Data & Insights Recap: Runes hype slows down, a small rebound for friend.tech

A flash in the pan

Source: Coin Metrics

• Last week, we talked about the crazy impacts that the hype around Runes was having on the Bitcoin network.
  • Specifically, the new token standard that launched at the halving helped push both the number of transactions and the amount of fees being paid on the network to new all-time highs. 
  • But as is often the case, hype cannot last forever. While roughly half of the transactions on Bitcoin are still related to Runes, the number of transactions has vastly subsided. There were almost 800,000 Runes transactions on April 23rd, but since then, the amount has stayed below 350,000. 
  • The fees during the initial excitement around Runes did seem to reach an unsustainable level. The 7-day moving average of the average transaction fee on the network hit $40, which is much higher than normal and not a price many users want to pay. The average has fallen back below $10 already as activity on Bitcoin has normalized.
• While the high fees weighed on Bitcoin users (we saw the 7-day moving average of active addresses drop below 700,000 for the first time since 2020), they were well received by Bitcoin miners, who were facing a 50% drop in the block subsidy in the wake of the halving. 
  • The jump in fees right as Runes launched helped stave off the impact of the 3.125 BTC reward. Over $80 million was paid in transaction fees the day after the halving, helping bolster miner revenue. 
  • But as fees have slipped back to normal levels, with total miner revenue from transaction costs dropping below $5 million, miners are now feeling the pinch. 
  • The 7-day moving average of bitcoin miner revenue per TH/s has fallen to $0.048, an all-time low. While a 3.125 BTC block reward now is worth more than a 25 BTC block reward in 2013, the amount of miners on the network has also jumped, making it all the more harder to actually earn the subsidy. 
  • While the 7-day moving average of Bitcoin’s hash rate has dropped slightly since the halving, to just over 600 EH/s, it is still historically very high. Bitcoin’s overall hash rate has essentially been on a straight upward trend since its inception, barring a small drop-off during the China crackdown. 
  • Miner revenue per TH/s can rise if bitcoin’s price rises, but unless miners start exiting the market, it's unlikely we will see the levels of miner revenue afforded when there was less interest in solving puzzles to mine the next Bitcoin block. 

Fee-ling pressure

Source: Dune Analytics

• In mid-April, Uniswap Labs increased the fee to swap on their interface from 0.15% to 0.25%. The fee applies to most, but not all, swaps that are executed using the Uniswap web interface and wallet. 
  • Using the Uniswap Labs interface is not the only way to use Uniswap. Traders can use aggregators, alternate UIs, or go directly through the smart contract themselves to make swaps. When the fee was first introduced back in October 2023, Uniswap founder Hayden Adams said it would allow his team to “continue to research, develop, build, ship, improve, and expand crypto and DeFi.” 
  • The fee change happened shortly after it became public that Uniswap had received a Wells Notice from the Securities and Exchange Commission. 
• It does seem like the fee has had an impact on the Uniswap interface’s popularity. The Uniswap frontend accounted for a still sizable 30% of DEX activity in April, compared to 35.8% in March. 
  • The frontend has still been helping Uniswap Labs bolster its coffers, though. Since the fee hike, the developers have made over $145,000 a day from their frontend on Ethereum alone. 
  • It does seem like fees have slowed down since the initial change, as more people have become aware of it. Eight of the first 10 days post-0.25% fee brought in over $300,000 in revenue, but only 4 days since April 21st have crossed that threshold. But part of that drop could also just be tied to a broader slowdown in the market, as fees did pick up at the tail end of last week when the prices of assets began to rebound. 
  • In the end, if the Uniswap frontend is what you are most comfortable with, a 0.1% fee hike might not be enough to deter traders from it. It has historically been one of the most popular frontend, and Uniswap itself is the most popular decentralized exchange. 
  • So far in May, which we are still quite early into, the Uniswap frontend is only on pace to account for 20% of volume, but that seems to be less of a reflection on Uniswap and more due to a surge in the usage of the 1inch website. 

Friends again

Source: Dune Analytics

• It has been a while since we last talked about the social finance platform, friend.tech. 
  • As a reminder, the premise behind the protocol was that users could buy keys (previously called shares) of popular creators, which granted key owners exclusive chats and content from the “influencer.” 
  • The platform was pretty novel when it launched, and to this day, it remains the largest SoFi platform by total value locked, despite several clones launching in the wake of its success. 
  • Friend.tech was also bolstered by launching on Base in the late summer. While friend.tech was having its own bout of hype, the network it was built on was having a wave of excitement, as well, giving it an added boost.
  • The protocol saw pretty explosive growth. The amount of daily transactions on the platform peaked at over 500,000, just about a month after launching. There were days when over 70,000 addresses were buying friend.tech keys. But as we talked about with Runes, hype can only get you so far. 
  • Coming into winter, the platform all but faded into obscurity. Daily transactions on the network didn’t exceed 40,000 from the end of October until early April.
• But friend.tech activity started to pick up last month, although not to the same levels seen when the platform first launched. But it is now more common to see tens of thousands of transactions a day.
  • One major draw for friend.tech users at the start were friend.tech points, which were earned by engaging with the platform. Points have now become a sort of precursor to airdrops, so many people wanted to get their hands on some. 
  • At the end of January, friend.tech announced they had distributed 90 million points through their beta period and would distribute another 10 million points after their v2 launch, temporarily putting points earning on hold. The platform’s X account continued to tease the upcoming v2, but in early March posted an image of bunnies in a boardroom saying, “photo from the friendtech board meeting where investors agreed to give up their right to dump on you to let us create the first truly user controlled currency in one of the craziest experiments that crypto has ever seen,” stoking a new wave of excitement for the airdrop. 
  • The token and v2 launch were originally slated to go live on April 29th, after continued promotions on the account through the spring, but it was pushed to May 2nd to allow creators to share their airdrop with keyholders, but the snapshot was confirmed on April 27th. 
  • Despite the fact that points weren’t being distributed anymore, it seems the anticipation for the airdrop was enough to get people back on friend.tech, as transactions have picked up again over the past month.
  • The airdrop was met with some backlash due to the delay and also difficulties claiming it. But the airdrop was also praised for giving 100% of the tokens to the community, as opposed to investors.

