network have decreased. 

Source: Coin Metrics Formula Builder 

Although there has clearly been a short-term impact, the underlying smart contracts were untouched and live on on the Tezos blockchain. In fact, the number of daily OBJKTs being minted and swapped have started to bounce back as collectors and artists turn to alternative tools and new front ends. Despite the uncertainty and interruption, the HEN community appears to be stepping up, showing the resiliency of dApps with strong communities and the merits of web3.

To follow the data used in this piece and explore our other on-chain metrics check out our free charting tool, formula builder, correlation tool, and mobile apps.

Network Data Insights

Summary Metrics

Source: Coin Metrics Network Data Pro

Although market caps ticked up over the last week, other major on-chain metrics were mostly flat. Bitcoin transactions grew by 2.9% week-over-week while Ethereum transactions dropped by 0.6%. Stablecoin activity also dropped off after a recent surge. Tether (USDT) active addresses declined by 2.1% on the week, while USDC active addresses fell by 8.9%. 

Network Highlights

Check out our new weekly summary video which breaks down some key metrics for Bitcoin, Ethereum, and stablecoins.

Coin Metrics Updates

This week’s updates from the Coin Metrics team:

As always, if you have any feedback or requests please let us know here.

Subscribe and Past Issues

Coin Metrics’ State of the Network, is an unbiased, weekly view of the crypto market informed by our own network (on-chain) and market data.

If you'd like to get State of the Network in your inbox, please subscribe here. You can see previous issues of State of the Network here.

Visit the Coin Metrics Blog for more in depth research and analysis.

© 2021 Coin Metrics Inc. All rights reserved. Redistribution is not permitted without consent. This newsletter does not constitute investment advice and is for informational purposes only and you should not make an investment decision on the basis of this information. The newsletter is provided “as is’ and Coin Metrics will not be liable for any loss or damage resulting from information obtained from the newsletter.

Coin Metrics' State of the Network: Issue 128

Tuesday, November 9th, 2021

Get the best data-driven crypto insights and analysis every week:

Smart Contract Platforms Lead the Market to New All-Time Highs

By Nate Maddrey and Kyle Waters

The Coin Metrics CMBI10 index hit new all-time highs this past week as bullishness picks up across the market. The CMBI10 index (Coin Metrics Bletchley Indexes) consists of the 10 largest cryptoassets weighted by their free float market-cap.

Source: Coin Metrics CMBI

ETH has led the way during the recent surge, breaking its previous all-time high several times over the past week including a surge past $4,800 on Monday. Other smart contract platforms have also remained hot with Avalanche (AVAX) and Solana (SOL) both breaking new highs. 

Following Facebook’s recent name change metaverse assets have been surging over the last week - Decentraland (MANA), Sandbox (SAND), and Axie Infinity (AXS) are all at or near all-time highs. Comparatively, top decentralized finance (DeFi) tokens like Uniswap (UNI), Aave (AAVE), and Compound (COMP) have been lagging, but are still on the rise. 

The following chart shows how close the major cryptoassets are to their all-time high price (current price divided by all-time high price) as of Monday, November 8th. For example, 100% indicates that they are currently at an all-time high, while 50% indicates that they are at 50% of their previous all-time high price. 

Source: Coin Metrics Reference Rates

While some smaller-cap assets will undoubtedly outperform during the bull run, many will likely not stand the test of time. Historically, most cryptoassets have fallen off over the long-run compared to BTC and ETH.

Source: Coin Metrics Reference Rates

ETH Gas Fees Back on the Rise

Amidst ETH’s fresh all-time high, ETH gas fees are rising as network activity picks up. Daily active addresses have averaged ~650K over the last week, the highest level since August of this year. 

The mean Ethereum transaction fee over the last week averaged roughly $50, with a median of $26. Even after adjusting for the rise in ETH’s price in USD terms, fees are still increasing in native units. The high fees are starting to price out certain economic activity such as small transfers under $100 in value that have dropped off with the increase in fees.

Source: Coin Metrics Formula Builder

Despite being responsible for a gas surge over the summer, NFT activity is likely not the main factor behind the recent jump in gas fees. Daily ERC-721 transfers averaged 67K over the last week, down from a peak of ~200K per day in early September.

