Web3 Watch

The retail market has been buzzing, with mini alt seasons of its own, with many throwing out calls on potential narratives that may explode – AI, gaming, modular blockchains, etc. We believe this is a strong sign of bullish anticipation in the retail crypto markets, anchored by the anticipation of Bitcoin Spot ETFs being approved.

Layer 2 Lay of the Land

In terms of TVL, the top 5 L2s in descending order are: Arbitrum ($7.38b), Optimism ($3.69b), Base ($583m), zkSync Era ($510m) and Linea ($259m), according to L2Beat. However, in terms of revenue and fees earned, the data tells a different story:

Chart 1: Top 6 Layer 2 Blockchains by Monthly Fees and Revenue, as of 20 November (Source: CryptoRank)

A new EVM-L2 Blasts off

This past week, Blast, a new Ethereum optimistic L2 rollup, created by @pacmanblur (Founder of Blur), was launched. They raised $20m from notable investors such as Paradigm, Standard Crypto, EGirl Capital, along with other angel investors.

A first-of-its kind offering that the chain provides is that it is an ‘L2’ that provides users with native yield derived from staking (for ETH balances) and RWAs (for stablecoin balances deposited into T-Bill protocols such as MakerDAO). On Blast, a user’s balance compounds automatically, and earns Blast rewards on top, which boosts reward emissions. This is an attractive offer as merely holding balances on the chain offers users a base interest rate of 4% for ETH and 5% for stablecoins, in contrast to 0% yield for holding balances on other chains. 

Users can earn Blast points by bridging ETH over and referring friends. Bridging stablecoins over, however, does not earn a user any points, and only its respective RWA yield. It is also important to note that for the next 3 months until February 2024,  users will not be able to bridge their assets out until then. In May 2024, users will also be able to redeem their $BLAST airdrops with Blast points that they have accumulated. 

As of 21 November, within a day of its launch, there has been a total of 563 ETH, 34,575 stETH, and 68,128 DAI deposited on the chain, across 24,908 addresses, according to a Dune dashboard created by Hashed.  @wumbonft in another Dune dashboard reports a total of 30,096 ETH, 8,332 stETH, and 14,522,247 in USD-denominated stablecoins deposited. This adds up to ~ $69m to $90m bridged to the ‘L2’ – a great success for Blast. Within 48 hours, Blast reported a total of ~$230m in TVL with 37,131 users. 

The ‘one-way bridge’  till February 2024  benefits the ecosystem, as there would be an upward trajectory of assets on Blast, and essentially forces users to utilize their assets for activities or leave it on the chain.

Despite Blast’s rapid rise to success, surpassing other L2s like Manta and Scroll, some have criticized it as merely a multi-sig contract that users have been depositing into and not an L2.   

Since Blast’s launch, Lido’s TVL has increased from $18.244b on 20 November, to $19.043b (+4.38%) on 23 November.  Lido’s increased TVL could possibly be idiosyncratic, due to the inflow of ETH to Blast, and then staked with Lido. However, we may not be able to make the same case for DAI on Ethereum, due to market caps of other large stablecoins like USDT and USDC on Ethereum, that have increased from 20 to 23 November. 

The launch of this new chain  coincided with Blur’s Season 2 airdrop, possibly to bolster the outflow of supply of $BLUR. The immediate negative impact on the price action of $BLUR ($0.35 to $0.30) was negated, as $BLUR surged and broke the $0.35 resistance levels that were rejected twice in the past week. As of 23 November, $BLUR is currently whipsawing around the $0.48 to $0.50 range.  

Polygon Village 2.0 

As one of the only large CEXes without its own chain, OKX has finally joined its peers. Unlike CEXes  that have their own L1s,  and/or L2s, OKX has decided to utilize Polygon’s CDK instead, to launch X1 Network. X1 Network is OKX’s own zkEVM-L2 that relies on $OKB as its native token, which will be used for gas. 

 Polygon has also announced Polygon Village 2.0, a grant program, comprising of more than 110m $MATIC, to grow the Polygon ecosystem.  The program includes strategic support, mentorship, co-working spaces, thought-starter plans, and introductions to VCs.    

Arbitrum’s Short-Term Incentive Program

Arbitrum’s STIP has been a success to date, with a positive impact on its TVL by almost half a billion, along with positive impact on $ARB’s price action and market cap. 

