Web3 Watch

Eigenlayer opens its floodgates once more 

On August 22, Eigenlayer opened its pools once again, raising the cap to 100,000 ETH for a single pool. More holders of liquid staked stETH, rETH and cbETH were allowed to restake their ETH on the platform, until a single pool reached the limit of 100,000 ETH. 

Unfortunately, when this happened, many users encountered a UI bug that prevented them from depositing their assets. However,  many astute users found a workaround to deposit their assets through enabling the deposit button via the “inspect element”, and the 100,000 ETH limit was reached in one of the pools within a span of 1h+.

The desire for many to restake their ETH was strong, with gas spiking up to over 80 gwei at the time. Previously, we mentioned that the collective cap was 45,000 ETH, with the stETH pool filling up much quicker than its peers, rETH and cbETH. In a similar fashion like previously when pools were reopened, the pool that surged to the 100,000 ETH cap to bring deposits to a halt was the stETH pool. 

As shown in the chart below, the ‘first-to-100k’ cap reopening on 22 August had caused a huge disparity between stETH restaked, compared to its counterparts. The disparity is as such: ~100k stETH restaked,  versus ~21k cbETH and ~20k rETH restaked. 

Chart 1: Eigenlayer Historical Supply of stETH, cbETH, rETH (Source: Dune Analytics via 21co)

As it stands, Eigenlayer has approximately $236m in TVL. The chart below shows the huge spikes in TVL are the moments when the pools reopened, indicating the huge interest of ETH LST holders in staking their liquid staked ETH. 

Chart 2: Eigenlayer TVL (Source: DefiLlama)

From Chart 3 and Chart 4 below, we observe that across the 3 rounds of Eigenlayer opening up their pools for deposits, there has been a general increase in ETH staked across the 3 integrated LST protocols.

Chart 3: Amount of ETH staked to Coinbase (Blue) and Rocketpool (Orange) (Source: QCP Insights)

Chart 4: Amount of ETH staked to Lido (Green) (Source: QCP Insights)

From the summarized figures above, although Lido experienced the largest increases of ETH staked in absolute terms across the 3 rounds, Rocketpool experienced the highest % increase in ETH staked with them between the first and second rounds. Lido experienced the highest % increase in ETH staked with them between the second and third rounds.

The Eigenlayer NFT 

Following the closing of the pools, Eigenlayer announced the launch of their second NFT collection, EigenWorlds. Community members were able to mint their own names and visual emblems up till 30 August, with the mintable NFTs comprising of 3 tiers – ‘Base Layer’ for all, ‘Collector’ for holders of their first NFT collection, and ‘Restaker’ for users who have restaked their assets on Eigenlayer. Some have speculated that holding such NFTs may increase the possibility of getting an airdrop, albeit a higher one.

As highlighted in a previous Web3 Watch, the success of Eigenlayer has a positive effect on ETH staked in its integrated liquid staking protocols, but not its token price, regardless of tokenomics (ie. revenue accrual). This has remained the same for $LDO and $RPL when Eigenlayer reopened its pools on 22 August – overarching market forces (currently at lower levels and trending sideways) had played a dominant role in price action, over idiosyncratic factors. Two days following 22 August when the pools reopened, $LDO appreciated ~6.74% before falling by ~10% three days after. As for $RPL, it had experienced a gradual decline over the days leading up to 22 August, and the following days after.

friend.tech, keys and othertokens 

friend.tech, a socialfi platform built on Base, launched in early August and took the web3 community by storm. It allows users to trade tokenized ‘shares’ of personalities, and prices are driven by popularity on Twitter or the platform itself. Users who own ‘shares’ of a personality, are granted access to interact with their ‘idol’ for a closer connection, or to discover early alpha through a private chat. This has helped key opinion leaders and influencers monetize their following, andalso enabled users to make profitable trades through identifying such personalities early, purchasing their ‘shares’, and selling them for higher. Given its rapid rise to success and newfound spotlight, friend.tech renamed its ‘shares’ to ‘keys’, in an effort to allay regulatory concerns and uncertainty surrounding crypto. 

As of 18 days from its launch (28 August), the platform has generated up to ~$4m in fees, with ~2.3m transactions, and ~$80m of inflow into the platform. As a result, the community has found ways to capitalize on this new trend – in combination with the recent sniping bot token trend that assisted holders in sniping memecoins early, share sniping bot tokens such as $SHARES and $SNIPER were created, which helps holders snipe ‘shares’ of key opinion leaders and influencers early.  

Earliest $SHARES holders saw the price of their token rise from $1-2 to a top of ~$46 (a 20-40x!). As of 28 August, $SHARES stands at ~$7, falling ~84% from its highs. Earliest $SNIPER holders witnessed its price rocketing from $0.009 to ~$0.34 (~ +3605%). Since then, the token has fallen close to its initial price at TGE. The price action of these tokens are reminiscent of other ‘fad’ tokens, with traders hoping to earn quick and outsized gains off a hot narrative.     

However, just like related tokens, the attention on friend.tech seems to have tapered off, as various community members complain about poor/buddy UI/UX experiences and slow loading times. As seen in Charts 5 and 6 below, transactions and protocol inflow have slowed to a plateau since August 26.

Chart 5: Daily and Cumulative Transactions on friend.tech (Source: Dune Analytics via @cryptokoryo)

                          Chart 6: Daily and Cumulative Protocol Inflow, USD (Source: Dune Analytics via @cryptokoryo)

Recently, an 8-bit ‘Runescape-like’ game, FrenGame.tech was also launched, building a DeFi gaming experience on top of Base, with crypto culture embedded in in-game dialogues, and the friend.tech social layer (connecting friend.tech services into the game UI). 

