Data & Insights Recap - Restaking popularity grows, Base revenue for Coinbase rises post-Dencun

Rise of Restaking

Source: The Block

• Restaking has been gaining more and more prominence throughout recent weeks.
  • As a reminder, the idea behind restaking is that people who have staked ETH to secure Ethereum can “restake” their ETH to help secure third-party protocols. In a certain sense, this is a win-win since restakers can earn more yield, and newer protocols can tap into a vast security system rather than bootstrapping their own. 
  • EigenLayer is the primary restaking protocol, although it has not yet launched its mainnet. However, it has already amassed over $13 billion in total value locked. 
  • There is also over $8 billion of value locked across liquid restaking protocols. These protocols act like wrappers for EigenLayer to some degree, using EigenLayer for the actual restaking but providing depositors with liquid restaking tokens. Similar to how liquid staking protocols give depositors a derivative token, these tokens give users access to their funds while they are locked up, securing the network. 
  • While restaking is gaining popularity because of the increased yield potential, there is, of course, airdrop potential both from EigenLayer itself, which has been giving out points, but also by some of the liquid restaking protocols. For instance, ether.fi, the largest liquid restaking protocol by value locked, announced its airdrop last month. 
• We have now reached an era where it is more common for new validators on the Ethereum blockchain to restake rather than not. 
  • Since March 23rd, more than 40% of new validator nods for the Ethereum Beaconchain have been restakers, with that share reaching as high as 85% some days.
  • Across all validator entities, about one-quarter are now restaking, showing how quickly the popularity has spread. At the start of 2024, the share was only about 2%.
• Overall, it still seems very early for restaking on the whole. But that hasn’t stopped the idea from catching on quite significantly.
  • EigenLayer actually has deposits of liquid staking tokens paused right now. Historically, the protocol has had deposit caps in these preliminary days, but plans to lift them permanently down the line. 
  • So, this rise of restaking success has been accomplished even with some limitations on how much restaking can actually be done through EigenLayer, meaning there is a lot more room for growth in the future.

More coin for Coinbase

Source: The Block, Dune Analytics

• Coinbase’s layer 2 network Base has continued to see strong success in the wake of the Dencun upgrade.
  • The 7-day moving average of transactions on the network has climbed to 2.63 million, putting it way above its two main optimistic rollup competitors, Arbitrum and Optimism, and surpassing the previous peak in transactions set by the scaling solution back in the summer when it first launched. As we talked about last week, Base has seen a surge of DEX activity as memecoins flood the network. 
  • Part of what has helped Base surge in popularity lately is the fact that Dencun helped reduce fees on the network. By using blobs instead of calldata, it has become much cheaper to post data on Ethereum mainnet, which helps rollups since they have to publish their transaction summaries.
  • The 7-day moving average of the average transaction fee on Base fell from $0.83 in early March, which was still much cheaper than the Ethereum mainnet, to below $0.01 shortly after Dencun went live. However, fees have picked up again since Base began seeing more activity but largely remain less expensive than they were prior to Dencun, tending to stay below $0.25. 
• This uptick in Base usage has spurred an uptick in revenue for Coinbase.
  • The total revenue of Base is essentially just the sum of all fees paid on the network per day. However, some of the total fees paid on the rollup go towards paying to publish data on the Ethereum layer 1. Additionally, since Base was built using the OP stack, 15% of Base’s net revenue (excluding the data submission costs) goes to the Optimism Collective.
  • But, since it is so inexpensive to publish data now, Coinbase has seen a sharp rise in the profits it collects. Some other layer 2s have seen revenues slip in the wake of Dencun (although costs have dropped sharply as well, so profit margins are still on the upswing) since fees have fallen so dramatically, but in the case of Base, the fact that there are so many transactions has helped compensate for the drop in fees per transaction. 
  • Base has been seeing its highest days of revenue since launch in the post-Dencun era, but its costs have been some of the lowest they’ve ever been, allowing Coinbase to earn $1 million some days and the Optimism Collective to also take in several hundred thousand dollars. The amount of money spent posting to the Ethereum mainnet has fallen from over $200,000 some days leading up to Dencun to typically less than $2,000 now. 
  • For now, it does seem to be the perfect storm for Coinbase, but Base could see revenues start to decline again if interest does not stay as high as it currently is.

