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About the editor:Spencer Noon is General Partner at Variant, a first-check crypto VC fund. DMs always open for entrepreneurs.
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👾 NFT Fundamentals
Over the last few weeks, the NFT ecosystem has ratcheted up to levels that even I doubted we’d see so soon. Pudgy Pengins (not a typo) was just featured in the NYT, the cheapest CryptoPunk to buy is now $145K, and OpenSea—with $775M in volume this month after just 13 days—is on pace to do more volume in August than all other months combined. This is unbelievable! (Image Source: Richard Chen)
As with every new hype cycle in crypto, we’re seeing incredible price appreciation across the board, sometimes for assets that don’t appear to have any fundamental (or artistic or cultural) value whatsoever. This can be overwhelming at times, so to help investors make a bit more sense of it all, I decided to aggregate a list of my favorite indicators that I personally use to evaluate NFT projects:
If you’re interested in the NFT space, I’d love to hear your feedback on the indicators listed here. Also feel free to suggest your own. Finally, expect us to start covering more NFT projects on Our Network in the coming weeks.
Switching gears—this week our contributor analysts cover DeFi: PERP, SUSHI, DYDX, POOL, and NXM.
On August 3, the dYdX Foundation launched DYDX, a governance token for the dYdX Layer 2 protocol. The launch included multiple pools to incentivize liquidity and trading on dYdX across makers and takers: Retroactive Mining Rewards, Liquidity Provider Rewards, Trading Rewards, Liquidity Staking, and Safety Staking. Since launch, dYdX has quickly become the top decentralized perpetuals exchange by volume (>$1B weekly volume) and the top Layer 2 by TVL (currently at $209M).(Source: The Block)
Over $108M USDC across 400+ stakers is now being staked in Liquidity Staking Pool. This pool functions as a zero-interest, uncollateralized loan to known market makers governed by the dYdX Community. This capital will be used by market makers to continue to bolster liquidity on dYdX order books. (Source: Etherscan)
Weekly active traders on the network increased 635% to a total of 8,784 unique addresses. This has been largely driven by the Retroactive Mining and Trading Rewards Programs, which incentivizes 64,306 historical users of dYdX to onboard onto the L2 protocol and start trading. (Source: metrics.dydx.exchange)
There is renewed interest in the on-chain derivatives space with the recent regulatory crackdown on derivatives trading. Perpetual Protocol’s unique daily trader count has been trending up since its mainnet launch. It experienced a significant spike in numbers during the recent market downturn in May, but while daily volumes afterward have been slightly lower, unique daily trader count has showed no signs of slowing down. (Source: @yenwen, Dune Analytics)
With the low gas fee on xDAI, most users are high-frequency traders with a volume share of 90% of the total. However, medium-frequency traders' share has been growing fast in the past 60 days. We are seeing new low- and medium- frequency traders (i.e., retails) beginning to experience Perpetual Protocol. (Source: @yenwen, Dune Analytics)
The protocol has collected nearly $23M in revenue, with an average of ~$9K revenue/trader. On average, each trader makes 1600 trades and contributes $5.39 in fees per trade. Comparing the recent two months of stats, each trader made roughly 1300 trades and contributed just above $4 per trade. (Source: @yenwen, Dune Analytics)
③ Perpetual Protocol (Part II)
👥 Lewis Harland
📈 55% of PERP circl. supply is now being put to work
Perpetual Protocol has facilitated $23B in trade volume to date. As futures take flight within DeFi, a more interesting question is: how much of the perp swap market has Perpetual Protocol taken over time? For the high-cap names, Perpetual Protocol took 0.2% and 0.05% market share at its peak for ETH and BTC respectively before declining in line with trading volumes. DeFi assets have been taking larger market shares overall. DeFi asset perpetuals are finding product-market-fit in DeFi itself. (Source: IntoTheBlock)
Perpetual's vAMM design means OI is not capped by liquidity provided. This has likely been a key driver for Perpetual Protocol's volume dominance over other perpetual swaps to date. It’s worth noting, however, that the announcement of the dYdX liquidity mining programs has led dYdX volumes to overtake Perpetual's by the widest margin. (Source: Token Terminal)
Perpetual Protocol losses are directly backed by its 4m USDC insurance fund and indirectly by PERP stakers. Stakers who shoulder the risk of the fund being depleted have now committed 24.3m PERP (~$380m), equating to 55% of the circulating PERP supply with the majority of PERP tokens now being put to work. (Source: @yenwen, Santiment, CoinGecko)
The table below compares all the projects in the DeFi insurance space that have live products. Nexus Mutual has by far the most active covers and the largest capital pool, yet is still the most undervalued relative to its fully diluted valuation when compared against the two insurance KPIs.
With protocol cover, Nexus is covering more projects on other chains outside of Ethereum L1. Anchor Protocol has been a popular source of cover purchases (with $25M in active covers), as APYs are still around 20% when stablecoin yields have come down across the board on Ethereum. (Source: nexustracker.io)
Nexus recently invested 10% of the capital pool into Lido stETH to earn yield on the capital pool. Right now, Nexus is the fourth-largest holder of stETH. The mutual earns around 2.4 ETH per day and has earned 181 ETH since late May. (Source: Nansen)
PoolTogether is a protocol for no-loss prize savings. Users deposit money to have a chance to win prizes and can withdraw their money at any time. Prizes are comprised of the interest accrued on all deposits. A key metric for the protocol is total prizes awarded, over $4 million in prizes have been awarded in the last 6 months. The luckiest winner deposited $73 and won $43,760. (Source: Sarfang, Dune Analytics)
A portion of each prize is retained in the protocol reserves. In the last 4 months the protocol reserves have grown from $0 to ~$1 million. All reserves contribute interest to future prizes increasing the expected value for all depositors. (Source: Sarfang, Dune Analytics)
The first prize pool deployed on Polygon has shown the importance of low transaction fees. This prize pool quickly grew to be the second-largest pool measured by unique depositors (3,846). The protocol is currently deployed to Ethereum, Polygon, and Binance Smart Chain. (Source: Sarfang, Dune Analytics)
SushiSwap has quickly established itself as a main player in DeFi. It has integrated into 11 different blockchains and launched new features aside from its DEX. These use-cases include lending (Kashi), IDOs (Miso), and an upcoming NFT marketplace (Shoyu), thusshowcasing SushiSwap’s ambitions to become a DeFi super app. In terms of its core DEX product, activity across several key indicators has recovered, and it’s also soon to launch a new capital efficient DEX called Trident.
SushiSwap’s liquidity between its two main chains (Ethereum and Polygon) has rebounded by over 50% in the past month. In spite of growing competition, total liquidity supplied for the protocol remains above $4 billion and is within 30% of its previous all-time high. Trading activity and revenues have also been on an uptrend recently.
SushiSwap is projecting $60 million for xSUSHI stakers. Taking these as the protocol’s earnings, this would give SUSHI a P/E ratio of 38.5, which is significantly lower than Coinbase’s 160 P/E. SUSHI's P/E has been declining while SUSHI’s price has been increasing, getting cheaper relative to its revenues.