It is worth noting, this only took a week or so! Its current server capacity limit is ~ 130-140 concurrent users. A token launch is in their sights. 

Layer 2s: Lay of the Land

Aerodrome launches from its Base

On 29 August, Aerodrome, a fork of an Optimism Solidly-based AMM, Velodrome, launched on Base. Distribution of its airdrop of its native token, $AERO, is underway. Holders of Velodrome’s native governance token, $veVELO have qualified for the airdrop, with the snapshot having already taken place. Emissions and liquidity for $AERO and $veAERO are set to begin on Thursday, 0:00 UTC. Voting incentives have already begun.

In the ‘early days’ of Base around late-July, we saw the rise and fall of Base-native DEXes. Leetswap started out as the dominant DEX, with its exploit toppling them from their throne. Rocketswap, the second-most dominant Base-native DEX then took the lead, and in a strange coincidence, was subsequently exploited as well. BaseSwap emerged as the new DEX leader from the rubble in the Base ecosystem and since then, Alien Base has taken the lead. 

Amidst all of this, we had also seen other DEXes with a multichain presence, joining the fray – Uniswap, Balancer, and Sushiswap. Despite these dominant brands entering the Base ecosystem, only Aerodrome and Uniswap have managed to exceed Alien Base’s TVL. Thus far, Aerodrome has a whopping ~80m in TVL, with Uniswap coming in second with 18.87m in TVL, and Alien Base in third, trailing close behind at 18.52m. 

Previously, Alien Base was the leading DEX on Base, surpassing Uniswap. However, merely hours following the launch of Aerodrome, we’ve seen Aerodrome take the lead, coinciding with a ~36% drop in Alien Base’s TVL – a sign of potential funds flowing over to Aerodrome, where users are hoping to farm emissions ($AERO) to potentially vote-escrow them for $veAERO, to influence emissions, fees and incentives. 

As of 30 August, there is a total of $197.5m in TVL on Base. Despite its early struggles of DEX exploits, the Base ecosystem remains strong, showing a gradual increase in TVL over time, despite flattening volumes (chart below).  It is important to note that this divergence may be due to the huge inflow of funds into friend.tech. 

Chart 7: Base TVL and Volume (Source: DefiLlama)

Polygon announces Chain Development Kit (CDK)

On 30 August, Polygon’s founder, Sandeep Nailwal announced their CDK, a software suite allowing builders to customize and deploy their own Supernets with added features from Polygon’s ZK technology. The CDK claims to improve scalability, and unify liquidity of any interconnected L2s to all Polygon 2.0 chains.

Mantle: The Mantle Journey has begun

To increase its user base, user activity and TVL, Mantle recently announced‘Mantle Journey’, with 20m MNT tokens in their incentives/reward pool. Here are some highlights:

• Mantle users will be able to participate in we the ecosystem and dApp level quests campaigns, with a leaderboard integration. 
• Involvement of DeFi primitives, mechanisms, and more to grow the Mantle DeFi ecosystem: External bridge integrations, bluechip dApp migration, ETH LSD involvement, [Redacted] deployment and bribing wars, RWAs, BetFi 
• 3rd party dApps would be able to utilize Mantle Journey ‘miles’ for IDO whitelists and airdrops, making it attractive for protocol founders, launchpads, and users alike.
• SocialFi elements: Citizens of Mantle (SBT) mint and upgrades – onchain achievements and utility

A Bird’s Eye View: L2 TVLs

From the chart below,  Arbitrum remains the dominant L2 with ~2.1b in TVL, more than twice the TVL of Polygon and around thrice the TVL of Optimism!  New L2s such as Base and zkSync have over 100m in TVL, while Mantle trails at ~38.5m.   

Chart 8: TVL Comparison, 1Y – Arbitrum (Green) vs Polygon (Red) vs Optimism (Blue) vs Base (Pink) vs zkSync (Yellow) vs Mantle (Orange) (Source: DefiLlama)

Other Web3 developments in the world 

Hong Kong: Hashkey begins to offer BTC & ETH 

On 28 August, to great excitement in the market, Hashkey began offering Bitcoin and Ether to retail clients in Hong Kong. However, the impact of this new offering remains to be seen, as investors are only allowed to invest up to 30% of their net worth in crypto when using the platform.  

Immediate price action wise, this was a non-event, as prices of majors remained flat. This was in stark contrast to the price reaction to the news regarding the Greyscale vs SEC lawsuit, which we just covered in our Market Update.

Our view is that it will be awhile before we see positive price action fuelled by retail participants from Hong Kong and even China. As mentioned in a previous Web3 Watch, it takes time for registration and regulatory requirements to be fulfilled such as relating to insurance, independent assessment reports, regulated custodians, and adherence to the FATF’s Travel Rule for transaction monitoring and more

USA: Elon Musk, X, and Rhode Island

In the US, Elon Musk’s X (formerly Twitter) was granted a currency transmitter license by Rhode Island regulators on 28 August, getting Musk one step closer to transforming X into the ‘WeChat of the West’, with crypto and fiat payment features. This Rhode Island transmitter license is one of the seven transmitter licenses that X has attained across the states in the US.

X will begin with offering fiat transaction services similar to PayPal, before rolling out its crypto integrations. The potential effects of a potential app integrating crypto, would be rather similar to that of the launch of Paypal’s stablecoin, PYUSD – the facilitation of online user interest into crypto and blockchain, as well as mainstream adoption of digital assets on traditional Web2 platforms and marketplaces.