Data & Insights: Base Activity Soars, ETH Staking Slows

BTC Miners are Subsidy Surfing

• Bitcoin miner revenue is navigating some choppy waters, with the block subsidy now accounting for almost the entirety of miners' income. On September 13, 2024, of the $25.35 million in daily miner revenue, only $398,860 came from transaction fees—a mere 1.6% of total revenue.
  • This marks a significant change from earlier periods when transaction fees peaked at more than 40% of miner revenue, underscoring the increasing reliance on block subsidies.
  • With the recent Bitcoin halving, reducing the block reward to 3.125 BTC, miners are facing a double squeeze on their income, highlighting the challenges in the current mining ecosystem.
• The sharp decline in fee revenue can be largely attributed to the cooling of once-popular trends like Ordinals and Runes. These innovations had briefly promised a renaissance for on-chain activity, driving up transaction fees and miner profitability.
  • As interest in these trends waned, so did the fees, leaving miners to grapple with a new economic reality.
  • This situation raises critical questions about the long-term sustainability of Bitcoin's security model, as miners play a crucial role in maintaining the network's integrity.
• As block subsidies continue to halve approximately every four years, the importance of transaction fees in securing the network will only grow. 
  • Some argue for larger block sizes to accommodate more transactions, while others advocate for layer-2 solutions that could potentially drive more settlement transactions back to the main chain.
  • The success of these proposals could significantly impact the future of Bitcoin mining and the overall health of the network.
• As miners navigate these choppy waters, the resilience and adaptability of the Bitcoin ecosystem will be put to the test.

Can't Get Base(d) Enough

• We can’t seem to get enough of Base! Coinbase's Layer 2 solution continues to dominate the scaling race, shattering records with over 4.5 million transactions on Saturday. This milestone cements Base's position as the leading Layer 2, showcasing its growing popularity and robust ecosystem.
  • The surge in transactions represents a significant leap from Base's already impressive performance, highlighting its rapid adoption and scalability.
  • This growth trajectory puts Base far ahead of other Layer 2 solutions, demonstrating Coinbase's successful strategy in the competitive scaling landscape.
• Coinbase recently launched cbBTC, a wrapped Bitcoin alternative, on both Ethereum and Base networks, which continues to fuel activity on the layer 2.
  • Introduced last Thursday, cbBTC is an ERC-20 token backed 1:1 by Bitcoin held at Coinbase, designed for use in DeFi applications across Ethereum and Base ecosystems.
  • The product will aim to compete with WBTC, currently the largest tokenized BTC product with a market cap of nearly $9 billion.
• The token's launch opens new possibilities for Bitcoin holders, allowing them to provide liquidity to DeFi protocols or use it as collateral for borrowing other assets.
• Outside of new product launches, Base's success can be attributed to several factors:
  • Coinbase's massive user base provides a ready pool of potential users, lowering the barrier to entry for many crypto enthusiasts.
  • The integration with Coinbase's established infrastructure offers enhanced security and reliability, which are crucial factors for both retail and institutional users.
  • The growing ecosystem of dApps on Base, including DEXs like Aerodrome and Curve and lending protocols such as Aave, Compound, and Morpho, provides a diverse range of use cases.
• As Base continues to evolve, the introduction of cbBTC and other innovations could further fuel its growth. The platform's ability to consistently break transaction records suggests that Coinbase's bet on Layer 2 scaling is paying off, potentially reshaping the landscape of Ethereum scaling solutions.

Ethereum, the gift that keeps on losing

• The 7-Day Moving Average (7DMA) for daily staker revenue on Ethereum fell to $5.44 million on Thursday, September 12, 2024.
  • This represents an over six-month low for this metric, recording its lowest figures since the middle of February 2024.
• Staker revenue on Ethereum refers to the rewards and earnings that participants in Ethereum's proof-of-stake (PoS) consensus mechanism receive to validate transactions and secure the network.
  • This revenue is typically generated through block rewards and transaction fees, which are distributed among stakers proportionally based on the amount of ETH they have staked
• This metric falling means that stakers are earning less from their participation in the network, which could be influenced by factors such as lower network activity, which leads to fewer transaction fees being paid
  • This is further backed by the 7DMA of the number of transactions on the Ethereum network being close to February 2024 levels as well, with just 1.15 million transactions on Friday, September 13, which is down ~13% from its yearly high in March.
  • Meanwhile, the 7DMA of Ethereum’s on-chain volume has also been hovering around February’s levels as well, with just $2.83 billion, down -60% from its yearly highs in March, and -56% from just over a month ago.

Clawing Their Way Back? 

• During the first week of September 2024, the number of sales of Cryptokitties NFTs experienced a notable surge.
  • In this period, there were over 1,090 sales of Cryptokitties, up over 800% compared to the previous week’s sales figures of just 112 NFTs.
  • This spike in sales was likely caused by the open mint of Eggs, a sub-project by Cryptokitties.
  • This mint was open for 24 hours, limited to 1 NFT mint 1 per wallet at  a price of 0.008 ETH per mint
  • In this 24-hour period, a total of 3134 NFTs were minted.
• While information surrounding the utility of these eggs is currently sparse, there have been hints from the official Cryptokitties X account.
  • These hints, although not entirely confirmed at the time of writing, indicate that the Eggs might be related to a Cryptokitties-related Telegram-based game.
• As a refresher, in case you forgot, Cryptokitties are one of the earliest and most well-known NFT projects, launched in 2017 on Ethereum.
  • Each Cryptokitty is a unique digital cat, represented as an NFT (Non-Fungible Token), which can be bred, collected, and sold by users.

Avalanche's Uphill Battle

• Avalanche, once a rising star not too long ago, is now facing a steep uphill climb. The number of active addresses on Avalanche's C-Chain has plummeted to a 12-month low of 31,000, matching levels last seen in October 2023. This starkly contrasts the network's peak of 99,000 active addresses in December 2023.
  • The current user activity represents a nearly 70% decrease from its December high, raising questions about the network's ability to maintain user engagement.
  • Despite processing around 150,000 transactions daily, the shrinking number of active addresses suggests a concentration of activity among fewer users.
• Avalanche, designed as a high-throughput, low-latency blockchain, aimed to solve the scalability issues plaguing older networks. Its unique consensus mechanism and multi-chain architecture promise to deliver the trinity of blockchain design: decentralization, scalability, and security.
  • The December 2023 spike in activity coincided with JPMorgan and Apollo's announcement of plans to use Avalanche for real-world asset tokenization, highlighting the network's potential for institutional adoption.
  • However, the subsequent decline in user activity underscores the challenges faced by even the most promising blockchain projects in sustaining long-term engagement.
• The current state of Avalanche reflects a broader trend in the crypto space, where projects are struggling to find compelling use cases and maintain user interest, especially in a bearish market.
  • The drop in active addresses could be attributed to various factors, including the general market downturn, increased competition from other Layer 1 and Layer 2 solutions, and possibly a cooling of speculative interest.
  • This situation highlights the importance of developing real-world applications and use cases that can drive sustained user engagement beyond speculative cycles.
• As Avalanche and similar projects navigate these challenges, the focus must shift toward building practical applications that can weather market volatility and attract long-term users. The coming months will be crucial in determining whether Avalanche can reignite user interest and climb back to its former peaks of activity.