Data & Insights Recap - Farcaster activity surges, a drop in Ethereum blocks

Chopping blocks

Source: The Block

• Last week, we discussed the Dencun upgrade hitting the Ethereum mainnet, which has made it drastically cheaper for layer 2s that have started using the new cos-efficient blobs instead of calldata to post their transaction summaries to the layer 1. 
• While the most anticipated feature of Dencun was the cost savings for scaling networks, people can post anything in these blobs, much like how users could really put anything in the calldata of a transaction. We've seen hackers communicate with their victims in this way and vice versa. And when blobs first launched we saw some people send fun messages through the new type of transaction. 
  • But if there's data to be published on-chain for cheap, there's definitely a newer crowd of people who will be interested. 
  • That crowd, of course, is the inscription enthusiasts. What first started with the Ordinals protocol on bitcoin, attaching metadata to specific satoshis based on the order in which they were minted and bringing NFTs and new token issuance to the chain, saw an explosion of popularity on other chains at the end of 2023.
  • One chain that was spared from a deep inscription craze was Ethereum. The network had a surge of inscriptions on January 14th, but it proved to be quite expensive. There were just over 1 million inscriptions on Ethereum that day, but over $2.5 million was spent to do it. For comparison, on February 24th, there were almost 6 million inscriptions on the Avalanche C-Chain, but it only cost users $500,000. So, since it was so costly, inscriptions on Ethereum did not really seem to catch on. 
• But now, posting data to Ethereum has gotten much more inexpensive, so naturally we saw a new wave of blobs-based inscriptions. 
  • At the start, this might have been just for fun, using a new feature to try out a popular trend. However, these blobs inscriptions have now started impacting Ethereum's network performance.
  • Over 30% of blobs submitted in the past 4 hours have been inscriptions, according to data from hildobby. The demand for blobs has left them operating at full capacity, with a 100% blob utilization rate being reached and often a backlog of blobs appearing since each block can only have 6 blobs. 
  • In turn, we have seen an uptick in missed blocks on the network, which typically happens when a validator is offline or, if they are, for some other reason, unable to propose a block for their slot. We once saw an uptick in missed blocks after an MEV-Boost vulnerability patch that increased latency for validators and caused them to miss slots. It's likely the vast amount of data coming in is putting pressure on some validators.
  • There were only 6,921 blocks produced on Ethereum on March 27th, the lowest level since May 2023. 249 blocks were missed, or 3.49%.

A far cry from defeat for Farcaster

Source: Dune Analytics

• Back in early February the decentralized social media platform Farcaster launched its news Frames feature, allowing for interactive experiences embedded into posts. 
  • Both users and usage of the network soared. Prior to Frames, typically, about 2,000 users posted casts on Farcaster, but that number reached over 40,000 in February. The number of casts similarly jumped from about 10,000 a day to over 280,000 shortly after Frames hit the market. 
  • But the rapid success of Farcaster did bring concern to some. Would this new growth be sustained? A different type of decentralized social media protocol, friend.tech, also saw a lot of attention in the summer when it first launched but has now faded dramatically in popularity.
• But activity on Farcaster now seems to be at a new all time high, surpassing the peaks set when Frames first went live.
  • There were over 510,000 casts and 1.29 million reactions to those casts on March 30th, both of which exceeded past highs by over 45%.
  • The number of users posting casts and reacting to them is currently still lower than the post-Frames rise, but the count has been on the rise since hitting a low in the beginning of March.
  • So while there initially was some correction in the daily activity on Farcaster, it seems to have now found its footing. The fact that the amount of posts has climbed above its previous peak but users are still not at that level yet suggests that there is a more active user base that might have made Farcaste their primary social media outlet. And even though there was a decline in action after the Frames mania, the number of users and posts always stayed significantly higher than pre-Frames levels. 
  • One prominent Farcaster user is Ethereum co-founder Vitalik Buterin, who has essentially departed from X. Elon Musk recently replied to a post suggesting that Buterin needs to get back on X to engage with a larger community, asking why he left. Buterin sees Farcaster as a viable and usable X alternative, although he has much fewer followers on the decentralized platform. 
  • While Farcaster does still seem to be a bit niche, it would not be true to say that Frames only gave the protocol brief success. Farcaster seems to now be experiencing a more organic level of engagement growth following its explosive initial success. 
• There is also a lot of speculation about airdrops surrounding Farcaster. One of the most popular memecoins on Base, DEGEN, was airdropped to people in the Farcaster Degen channel. The fact that wallets are linked to accounts opens a lot of doors for rewarding community members, which, of course, people have been trying to farm and has also likely played a part in this continued success. 

