Relief Rally, L1s Battle, L2s Gain Steam
SEP 23, 2021 • 3 Min Read
Disclosure: Delphi Ventures has invested in ETH, SOL, LUNA, AVAX, dYdX, JOE and Offchain Labs (Arbitrum). This statement is intended to disclose any conflict of interest and should not be misconstrued as a recommendation to purchase any token. This content is for informational purposes only and you should not make decisions based solely on it. This is not investment advice.
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Market Update
The wider crypto market seems to be experiencing some relief on the back of receding volatility expectations following the market sell-off earlier this week. Meanwhile, Chinese authorities appear to be preparing for a worst case scenario in which Evergrande collapses. With this in mind, the relief rally across global markets could be partly driven by a perceived higher probability of government intervention to manage and mitigate its potential spillover effects.
ETH Lags Other L1s
- Over the past 30 days, ETH has struggled to keep up with other L1 tokens. A likely cause for this has been the flurry of announcements regarding new incentive programs on these L1s to attract liquidity and users.
- We would like to single out Avalanche and its massive $280m ecosystem investment round led by Polychain Capital & 3AC. In addition to this, on August 18th, the Avalanche Foundation set aside $180m for a liquidity mining program which is now worth ~$600m. You can read about these recent Avalanche developments and more in our post from September 9th.
L1s Battle For Liquidity
- Solana, Terra, Avalanche and Fantom have all seen a surge in TVL over the past month, while Polygon seems to have plateaued, at least momentarily.
- Avalanche’s TVL growth in particular has been steady, even amidst the broader market weakness that we’ve experienced in September.
- At the application level, Trader Joe has seen the largest inflows, with its TVL having grown ~57% over the last 7 days.
L2 Gas Consumption
- L2s have continued to gain steam, with them now comprising ~1% of total daily gas spend on Ethereum.
- Relative to the beginning of the summer, Arbitrum and Optimism have seen their share of total L2 gas consumption surge. When combined, both now account for ~50% of the total. Importantly, we should note, that this isn’t necessarily an indicator of greater success.
- An optimal L2 should offer high throughput off-chain and an efficient / small footprint on-chain. For example, dYdX has undergone incredible growth recently in terms of trading activity yet still only accounts for ~6% of total L2 gas consumption. This is due to the fact that Starkware’s proofs benefit from economies of scale, becoming more gas efficient as they batch more transactions.
Notable Tweets
Our very own @cangurel hosting Hop Protocol.
New ep! @CannnGurel hosts @WhinfreyChris
?The two discuss @HopProtocol, a token bridge for Ethereum’s layer-2 ecosystem that allows quick & easy token transfers between L2s, sidechains, and L1 Ethereum @0xPolygon @xdaichain @optimismPBC @arbitrum
? https://t.co/KNiG9Z2RZw pic.twitter.com/kvmDVg2e4f
— The Delphi Podcast (@PodcastDelphi) September 23, 2021
Solrise launches a KYC enabled DEX for institutions.
We’re thrilled to announce our partnership with @civickey to launch @solana‘s first permissioned DEX! Solrise DEX Pro will offer a KYCed environment built on @ProjectSerum to offer an exchange suited for institutional users. https://t.co/vl4GaeJgIk pic.twitter.com/EqL9j6i5Ty
— Solrise Finance (@SolriseFinance) September 23, 2021
Good way to think about funding.
Why wouldn’t you pay attention to funding? It is such an important detail of market microstructure.
If price is doing everything it can to break further down and this is increasingly becoming more negative, it’s a pretty good hint someone is about to get screwed. pic.twitter.com/gwVFJFlXI3
— Ryan ? Cantering Clark (@CanteringClark) September 23, 2021