Crypto stablecoin comeback

Source: The Block

• While there is no question that the fiat-backed USDT and USDC dominate the stablecoin market, and Ripple is looking to launch a fiat-backed stablecoin this year, and PayPal just announced U.S. customers would be able to use their new PYUSD stablecoin for international payments, interest in crypto-collateralized stablecoins seems to be on the rise.
  • The total market cap across crypto-backed and algorithmic stablecoins on Ethereum surpassed 9 billion this month, the highest level since November 2022.
  • The crypto-backed stablecoin market cap on Ethereum peaked in January 2022 and then faced pretty heavy contraction following the collapse of UST, which had many people questioning the trustworthiness of crypto-backed stables. 
  • DAI, the largest crypto-collateralized stablecoin, saw its supply drop from 8.5 billion just ahead of the Luna fallout down to 6.4 billion by mid-May. DAI’s current supply is even lower than that at 5 billion now, as its popularity continued to wane through the summer of 2023.  
• But it seems things are turning around for the crypto stablecoin community.
  • For one, while DAI’s supply is still significantly depleted compared to its pre-UST peak, its supply has seen some reprise from a low of 4.4 billion reached in August of last year. Part of that is because of a higher yield being offered for DAI on the Spark lending platform. The DAI savings rate jumped from 3% to 8% in August 2023 after MakerDAO raised it. While there have been a few drops in DAI’s supply so far this year, it primarily seems to be trending upwards. 
  • The other major player contributing to the growth has been Ethena’s USDe. We talked about USDe a few weeks back due to its novel idea of using a long ETH position (taken via staked ETH) and a short ETH position (taken via perpetual futures contract) to maintain the dollar peg. USDe has surged in popularity because holders of the stablecoin can stake it and earn yield, currently at 37% APY. The yield comes from earnings on both the staked ETH position and the short perpetual contract when funding rates are negative. USDe has only been launched to the public for 2 months, but its supply has exceeded 2 billion. 
• MakerDAO, the issuer of DAI, is weighing a proposal to allocate $600 million worth of DAI in to USDe and sUSDe (the staked version of the token), with interest driven both by the yield generated as well as the potential to earn ENA tokens, the governance tokens for Ethena. 
  • Community members from the Aave protocol fought back against this move and called it risky, potentially putting DAI’s use of collateral on the lending platform in peril.
  • However, these are all just proposals, so time will tell how the stablecoin landscape morphs as a result of what’s been put forward. For now, though, it seems like interest in non-fiat stablecoins is back on the upswing.

Withdrawing away

Source: The Block

• The week of March 24th saw over 166,000 unique withdrawers across bridges of all types on Ethereum, marking the second-highest week ever of addresses pulling their funds back to the mainnet.
  • Most notably, roughly 126,750 addresses withdrew from bridges connecting to ZK rollups, marking a new high for the category. 
  • The majority of those withdrawers were taking their funds out of the zkSync Era bridge. Over 96,000 users pulled funds from the bridge that week.
  • This isn’t really a cause for concern, as zkSync Era remains the most popular ZK rollup in terms of daily activity, and it's the second largest by value locked in escrow contracts, coming second only to Starknet which saw a huge jump in TVL after its airdrop. A pickup in withdrawals might actually be a good sign if you consider it a signal of broader adoption for the layer 2 network. While, of course, you can park your funds on zkSync Era and transact there, capital typically has to make its way back to the mainnet in the end. 
  • There also does not seem to be a mass exodus from ZK rollups, as the number of withdrawers from zkSync Era dropped this past week to lower levels. 
• On the other hand, though, across all optimistic rollups, only 3,540 addresses withdrew funds that same week. Typically, the amount of withdrawals on optimistic rollups is much smaller than that of ZK rollups. 
  • Part of this might be because of how long the most popular optimistic rollups have been around and how robust their ecosystems are. For instance, Coinbase Wallet, which can be connected to Coinbase accounts to help transfer funds on-chain to the CEX, supports all three of the big optimistic rollups but no ZK rollups. 
  • So, for some exchanges, users can deposit into CEXs directly from the scaling network if they are looking to cash out, but that option is often less widely available for the ZKRs, leading to more mainnet bridging. 

A hub of new addresses

Source: The Block

• There is no question that people love memecoins these days. And a really good way to bring action to a blockchain community is to start a memecoin trend, much like what we have been seeing on Base recently. A lot of memecoins try to drum up hype by airdropping to an existing group of people, like the first DEGEN airdrop, which went to people part of the Degen channel on Farcaster. 
  • Recently, that energy has spread to the Polkadot ecosystem. Polkadot is sort of like Cosmos in the sense that it is made up of a bunch of separate parachains that all get validated by the main Relay chain. 
  • This system makes the logistics for a widespread airdrop somewhat difficult because if you wanted to airdrop a memecoin to all holders of DOT, there’s a wide variety of places where users could be holding the Polkadot token. 
  • There is one parachain called the Asset Hub, which mainly serves to launch tokens. It aims to facilitate asset deployment with fees as low as possible. 
  • So Asset Hub answers the question of where you will deploy your memecoin, but the question of how to get your memecoin to the people is still a somewhat open question, especially given that not every person you want to airdrop to necessarily has an address on Asset Hub. Asset Hub also has a requirement of an existential deposit of 0.01 DOT that allows an address to continue operating. Without that deposit, the account gets deleted to prevent “dust” accounts from building up. 
  • There are a few memecoins that took it upon themselves to launch on Polkadot recently, the two primary ones being PINK (which is also on Base) and DED. To solve the existential deposit problem, DED submitted a proposal to OpenGov, the Polkadot governance forum, to have their treasury provide the deposit for all the addresses it wished to airdrop to on the Asset Hub. 
  • So, in turn, a new address was made for every eligible airdrop recipient who did not already have an active address on Asset Hub. This airdrop encompassed a large group, as the qualifications just state that if you had DOT in self-custody during the snapshot, then you received the token. 
  • On March 20th, we saw almost 930,000 new addresses on the Asset Hub parachain, a new high by a wide margin. Across the whole month, the parachain had 2.6 million new addresses, a new peak for any of the parachains, and exceeded the highs of the more popular parachains like Nodle and Moonbeam. 
  • At the very least, now most active Polkadot ecosystem participants have an address on Asset Hub if they left the existential deposit on the account, opening up the door to more potential airdrops on the parachain.