Data & Insights Recap - Farcaster falters, Taiko's blob usage

Farcaster caught falling

Source: Dune Analytics

• Farcaster announced late in May that it raised $150 million led by Paradigm, with participation from other notable crypto venture firms. It followed reports in March that the decentralized social media platform was looking to raise at a $1 billion valuation. 
  • It seemed like a good time for Farcaster to be raising, given that the platform had really taken off earlier in the year after the launch of the Frames feature at the end of January. The Frames allowed for interactive experiences to be embedded within posts on the platform, allowing users to play games, watch movies, mint NFTs, or do instant checkout, all without leaving the app.
  • Farcaster’s functionality is sort of a hybrid of X and Reddit. Users can use their accounts to post text based content, which can include images if they choose, and they can also join communities to discuss specific topics. Users sign up using a wallet, which has allowed many users of the platform to reward fans and community members directly. For instance, the popular Base-based memecoin DEGEN started as an airdrop to Farcaster users who were a part of the Degen channel. 
  • Ethereum co-founder Vitalik Buterin is also a strong supporter of Farcaster and it is where he does most of his posting. 
  • It costs $5 a year to have a Farcaster account, but given that an X blue checkmark is $8 that might not feel so expensive to power users of Musk’s social media platform. That being said, you can use X and most other social media networks for free. 
  • However, Farcaster was able to attract a lot of new users when the hype around Frames was highest, and especially as people started to join the platform hoping to get in on community or fan-based airdrops. So many people have now already paid the $5 necessary to keep the lights on for their Farcaster account for the rest of the year. 
• Farcaster quickly grew from 10,000 posts per day in January to over 500,000 posts per day by March. However, as we have seen with another popular social finance platform, friend.tech, explosive growth can often lead to a rapid downfall after hype dies out.
  • For a while, Farcaster’s user growth seemed healthy in the context of actual usage, with the number of casts, or posts, on the platform each day growing all the way into April, way after Frames launched and reaching over 1.5 million at its peak. 
  • But since then, the amount of activity on Farcaster has slowed down, dropping back below 700,000 casts per day. That is still sizable compared to the number of posts the network was seeing before Frames but is a 50% drop from the April highs. The amount of reactions to posts has fallen even more sharply, from 5.4 million to just 1.4 million. 
  • That being said, the amount of users casting still remains quite high, peaking at the end of May and holding on to a lot of that growth, with over 47,500 casters. But Farcaster has seen a large exodus of bots lately, which Andrew Hong of Dune Analytics suggests could be related to changes in the Warpcaster (the main Farcaster client) algorithm or the DEGEN tipping allocation. 
  • It’s possible that people have now been using both Farcaster and X for their social needs by either posting to both or tailoring content to one or the other. One thing that X has going for it is that it has a much broader audience, which might appeal to some people. The relatively crypto-native user base and ability to join like-minded communities has led to some complaints that Farcaster is an “echo chamber,” which might be partially contributing to the platform’s recent decline.
  • It’s still far too early to declare the demise of Farcaster, as early projects often see high growth followed by some tempering of activity and usage, and given Farcaster’s daily activity still surpasses that of Lens, one of its biggest competitors in the decentralized social network space. 

