The state of layer 1s: Q2 22'
Alt L1s are the best investments right now in terms of risk vs rewards. While Ethereum is working on merging and scaling, other L1s are battling it out.
Here's my analysis on the major L1s as we head into Quarter 2.
Today I'm covering:
- Chain Vibe Check: my opinions on different Layer 1s
- Transitioning to a Web3 Job: Web 3 companies are on a hiring spree.
Thoughts on Various Layer 1s
Here's my analysis of various chains that I participate in.
All eyes are on Ethereum this year and what happened with the Merge.
- The Merge is coming this Quarter (June). Ethereum transitions to Proof of Stake.
- Triple halvening. Yearly ETH emissions will go from 4.3% down to .43%. The burning will cause ETH to become deflationary. ⬆️ demand. ⬇️ supply. What do you think's going to happen?
- The Layer 2 solutions are heating up. Zk-rollup solutions such as Starkware are coming.
- More and more institutional interests. Hedge funds are risk averse so they'll stick to mainly BTC and ETH.
The biggest threats to Ethereum are the Alt L1s catching up, and possible issues & delays with the Merge.
Every portfolio needs exposure to ETH.
Terra has been a shining star in a quarter where everything got wrecked. When the market turns bear'ish, demand for $UST increases. Everyone's in a risk off environment and prefer exposure to Anchor Protocol's 19.5% yield.
- Terra plans to buy and hold up to $10b of Bitcoin in its reserves. It's to help defend the peg of the $UST.
- Alice Finance. Use $UST in the real world. Chai allows you to use $UST to pay for stuff in South Korea. Alice is looking to bring that to the US and the rest of the world.
- The main risk is the sustainability of the Anchor Protocol 19.5% yield reserves. They're addressing this with semi-dynamic rates.
The entire ecosystem hinges on the adoption of $UST. I'm bullish on a decentralized stablecoin, and how they're building towards real-world adoption.
Even if Anchor Protocol earn rate lowers to 15% to be sustainable, I'm still parking my Stablecoins there.
There's significant momentum after the Avalanche Summit.
- DeFiKingdoms has launched on its own subnet on AVAX. There's some congestion with the bridging, but everything seems to be going smoothly.
- Subnets. DFK is the first major test. Other subnets including Crabada's are coming soon.
- GameFi on AVAX: Crabada, DFK, Chikn, Imperium Empires, and more games. AVAX could become the #1 chain for games because of their subnets.
- Liquid Staking. This launched a few weeks back and is unlocking more liquidity to the system.
- The PTP Party. Platypus Finance is a stablecoin dex on AVAX. Protocols are being built to acquire PTP ala Convex / Curve.
- Trader Joe Tokenomics. The largest dex on AVAX has finished upgrading their Tokenomics.
AVAX's main risk is competition among other Layer 1s. We saw significant money leave the ecosystem in January for FTM in anticipation for Solidly.
Fantom was the hottest Layer 1 coming into Quarter 1. We saw several billion flowing in because of Andre Cronje's anticipate project, SOLIDLY.
Well, FTM has taken a beating.
FTM is still the most undervalued chain by far with a Mcap / TVL ratio of .42.
Imo, FTM is still the DeFi's favorite place to be a degen. While Cronje's presence will be missed, many of the FTM developers are ready to pick up the Baton.
The main narrative playing out in FTM war the wars for governance tokens such as Spirit & Beets.
Harry Yeh is launching Felix Exchange which should help onboard people into the FTM ecosystem.
FTM just announced a $480m grant program. Remember that AVAX and NEAR protocols had great price movements once their ecosystem funds were announced!
A vulnerability in DeFi are cross chain bridges. Chains like Ethereum, Solana, and Fantom are not designed to play with each other. Vitalik warned us about this months ago.
In February, hackers exploited Solana's wormhole bridge for $325.
A few days ago, hackers exploited the Ronin bridge (Axies Infinity) for $625m.
This is where Interoperability comes in. It's the ability for blockchains to share information among each other.
Cosmos is a Layer 0 network. It provides the infrastructure for Layer 1's to be built on top of it.
Current ecosystems built on Cosmos include: Terra Luna, Thorchain, Cronos, Binance, etc.
I think about Cosmos like it's the European Union. There are different (L1s / Countries) built on it, but there's an infrastructure setup for easy communication.
So as more Blockchains are built on Cosmos, there's a network effect where the ecosystem itself becomes stronger.
I will start covering more of the Cosmos Network this quarter.
Harmony One has a lot of concentration risk. Most of the TVL is within the top 2 Dapps.
- DeFiKingdoms represents 55% of the TVL of Harmony One chain.
- Tranquil Finance is 22% of the TVL of Harmony
The bad news is that money's leaving the ecosystem. DeFiKingdom's expanded to AVAX yesterday. People are bridging their $Jewel over to get those juicy APR's.
There has also been some scaling issues in regards to their RPC.
The good news is that new apps are being developed. Harmony One launched a $300m ecosystem fund a few months ago.
The chain is still the fastest and cheapest by a large margin.
GameFi's going to be a huge wave and we could see it becoming big on Harmony One.
Games to watch out for: Defira, Mars Colony, Cosmic Universe, Freyala, etc.
The short term outlet isn't too good. But I love the team and they're doing the right moves. They could have a comeback due to GameFi.
Quick thoughts on Other Protocols:
- BNB. I don't pay attention to BNB but you can't fade CZ. Owning the #1 exchange in the world is quite the moat.
- Solana. Bear'ish. The TVL has been tanking since November. A little overvalued compared to other L1s.
- Matic. Bear'ish. The true L2s like Starkware are coming.
- Cronos (Crypto.com). Bullish. They know how to get eyeballs to their product. TVL has been steadily going up even in a bear'ish environment.
- Thorchain. Bullish.
- Polkadot. I don't pay too much attention to them. My attention's on Cosmos as my Layer 0 of choice.
What I'm Getting Excited About:
- Cosmos Ecosystem.
- Near Ecosystem.
By the way, the Crypto space has gotten too large for me to have a pulse on everything. It's just me - I don't have a team of researchers under me.
So if I don't mention a certain L1, it means that I haven't kept up with it at all. I have no idea what's happening with Algorand, Elrond, or Tezos for example.
Do You Want to Work in Web 3?
Have you ever thought about working in Web 3? Everyone thinks you have to be a Blockchain developer to get a job, but that's not true.
There are non technical paths such as being a writer, researcher, managing a community, etc. I've even seen new positions created such as a Tokenomics expert.
Also remember, Web 3 needs non blockchain people too. Executive assistants, software engineers, UI / UX developers, and more.
You get front row to a skyrocketing industry and most of the jobs are remote. There's a "sweet spot" in time now because it's going to be a bloodbath to get a job in a few years. You can break in now.
Join the Collective
I'm launching a DeFi job board next week!
I want to connect talented people with Web 3 companies, and help drive this industry forward.
Something cool that I'm building is something called the Collective.
Think of it like an insider's club where I help you find a job in Web 3.
- I'm networking more and will get exclusive access to Jobs / Positions you won't find anywhere else.
- It's 100% free to you.
- You can apply anonymous.
You have to apply to get in.
By the way, please put some effort into your application. Sell yourself.
If your bio is "hey I'm looking for a Web 3 job" then I can't really help you.
Apply to join the Collective
Oh and if you're a Web 3 protocol that's hiring, reply to this email. I have built one of the largest communities of DeFi enthusiasts.
There's a war for talent, and I can make your life easier.
Until next time,
The DeFi Edge
p.s. here are some monster threads I wrote this week in case you missed em