Eigen slayer

Source: The Block

• Friend.tech wasn’t the only airdrop to get people talking last week. Another major protocol, Eigenlayer, came under fire for the plans it revealed for the upcoming launch of its EIGEN token.
  • The major pain points? While 45% of the 1.67 billion token supply was reserved for the community, only 15% was set aside for “stakedrops” (with only 5% being claimable during the first season), and another 15% going to community initiatives and the other 15% going to ecosystem development. This is compared to a 29.5% allocation for early investors and a 25.5% allocation for early contributors. The investors and contributors are on a three year lock up, though, with the first year being a complete lock and then a gradual monthly release. While large allocations to investors and contributors are very common these days, people were still upset by the distribution. 
  • However, airdrop earners were also put in a lock-up of sorts, with the tokens starting out non-transferable to allow for decentralization and fostering of community consensus. However, claimants will be able to stake their EIGEN to help secure EigenDA. 
  • There was also the criticism of the fact that the airdrop would be blocked from certain countries, and also from VPN users. While many airdrops do sometimes filter based on location to avoid regulatory scrutiny, some thought it was unfair since users from those areas were able to deposit into Eigenlayer but would now be excluded from the airdrop. 
  • The Eigen Foundation responded to the backlash, clarifying that investor tokens will only start vesting once transferability starts, slated to happen at the end of September, helping calm fears that investors would be able to immediately dump on community members. The Eigen Foundation will also be giving 100 more EIGEN to over 280,000 users to help address the criticism that the tokenomics were not rewarding early adopters enough.
• Despite the recalibration, it didn’t stop people from fleeing the platform.
  • On Eigenlayer, when a user wants to withdraw, they are subject to a 7-day escrow period before their withdrawal completes, so the actual withdrawals from Eigenlayer are on a slight delay compared to when users actually wanted to exit the platform. 
  • We can, however, look at when users have queued withdrawers to get a better picture of when people are trying to exit. We can see big spikes in the number of withdrawers joining the queue on April 10th (the day after the protocol’s mainnet launch) and April 15th (shortly after the protocol announced its six actively validated services and the day before the platform unpaused LST deposits). Large spikes like that can often happen after big news, but generally, the number of users entering the withdrawal queue has been pretty low, typically less than 500 a day. 
  • But since the tokenomics were unveiled, there have been more than 650 users entering the withdrawal queue each day. Part of this could be due to unhappiness with how the distribution was handled, but part of this could also be people exiting now that they know they have qualified for the first airdrop. 

Holding on

Source: Company Filings

• We are back in the heat of earnings season, and everyone’s favorite public crypto exchange did not disappoint when it came to Q1 earnings. 
  • Coinbase reported $1.6 billion of revenue in the first quarter, blowing past Wall Street estimates and also climbing 72% compared to the previous quarter.
  • The main driver was naturally an uptick in trading volume on the exchange as digital assets rebounded in the first three months of the year. The exchange reported $312 billion of volume in the first quarter, the highest level since Q4 2021. 
  • About $56 billion of that volume came from retail customers, or about 18%. The 18% share of retail is actually a slight drop compared to the previous quarter, but is still higher than Q3 2022 through Q3 2023. The share still remains much lower than levels seen early on for Coinbase, though. For all of 2018, more than half of Coinbase’s volumes came from retail customers. 
  • Coinbase, both in terms of its App Store ranking and in terms of its quarterly institutional vs retail volume reporting, can often be used as a proxy to see if retail is “back.” From the Q1 report, it seems like retail is still back at their full potential. As Mika Honkasalo pointed out on X, the volume reported for retail this past quarter is only 31% of the all-time high for retail trading, whereas the $256 billion of institutional volume is 69% of their all-time high. It does seem like institutions have been more eager to begin trading on Coinbase in the wake of the recent bull market and spot ETF approval.
• One metric that did reach an all-time for Coinbase was the amount of assets held on their platform. Coinbase reported $335 billion of assets for Q1, blowing past the previous peak of $278 billion in Q4 2021. 
  • Part of the reason the value of Coinbase’s assets swelled so much is because of the fact that digital asset prices appreciated significantly in Q1. Bitcoin has been trading above $60,000 for the most part since the end of February, a threshold that it has historically not been able to stay over for very long. It’s likely that for many popular digital currencies, when Coinbase took the snapshot to report the value of its assets, that it was the highest they had been for the end of a quarter. 
  • But as volumes increase, it is also likely that more users might be parking more funds on Coinbase, both by either leaving their trading balances on the platform, or by using the Coinbase Custody product. It’s likely that both the combination of increased usage and the jump in cryptocurrency prices combined to help Coinbase reach a new peak for its asset balance.