[Article] The market performance and development pattern of bull market public chain track from 2020 to 2022 are summarized

Original title: "Three Years of bull Market, 21 head public Chain review"

Source: LUCIDA   

The book goes back and forth5 million lines of data, retracing the three rounds of Crypto bull market in historyLUCIDA analyzed the macro performance of the whole Crypto market in the past three years through data.

In this article, LUCIDA teamed up with SnapFingers DAO's research partners to take stock of "public chain".

The introduction

Ethereum's runaway success has made the smart contract public chain the holy Grail of capital. Ethereum is still the largest and most important platform in the smart contract public chain, but due to low performance and high cost, a large number of applications are not suitable to run on Ethereum.

The new public chain with performance and cost advantages to take on these ethereum spillover demand. Especially in the bull market of 2021, a large number of applications have emerged, and new public chain ecosystems have exploded in succession, from BSC to Polygon to Solana, while Avalanche, Fantom, and Terra ecosystems have also grown significantly. As Vitalik Buterin said on Twitter that "the future will be multi-chain", the growth paradigm of this bull market public chain may have some implications for the future "multi-chain" pattern.

1. Performance of the great bull market public chain market from 2020 to 2022

The public chain is the infrastructure and most important component of the crypto market. The public chains discussed in this paper include smart contract platform and cross-chain platform, 21 in total. In addition to Ethereum, the other selected samples and categories are as follows. The standard of sample selection is the top 100 in market value, which has established its own ecology and attracted certain attention.

The 21 common chain samples studied in this paper

For subsequent analysis, we also did data cleaning and preprocessing.

1.1 Formulation of public chain price index

In order to make it easier for you to observe the overall performance of the track, we created a Chain_Index using a weighted algorithm. The Chain_Index algorithm is as follows:

Public chain index price of the day = the closing price of the underlying asset of the day * the weight coefficient of the underlying asset of the day

The weight coefficient of the underlying asset of the day = the average daily transaction amount of the underlying asset in the past 30 days/the average daily transaction amount of the underlying asset in the sample in the past 30 days

In order to more conveniently observe the overall situation of the track, we made a chart of the index price of the track, and changed the coordinate axis to the logarithmic axis.

LUCIDA Public chain price Index & NBSP;

1.2 Corporate circuit has better excess return and return risk ratio in bull market

In this bull market, the maximum increase of the public chain index was 3013%, the lowest point was on March 16, 2020, after the 312 crash, and the highest point was on May 11, 2021. The maximum retracement of the public chain index was 36.4%, which occurred between February 18, 2021 and February 28, 2021. The maximum fall in the bear market for the public link index (as of June 20, 2022, when the data is available) was 72.5%.

If we compare the performance of bitcoin in the same period with the biggest rise, the biggest retracement and the biggest fall in the bear market, we will find that the public chain track as a whole has a better return to risk ratio than bitcoin. And, so far, the public chain track in the bear market did not show oversold situation, so the public chain in the bear market defense is not worse than bitcoin. (But assuming the bear market continues, do not rule out the public chain to fill the possibility of decline).

Public chain index and Bitcoin comparison & NBSP;

1.3 The trend of the maximum increase of each public chain is seriously differentiated: there are thousand-fold increase, and some are listed as highs

Next, LUCIDA does a separate data analysis on these 21 public links.

21 public chain bull market maximum rise bar chart

21 public chain bull market maximum increase

Let's look at the revenue part.

The chart above shows the biggest gains of 21 public chains in a bull market. The first is Fantom (FTM), which reached 144,198%, followed by Solana, with the largest increase of 50,152%.

LUCIDA also found that the maximum gains on the public circuit were spread widely:

Top tier: Fantom 144198%, Solana 50151%, Polygon 35434%, Harmony 22862%, Cardano 12287%& NBSP;

Second tier: Represented by Binance, Avalanche and Ethereum, the maximum increase is less than 100 times.

Third echelon: represented by Internet Computer and Moonbeam, listing is the peak.

Therefore, LUCIDA believes that public investment chains need to be carefully selected, or they are likely to be deeply ensnared.

1.4 The maximum retracement of each public chain is 60%, lasting for 2 months, and BNB is the most resistant public chain

Having said the distribution of returns, let's look at the risk part.

The green figure below is the time distribution of the maximum increase of 21 public chains; Most of the public chains began to rise from March to August in 2020 and peaked from September to December in 2021, with an average rising period of 467 days.

The red figure below shows the time distribution of the maximum retracement of 21 male chains. Most of the public chains experienced their maximum retracting from February to May in 2021, and stabilized and rebounded from June to August in 2021, with an average retracting period of 69 days and an average retracting range of 59.9%.

It is worth mentioning that BNB's maximum retracement was only 36.9%, and it only lasted 9 days to recover the decline, making it the most resilient of the bull market.

Ii. Development pattern of bull market public chain track from 2020 to 2022

Finished with the overall performance of the track, LUCIDA to sort out the pattern of the track. Ethereum is the clear leader on the public circuit, consistently holding more than 50% of the market. However, if we break down the public chain track in terms of TVL ratio and market cap ratio, we find something interesting.

Starting in February 2021, the TVL share of Ethereum has suddenly decreased, and BNB chains have suddenly risen. Led by BNB chains, Polygon, Solana, Tron, Avalanche and other public chains are squeezing Ethereum's dominance together.