On 8 November, a proposal was made to conduct a one-time backfund of 21.4m $ARB, to projects that were approved, but not funded, from Arbitrum’s STIP. We had previously touched on the proposal’s results and opinions surrounding it, here. The proposal’s approval would increase the amount of $ARB to be handed out via the incentive program, from 50m to 71.4m $ARB, and the amount of funded projects from 30 to 56. Notable projects vying to receive grants are Wormhole, Gains Network, Stargate, Thetanuts Finance, WOOFi, amongst others.  

Voting began around 16 November and will end on 2 December. As of 20 November, the quorum of 73.16m has not been reached, currently standing at 25.45m. Approximately 43.23% (11m) have voted for the proposal to be passed, while 56.76% (14.44m) have voted against the proposal.

Fren Pet launches on Base

Fren Pet, an on-chain ‘Tamagotchi’ built on Base, was released where users can mint a pet for 100 $FP, and will receive 100 $FP whenever someone mints a pet (inflationary). Users can spin a wheel once every 24 hours to receive points, ranging from 1-2000. They can also choose to attack other pets (‘bonk’) every 15 minutes to win 0.5% of their points, if they win. If they lose,  points goes to the winner who gets ‘bonked’. Points collected correlates to the amount of ETH a user can claim. There is a TOD (time of death) metric, where a countdown timer displays when a user’s pet will die – this can be increased by buying tea, in which its price was lowered to 1 $FP on 19 November. There are also other mechanics that essentially remove $FP from circulating supply. 

According to a Dune dashboard built by @petertherock, since 10 November, the protocol started out with 27 active wallets, and peaked at 2,103 active wallets (2,704 total) on 20 November. Here are some consolidated metrics, as of 21 November:

The $FP token was originally listed on 31 August, and soared by over 12,000% within the day, without any product launched. $FP then began to tank on 1 September and flatlined all the way until the launch of the game on 18 November, where it rose from ~ $0.04 to its peak of ~ $1.91 on 21 November (+ ~4,350%). Since then, $FP has fallen to ~ $1.09 – $1.11, and has not solidified a significant support level, if technical analysis even counts in this case.  

Ankr announces RaaS for Optimism Chains

Ankr, an infrastructure provider competing with  rivals Infura and Alchemy announced its first Rollup as a Service provision, in collaboration with Optimism. Organizations can customize and deploy dedicated OP chains in a quick and efficient manner, with engineering and infrastructure support provided by Ankr. 

Starknet scaling network

In a bid to combat censorship and improve robustness, Starknet plans to decentralize three core components of its ZK-rollup solution – its consensus protocol, proving layer and the process of L1 state updates. 

Starknet product manager, Ilia Volokh stated the importance of decentralizing all three of these components, because even if one of them is centralized, ‘you haven’t achieved much’. Starknet is currently still outlining the process of testing and implementing such decentralized mechanics.\

Tokenization 

Singapore

In a bid to expand asset tokenization initiatives and develop foundational capabilities to scale tokenized markets, the Monetary Authority of Singapore announced on 15 November, that it would be working with a group of 17 financial institutions as part of its Project Guardian initiative. Some notable institutions include Citi, Fidelity, BNY Mellon, Franklin Templeton, JP Morgan, amongst others. They will be testing promising asset tokenization use cases across the end-to-end process of the capital markets value chain, including listing, distribution, trading, settlement and asset servicing.

SC Ventures, the investment and innovation arm of Standard Chartered has launched a tokenization platform based out of Singapore, called Libeara. Libeara assists institutions in digitalizing financial instruments on-chain, while reducing the need for intermediaries, thereby increasing efficiency and lowering costs. Libeara is a permissioned (KYC-ed) platform that runs on Ethereum and Stellar, with a launch on Arbitrum in its sights. The platform partnered with FundBridge Capital, a Singapore-regulated fund platform, to create and issue a tokenized Singapore-dollar government bond to accredited investors, in conjunction with an international credit rating agency to ensure robust quality and structure. 

Philippines sells tokenized treasury bonds 

The Philippines sold tokenized treasury bonds for the first time, in a bid to develop its domestic debt market. The country raised 15 billion pesos ($271m) of one-year tokenized bonds, due in November 2024, with a coupon of 6.5% per year, were offered. 

This proof of concept was positive for the country, as the Treasury expects blockchain technology to reduce settlement risk and costs. Central Bank Governor, Eli Remolona stated that officials hope the bonds will be offered to retail buyers in the future. Officials also intend to include longer tenors for tokenized bond offerings down the road.