BouNcing Back

Source: The Block

• BNB, the exchange token of Binance and the native token of BNB Chain, reached an all-time high of over $700 last week
  • The token was just $312 at the start of the year but rallied up to over $600 by mid-March, bolstered by the broader crypto rally and some positive advancements for Binance in their post-CZ era.
  • As a reminder, at the end of last year, Binance settled with the U.S. Department of Justice for $4.3 billion and the exchange’s former CEO, Changpeng Zhao, pleaded guilty to anti-money laundering violations and stepped down from his post. Zhao was only sentenced to four months in prison, relatively short compared to the 36 months that prosecutors had recommended. 
  • Under new CEO Richard Teng, the exchange has been ushering in a new wave of compliance, most recently signaling that it will restrict access to “unauthorized” stablecoins in the EU in accordance with the Markets in Crypto-Assets Regulation (MiCA). 
  • Binance has managed to recover some of the spot market share it lost towards the end of last year. The exchange still counted for a sizable 37.5% of spot volume in November 2023, but it was a drop compared to the over 60% of volume it was accounting for in February of that year. While still not at peak levels, Binance has made up at least 44% of monthly spot volume since February of this year. 
• But BNB surged over 18.6% in just three days in early June, climbing from around $600 on June 2nd to $700 on June 5th. This sharp surge seemingly happened without any big news regarding the exchange or the blockchain. 
  • There are a lot of possible catalysts for what caused BNB to surge. The popularity of Binance Launchpool could be a contribution. The platform has users hold and stake BNB in order to gain access to new token offerings. Binance Launchpool was one of the first places to offer Notcoin, a token associated with a web3 Telegram game that has exploded in popularity. 
  • Others have pointed to the continued traction of BNB Chain, which is home to PancakeSwap, one of the most popular DEXs, and offers lower fees than Ethereum. More BNB Chain activity also leads to more BNB burns, which can lead to positive price action. 
  • Some also highlighted more leverage for the BNB token, with futures open interest across exchanges for the coin reaching $1 billion for the first time in early June, growing by 1.86x from June 1st to June 6th. 
  • It’s likely a combination of these things that has made BNB the best performing exchange token over the past year, up 186%. It is a good sign for Binance, though, as they continue to re-establish themselves after a relatively fraught 2023. 

Blobbed down

Source: The Block

• We talked last week about how more and more layer 2s are adopting the use of blobs over calldata to publish data to the Ethereum mainnet, but we sort of glossed over a recently launched blobs power user, Taiko.
  • Taiko’s mainnet launched on May 27th of this year, preceded by seven testnets and development that began back in 2022. 
  • Taiko is a based rollup, meaning it relies on Ethereum block validators to sequence transactions. This is beneficial since it grants Taiko the same liveness and security assurances provided by the Ethereum mainnet. Other protocols rely on their own sequencers, many of which are currently run by the developers of the rollup. 
  • This was the case for Taiko originally, with the Taiko team handling the sequencing. But on June 6th the network enabled permissionless sequencing, allowing anyone to spin up a Taiko node and prover, and the network claims to be the first layer 2 to do so. 
• Taiko started off a very slow layer 2. Up until June 4th the network never exceeded 60,000 transactions, putting it way below its main optimistic and ZK rollup peers. Transactions picked up on June 5th, though, surpassing 500,000, coinciding with Phase 1 of the TAIKO airdrop became claimable. But even before June 5th, Taiko was paying a lot more than other rollups to publish data on the Ethereum mainnet, despite seeing minimal usage. 
  • Taiko paid over $50,000 per day for data on Ethereum in its first twelve days, sometimes paying more than all other networks using blobs combined. Taiko tends to post around 4,000 blobs a day, sometimes exceeding the amount posted by some of the most active rollups, such as Base and Arbitrum. While these more active rollups group up to 6 blobs into one transaction, Taiko for the most part seems to be posting only one blob per transaction.
  • This is by design. Even when Taiko was doing its own sequencing, they were posting largely empty blobs since they have to post one every 12 seconds, coinciding with the Ethereum block time. Even though, in theory, when Taiko was in charge of sequencing, they could have bundled transactions better, the team was trying to simulate the actual execution of the network, and was doing final tests since they were going to decentralize their sequencers so soon. 
  • According to a Taiko community advocate, the cost of being one of only a few transactions in a blob (or possibly the only one) has been subsidized by the team to improve user experience. Down the line, either a user will have to pay a high enough fee to warrant a new block or blocks will be missed until enough transactions are in the mempool to produce a profitable block.
  • In theory, these issues go away with growing adoption. As more people use Taiko, then there will be enough transactions to fill a block profitably but in a way that each transaction is cheap to the users. Taiko has acknowledged that even with blobs, it is still more expensive than other L2s, but it is a tradeoff for the liveness and security the based setup provides. 
  • While Taiko is paying the most Ethereum mainnet fees of any layer 2 at the moment, the daily amount it is paying is still much less compared to how much rollups were paying pre-Dencun. 