Activity that might be less cost sensitive such as trading is likely the biggest contributing factor to the rise in fees. Daily Uniswap trades and unique buyers have picked up in recent weeks to the highest levels since early summer.

Source: Coin Metrics Network Data

Part of the recent uptick in activity and fees might also be attributed to the latest meme coin mania surrounding Shiba Inu (SHIB), which is an ERC-20 token on Ethereum. For example, on October 28th over 100K ETH addresses interacted with SHIB while 133K transactions involved the token that day, ~9% of the 1.5M ETH transactions that day.

High network use has ultimately been a double-edged sword for Ethereum: it is a sure sign there is high demand for Ethereum block space from users, but the limits to scalability on layer-1 Ethereum quickly begins pricing out activity. 

But there is progress being made towards scalability via layer-2 (L2) scaling solutions that promise lower fees and full alignment with Ethereum. This Thursday (November 11th) the L2 solution Optimism is set to release one of its biggest upgrades which will, among other things, greatly improve the developer experience building on Optimism.

President’s Working Group on Financial Markets Releases Report on Stablecoins

Last week, the President’s Working Group on Financial Markets released its highly anticipated report on stablecoins. The report identified the key use cases today for stablecoins as trading, lending, and borrowing of other digital assets. On-chain data is consistent with this: most stablecoin transfers today are generally high in value to facilitate these financial activities, and they are used relatively less for small transactions and payments. 

Using payment size metrics launched in Coin Metrics’ Network Data Pro 5.0 release, the charts below show the percentage breakdown of daily transfers of USDC and USDT (Tether, on Ethereum) by transfer size, as well as the average transfer size by day. 

For USDC, over one-third of all daily transfers are at least $10K or more in value and the average transfer per day was ~$100K over the last week. The daily median transfer size has typically been around $2.5K. Just ~7% of all transfers are under $100. Given the typical fees on the Ethereum base layer, transfers of this size are generally not economical.

Source: Coin Metrics Formula Builder

The breakdown is very similar for Tether on ETH. The daily average transfer size has been ~$55K over the last week while over half of all transfers are greater than $1K in size. 

Source: Coin Metrics Formula Builder

To follow the data used in this piece and explore our other on-chain metrics check out our free charting tool, formula builder, correlation tool, and mobile apps

Network Data Insights

Summary Metrics

Source: Coin Metrics Network Data Pro

Despite a price surge, BTC and ETH activity was relatively flat over the past week - BTC active addresses dropped by 0.7% week-over-week, while ETH active addresses grew by ~2%. The total number of transactions and transfers also dipped slightly for both assets. Stablecoin on-chain activity, on the other hand, is picking up, with USDC active addresses growing by 8.9% on the week. 

Network Highlights

Three months have now passed since the implementation of EIP-1559, the overhaul to Ethereum’s fee mechanism. In that time span just over 800K ETH has been burnt, ~40% of the roughly 2M ETH issued in that period. 

Daily net ETH issuance has dipped below zero (i.e. deflationary) in 10 days. This has significantly dropped ETH’s expected rate of net annual inflation. Looking at a 30-day moving average, ETH’s net annual inflation is now under 1%. The number of transactions implementing EIP-1559 type fees is still just around 60%, though.    

Source: Coin Metrics Dashboards

The total supply of wrapped Bitcoin (the ERC-20 tokenized version of bitcoin on Ethereum) has risen to 235K, or 1.2% of the total bitcoin supply today. Breaking down transfers by size helps to show how WBTC is generally used vs. BTC on the Bitcoin network itself. 

The average transfer size for WBTC was about $500K over the last week, while over 90% of all transfers were greater than $1K in value. 

Source: Coin Metrics Formula Builder 

While most transfers on Bitcoin itself also tend to be large in value, there are relatively more smaller-sized transfers. Just around 15% of all transfers are under $500 in value on a typical day today while the average transfer size has been around $50K over the last week, 1/10 the size of the average transfer of WBTC on Ethereum.

This likely suggests that WBTC is mostly used on Ethereum today in DeFi protocols for trading and other financial activity. For example, the 0.05% fee WBTC / ETH Uniswap V3 pool recorded $150M in volume on November 8th. Additionally, WBTC’s share of the total collateral in the Maker system has also increased to over 14%.

Coin Metrics Updates

This week’s updates from the Coin Metrics team:

As always, if you have any feedback or requests please let us know here.

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