An Avalanche of tokenisation news

As the retail crypto markets seek various narratives to latch onto, and tokens to rotate their profits into, $AVAX has seemed to benefit from this, as their token soared ~50% within a week, from $13 to ~$20 in mid-November. As of 18 November, the Avalanche C-Chain reached a high of $505k in daily transactions, creating a peak in YTD (?)daily transactions on 19 November with 2.35m transactions, and then surged to 5.76m transactions on 20 November. This is a bizarre figure to observe, given that it has been the most daily transactions that Avalanche has experienced, since its inception. (Chart below)

 Chart 2: Daily Transactions on Avalanche, All-Time

Ordinals on Avalanche have also been responsible for surging C-Chain fees to 6-month highs. (Chart below)

Chart 3: Daily Fees on Avalanche, 6M

Avalanche is also seeing positive developments in the world of tokenization.

Under MAS’ Project Guardian, JP Morgan’s Onyx digital assets arm has collaborated with asset manager, Apollo Global, engaging in a proof of concept, to demonstrate how tokenization streamlines automated portfolio management offerings. Onyx leveraged Avalanche’s Evergreen Subnets, along with Layerzero, to facilitate subscriptions and redemptions of funds offered by WisdomTree. Also under Project Guardian, Citi is utilizing Ava Cloud’s managed blockchain service and Avalanche’s Evergreen Subnets –  to track real-time streaming of prices, achieve capital efficiency, KYC/AML, information confidentiality, and post-trade analytics.

Republic has also utilized Avalanche to launch Republic Note (R/Note), a security token, in a few months. R/Note will be a digital asset that distributes dividends/returns from Republic’s venture portfolio of over 750 “private assets”. Whenever Republic exits a successful investment, holders will receive a pro-rata share of up to 25% of the dividend pool. Pre-sale participation amounted to over $30m from various individual investors and institutions.

The latest in ETFs

Ethereum

Fidelity joins the fray, alongside ARK / 21Shares, Invesco / Galaxy, Blackrock, and others, as they filed for a 19b-4 form with CBOE for a Ethereum Spot ETF, on 18 November. 

Bitcoin

A Senior ETF Analyst at Bloomberg, Eric Balchunas, shared that he had heard chatter from the SEC’s Trading & Markets Team regarding the SEC’s advice to amend the filings for the Bitcoin Spot ETF 19-b4s.  to be done via cash creates, rather than in-kind. Eric mentioned that as broker dealers are unable to deal in BTC, therefore putting the onus on issuers to transact in BTC, while preventing broker dealers from using unregistered subsidiaries or third parties to deal with BTC. Only 2-3 applicants have planned for cash creates, while the others intended to deal with the ETFs in-kind. 

Many see this as a positive sign of progress, however, there are potential negative implications of dealing with BTC Spot ETFs via cash creates: (i) hurting liquidity, bid/offer for the ETFs, while market makers get better fees and execution on crypto exchanges. (ii) Taxation, whereby in-kind redemptions do not trigger a taxable event.

Despite the consensus view of approvals in January, BitGo’s CEO, Mike Belshe, provided a contrarian view, believing that the range of BTC Spot ETF applicants are “quite likely to be rejected…before we get the positive news”, given that exchanges and custody are not separated – e.g. Coinbase was selected by several applicants as a custody partner for the ETFs.

Tokens Galore

Fake Blackrock XRP fund filing

Around mid-November, $XRP surged by 12% within 30 minutes (~ $0.65 to $0.73), due to a filing for a “Blackrock iShares XRP Trust”. However, the filing was exposed to be fake, following which, $XRP declined to ~$0.61, erasing its gains from the fake filing. $XRP currently sits around $0.59-$0.60. 

dYdX: $YFI liquidations

Earlier in the month, Yearn Finance ($YFI) witnessed a huge increase in its market cap by 60% – a 170% surge in price action. Active addresses spiked by over 100% within a span of 1-2 weeks, accompanied by high whale activity. However, on November 18, $YFI fell by over 40% within 4-6 hours. 

Some in the community cited traders with large positions taking profit, and attributed the move to high concentration risk of $YFI.This, along with the high open interest,  caused large liquidations on dYdX, resulting in a loss of $9m, despite their attempts to increase initial margin ratios for $YFI prior to the crash. dYdX’s founder, Antonio Juliano, strongly believes this to be “an intentional market manipulation attempt by a well capitalized actor designed to drain funds from the dYdX insurance pool”.

dYdX’s v3 insurance pool was utilized to cover these liquidations, and thus declined by 43%. The dYdX team is currently in communication with CEXes, and will be sharing relevant information discovered with applicable law enforcement agencies.

On a more positive note, $dYdX stakers will receive all v4 trading fees moving forward. 