Future is bright

Source: The Block

• For several of the past few weeks, I have mostly talked about how the recent crypto rally has helped bolster spot volumes, with volumes across centralized exchanges in March marking the fourth-highest month of crypto trading ever at $2.48 trillion. 
  • But it's not just the spot market that has borne the fruit of the recent price action. The futures market has also seen some pretty sizable action this past month. 
  • The volume of bitcoin futures across crypto exchanges came in at $2.45 trillion, marking the second-highest month of bitcoin futures volumes, falling only below May 2021. Ether futures saw over $1 trillion of volume for the fourth time ever. 
  • A lot of the recent rise can be attributed to the rise in prices of digital assets, much like for spot. If a futures contract is worth 1 BTC, that contract was worth a lot more in March compared to even January of this year. That is especially true when it comes to open interest, which hit a new high for bitcoin futures last month of $29 billion. 
• Futures are attractive primarily because they offer leverage. There is also the ability to take both long and short positions, whereas with spot you can really only directly buy the asset and hold it to be long. With the high volatility of crypto and the recent frenetic trading energy, it's not surprising that futures also saw success last month. 
• The last time monthly futures volumes were this high, FTX was still a major player in the derivatives space. The big derivatives exchanges like Binance, ByBit, OKX, and Bitget all seem to have absorbed some of FTX's market share. 
  • However, newcomer Coinbase International has also seen quite sizable growth, especially after opening up to retail traders not in the U.S. Previously, institutions had to apply to get access, which limited its user base. Coinbase International has also expanded its initial offering, which was just BTC and ETH perpetuals. 
  • Coinbase International now boasts 30 contracts, which is still pretty small compared to the over 350 that Binance offers, but it still shows that the exchange is working on growing. Many traders are also more trusting of the Coinbase brand since it is a publicly traded company in the U.S. 
  • Coinbase International had a peak in daily volumes of over $6 billion last month, a sizable gain considering the exchange never posted $1 billion in volumes prior to March. Again, these volumes do pale in comparison to some of the bigger competitors, but still show that interest is growing. 
• The futures market competition is heating up, and there seems to be no shortage of activity in the derivatives space amidst the newfound bull market. 

Token of appreciation

Source: Dune Analytics

• Much has been shifting in the decentralized exchange world recently. For the most part, it seems like Ethereum is losing its dominance to lower-cost chains. Many of the most successful and infamous memecoins of the past month have been Solana-based, like dogwifhat (WIF), Book of Meme (BOME), and SLERF. 
  • While Ethereum does have noteworthy memecoins like PEPE and SHIB, they have a sort of legacy popularity, whereas all the new and exciting tokens have, for the most part, made their way elsewhere. 
• And last week, we talked about how Base has decentralized exchange activity picked up after the Dencun upgrade, which helped push the already low fees on the layer 2 even lower. 
  • Uniswap on Base hit another new all-time high in daily volume of $521 million on March 30th. 
  • Base's TVL also reached $1 billion, with Aerodome, another Base DEX, being a major contributor. The value locked in the exchange has more than tripled since the start of March, further solidifying the narrative of Base becoming a trading hub. 
• But another indicator of the success of these Ethereum alternatives in attracting more DEX users can be seen in looking at new token listings across exchanges. 
  • In September 2023, Ethereum accounted for about 50% of new token listings across networks. This past week, only 2% of new tokens listed on DEXs were listed on Ethereum. 
  • The week of March 25th, 43% of new tokens were listed on Solana and 38% were listed on Base. 
  • Solana gained a lot of dominance in new token listing in December, when it had a strong comeback after a slower 2023 following the collapse of FTX. Solana's dominance actually slipped a bit last week, driven by the new attention on Base.
  • When the network first launched over the summer, there was a spike in token listings on Base, but after that, it hardly got any new tokens for trading. But now Base has become a flagship for memecoins, as well.
  • Memecoins are not new for Base, as even before the optimistic rollup was formally launched to the public, a memecoin with the ticker BALD garnered much attention before an abrupt liquidity pull by the developer.

A year after destabilizing

Source: The Block

• We just concluded a relatively stable March 2024. SBF was sentenced, we saw a $62 million crypto hack (but funds were recovered), the Ethereum mainnet had a major upgrade, and bitcoin hit a new high. 
  • This March might feel refreshing when comparing it to the one that came prior. 
  • March 2023 was the zenith of the regional banking crisis, which saw many crypto-friendly banks fall to the wayside, but most notably, Silicon Valley Bank collapsed, which triggered fears for Circle's USDC. The stablecoin issuer had billions of dollars in that bank, and many worried about the prospects of SVB depositors being made whole.
  • While all funds on SVB were backstopped, the panic caused a significant depeg to the second-argest stablecoin by market capitalization. USDC's price dropped as low as $0.87. 
• There was a mass selloff in the stablecoin, both on and off chain. Stablecoin volumes on Ethereum jumped to $751.9 billion, up 52% from the month prior. Volumes of decentralized exchanges on the network for the month also jumped, with a particularly strong performance from Curve, which focuses on pegged asset swaps.
  • Despite the recent crypto rally, monthly on-chain volumes for stablecoins continued to come in lower compared to March 2023. 
  • While total stablecoin volumes for this March came in slightly lower compared to the previous one, the difference was not that much, with $745.1 billion in stablecoin transfers. 
  • This is not that shocking given the uptick in decentralized exchange volume that has been felt across chains, including Ethereum, although the fixation has been on other chains. 
  • In general, though, on-chain activity has been increasing across all facets of the DeFi ecosystem. Beyond just DEX trading, lending, staking and restaking, and RWA have seen jolts of interest in the recent bull market. 
  • The 7-day moving average of transactions on Ethereum climbed to 1.32 million last week, jumping up 25% from mid-February. All of this, in turn, has helped push stablecoin volumes up.
  • While part of the recent surge has been driven by an uptick in DAI usage for complex flashloan transactions that seem to have started this year, both USDC has seen its highest level of volume since last March and USDT has surpassed the previous March in volume, showing a comeback across all top 3 Ethereum stablecoins. 
  • Newer stables like PYUSD, USDe, and FDUSD all also saw their highest months of on-chain volumes.