No Fun Traders

Source: The Block

• While there has been a lot of excitement in the broader crypto market so far this year, the non-fungible trading sector continues to lag behind. 
  • While there has been the occasional bright spot for NFT announcements, including an Adidas partnership with Stepn that is slated to begin with an NFT collection and the announcement of the upcoming 2025 release of the Pudgy Penguins game based on both their NFT collection and their associated toy line, which sold one million units in less than a year; it has largely been mostly negative headlines about NFTs or a lack thereof. 
  • The negative headlines primarily focus on the declining valuations and activity within the NFT space. Nobody wanted to buy the Coachella NFT VIP passes and Starbucks shut down its Odyssey Beta NFT program. The Bored Ape that was once owned by Kevin Hart sold for 83% less than what he paid for it, and the trading volume for the original Donald Trump NFT collection was plummeting ahead of the start of his criminal trial. 
  • While some collections catch the attention of the public eye, it has broadly been the trend that most collections have seen slowing volumes and most collections have seen floor prices dropping, including this year’s most hyped NFT subcategory, Bitcoin Ordinals. As we talked about a few weeks ago, activity on Bitcoin has been overtaken by Runes, putting memecoins at the center of attention and Ordinals left to the wayside. 
  • Monthly NFT marketplace volumes on Ethereum have been on the decline since January 2024, and even in January, volumes still paled in comparison to the billions of dollars being traded each month during the 2021/2022 bull market. In May, volumes didn’t even exceed $500 million. 
  • Perhaps the most jarring metric is once again the number of Ethereum NFT traders, which fell below 4,000 for the first time since June 2021. The number was over 80,000 at its peak back in February 2022 and has been on a decline ever since, although the amount of users flatlined from June 2023 through February 2024 but then began a slow decline again. 
• The NFT landscape on Ethereum might be facing tougher challenges as we have seen that other, cheaper alternatives have managed to attract activity away from the once de facto blockchain for most use cases. While Ethereum is still home to the majority of the blue chip NFT collections, its dominance has faded out. 
  • It’s not clear what exactly could reignite an NFT boom given some recent big brand partnerships haven’t been shaking out well. It would likely take a new trendy collection or a new marketplace with incentives to get things moving again. 

Get out of the gwei

Source: The Block

• While the Ethereum NFT landscape has been in a continued drought, Ethereum itself has recently been having an ever so slight comeback. 
  • We talked a couple of weeks ago about the demand for Ethereum block space being on the decline, with the amount of ETH being burned on the network coming in below 1,000 for several days in a row at the start of May. This in turn also boosted the supply growth of ether, since validator rewards were far outpacing the amount being burned each day. While not really an issue, some strong Ethereum proponents boasted about how ether would become a deflationary asset with the combination of EIP-1559, which resulted in a base fee being burned with every Ethereum transaction, and The Merge, which heavily reduced the amount of ether issuance in the conversion from Proof-of-Work to Proof-of-Stake. 
  • The drop off coincided with vibrant memecoin ecosystems emerging on other chains as the season of meme took off. Ethereum is relatively expensive compared to both its own layer 2s as well as other layer 1s, making it difficult for it to compete. Total fees paid on Solana were starting to put up comparable numbers to Ethereum, whereas historically Solana’s revenue has been way below that of Ethereum. 
• While transactions have been on the decline, it seems users are willing to pay more for gas, as we’ve seen the median gas price tick up over the past few days, reaching over 20 gwei at the start of the month, the highest its been since April. 
  • With rising gas prices, we’ve also seen the amount of ETH burned drum up again, hitting 1,990 on June 6th, although it dropped back below 1,000 on June 8th. This is not uncommon, though, as both gas burned and gas prices tend to climb over the weekdays and drop off on the weekends. The most important thing is likely that the jumps during the week are increasing week over week. The weekly peak of median gas price reached 13.69 gwei on May 21st, then 16.8 on May 28th, then 20.49 on June 5th, with the price dropping each time in between. 
  • Gas prices and the amount of ether getting burned are still historically very low, but it is a reassuring sign to see some revitalization. It’s hard to pinpoint an exact cause for the uptick, especially since it is still so slight, but as we just talked about, we have seen an uptick in L2 blob posting, and MEV bots seem to be willing to pay high gas costs to make profits. Just last week the infamous jaredfromsubway.eth bot spent over 210 ETH, worth $810,000, on gas in just 24 hours, making the bot the daily top gas spender.