Chainlink: Staking Platform v0.2 launch

In December 2022, Chainlink Staking v0.1 was released, comprising 25m $LINK. Starting in November / December 2023, as part of Chainlink Staking v0.2, an expanded pool size of 45m $LINK will be distributed, with 90.83% going to community stakers, and the remaining 9.17% going to node operators. 

The timeline for the launch is as follows: 

• Priority Migration: 28 November, 12pm ET
• Early Access: 7 December, 12pm ET
• General Access: 11 December, 12pm ET

The first announcement for the v0.2 platform was made a month ago, as $LINK began its climb from below $10. Although its break over $10 could be due to this and CCIP, along with narratives and hype surrounding $LINK itself, this  positive price action could also be seen as not entirely idiosyncratic, due to the recent overall strength of altcoins and the greater market. 

Synthetix 

Synthetix has recently been gaining traction as well, with positive price action from the ~$1.80 levels in late-October, to $3.60+ today (as of 24 November).  Besides the overall strength of crypto markets and altcoins, there has been some positive developments and catalysts idiosyncratically influencing $SNX’s price action.

Firstly, the news of their non-custodial CEX-like UX, Infinex, which will be launching soon. Next, they intend to have a fully decentralized backend, with deep liquidity from their Synthetix layer where  non-$SNX denominated collateral can be used. 

On a more macro level, they intend to deploy on Base soon. Around $SNX, many believe that given (i) discussions to turn off inflation and that (ii) the periods of huge supply events via staker unlocks are over, these are intrinsically positive developments.  

Pyth, Jupiter, Blur Airdrops 

On 20 November, Pyth launched their token, and airdropped ~250m $PYTH (~2.5% of token supply) to the community. Community members eligible to receive tokens were data feed providers, as well as users of Solana, Aptos, Sui, Sei, Injective, Osmosis, Neutron, and other EVM chains. According to @cctdaniel’s Dune dashboard, As of 23 November, approximately 143m out of the 250m $PYTH (57.38%) has been claimed, across 42,226 wallets,  an average of 3,398.98 $PYTH per wallet and  a total of 108,539 $PYTH holders. In terms of price action, $PYTH started off around $0.50 with sell pressure from the airdrop, causing it to fall to $0.25 levels. Despite the supply event, $PYTH has demonstrated strength, and is currently sitting around $0.44.

Within the Solana ecosystem, Jupiter, a DeFi aggregator, will be launching a token of their own, and airdropping it to users next week. According to Decrypt, almost a million SOL wallets are eligible for 4b $JUP in rewards. It is important to note that this 4b comprises 40% of token supply, hence there is a significant amount of possible sell-pressure. However, the team has taken measures to mitigate such sell-pressure, as it only begins with 1b in $JUP hitting the open market, to users who have made at least $1,000 worth of swaps on the protocol. As of 23 November, the protocol has achieved $38b in total trading volume since inception. Within the month, there has been close to $3.2b in trading volume and ~8.7m transactions from 222,900 unique wallets in  a sign of its early success. It remains to be seen how it can retain this level of volume and users, post-airdrop.

Another airdrop that has been the talk of the town is Blur’s Season 2 airdrop, where 300m $BLUR stood to be claimed. According to@sankin’s Dune dashboard, as of 23 November, over 260m $BLUR has been claimed (over 80%), across 38,843 addresses, averaging at ~ 6,800 $BLUR per wallet). As mentioned above, the launch of Blast played a pivotal role in not only mitigating sell-pressure from the airdrop, but even had a positive impact on $BLUR’s price. 

Manny Pacquiao collaborates with Shibarium, Doge goes to the moon (literally)

Ending off on a lighter note, on 15 November, boxing legend and Filipino politician, Manny Pacquiao, had announced a partnership with Shibarium (Shiba Inu’s L2 blockchain solution). The Pacquiao Foundation will utilize Shibarium for fundraising, distribution and other purposes. Within 24h, $SHIB rose by 7-10%. Since then, $SHIB has climbed higher, earning holders a total of 25-37% in profits. 

Above: The Pacman, Manny Pacquiao (Left), Kabosu (Right)

In December, the dogecoin community will be sending a physical token to the moon, via Astrobotic’s Peregrine Mission One. We note that this was originally planned in 2021, but was then delayed to 2022, and fizzled out indefinitely. $DOGE surged by 12% upon the news. However, since then, the beloved asset has fallen by ~13 to 19% from its peak on 17 November.

Above: Elon Musk (Left), Kabosu (Right)