Stack diagram of TVL proportion of major public chains

Statistically speaking, the collapse in Ethereum's market cap share was equally significant starting in February 2021.

Each major public chain market capitalization ratio stack chart

Note: The above data are from DefiLiama, which does not provide TVL data from Internet Computer, IOTA and Polkadot, and TVL data only started from August 2020, which will slightly affect the quantitative calculation of TVL proportion. But it should not affect the qualitative analysis of the text.

Three, 2021 bull market public chain logic & NBSP;

3.1 DeFi creates overcrowding in Ethereum

Ethereum interaction demand increased significantly after DeFi Summer in June 2020, resulting in a surge in Ethereum Gas. The liquidity mining launched by Compound blew DeFi off. In July, Token mining, named after food, took the crypto space by surprise. The high returns completely lit the crypto world on fire. At the end of the year, not only a large number of new projects come online, but also the original head projects become more dynamic.

With the DeFi boom, ethereum's daily Gas fees increased by more than 100 times from $447,000 to $49.55 million (June 2020 -- February 2021), with DeFi accounting for the highest percentage and fastest growing transactions.

Percentage of Gas cost & NBSP;

3.2 BSC is the first to seize the opportunity of public circuit

Ethereum Gas was high, DeFi enrichment effect was in full swing, and the huge demand gave new public chains an opportunity to catch up. The first to seize this opportunity was BSC (later renamed BNB Chain), which was officially launched in September 2020. Subsequently, Binance announced the establishment of a $100 million seed fund to support DeFi projects and developers on the BNB chain, further supporting CeFi and DeFi ecological synergy. February 2, 2021, online & NBSP; The five-month-old BNB Chain has reached a milestone -- one million unique addresses. On February 9, there were more than 1.6 million transfers on BNB Chain, surpassing the 1.32 million transfers on The Ethereum chain.

BNB 链通过兼容 EVM，承接了以太坊外溢的需求，又通过采用 BNB Token 参与项目打新，对 BNB chain 生态赋能。2021 年 2 月，BNB 链 DeFi 生态的爆发和 BNB 行情形成相互促进的呼应作用。

3.3 Polygon, Fantom, Harmony, Avalanche and other public chains adopt incentive mechanisms to promote development

随后 4-5 月爆发的 Polygon 同样兼容 EVM，和 BNB 链用 BNB Token 赋能的方式不同，Polygon 在 4 月底启动了 1.5 亿美元的激励基金，其中 4000 万美元流动性挖矿激励计划直接引入以太坊头部 DeFi 协议 Aave，2 个月时间，TVL 最高上涨 68 倍。

Ecological incentive has become the standard of subsequent public chain development ecology. In September and October 2021, Fantom, Harmony, Avalanche ($180 million), Celo, and NEAR launched incentive plans. Some public chains, such as the BNB chain and Polygon mentioned earlier, are evM-compatible, and Fantom is a better way to channel the Ethereum ecosystem.

3.4 Solana's strategy of "light technology, heavy ecology" realizes overtaking on curves

Solana 是公链 Token 涨幅第一梯队，它的崛起得益于轻技术、重生态的策略。相比 Avalanche、Algorand 等知名 PoS 公链，Solana 选择了较为中心化的技术方案，这使得技术实现难度大大降低，能够快速推出满足需求。为了使生态繁荣，Solana 团队及其投资人采取了一系列激励措施以激励用户体验他们的平台，例如引入流动性挖矿，为开发者提供补贴，举办黑客马拉松，提供捐款资金等等。

As you can see below, the Solana chain has attracted a lot of developers. In 2021, Solana Ecology will have the highest number of developers and the highest growth rate.

3.5 NFT again detonates demand for public chains

From the second half of 2020 to the first quarter of 2021, NFT was the largest source of public chain demand.

In the second quarter of 2021, NFT followed DeFi as the second application area to generate significant transaction demand. With the participation of various stars, NFT began to spread and go out of business, a large number of investors and projects emerged, and the transaction scale of NFT continued to expand. Ethereum, as the first public chain, has absolute advantages in capital, number of developers and ecological scale, and therefore has the most NFT projects. Meanwhile, other public chain NFT tracks are also developing rapidly. Solana Chain, for example, even bucked the trend with an uptick in NFT volume during the market downturn in May 2021. It is now the second largest NFT ecosystem after Ethereum.

3.6 Specific reasons for the moving logic of the male sprocket

Therefore, it can be said that the outbreak of this bull market is caused by the prosperity of the application layer and the lack of scalability of Ethereum. The moving logic of the male sprocket can be summarized for the following reasons:

- The DeFi boom has resulted in high Gas charges and congestion for Ethereum. This situation will continue until 2021, and the boom of NFT and GameFi wheel will continue to put forward requirements for the scalability of the public chain.

- The huge demand for all kinds of applications during the bull market enables the public chain with fast technology implementation and abundant capital to seize the opportunity to attract all kinds of applications to join the ecosystem.

- Different public chains have different resource endowments. Even if the general formula of "compatible EVM/ cross-chain bridge + ecological incentive" is also used, the specific strategies are different. BNB chains and Solana use flat Nt power, and Polygon introduces the Ethereum header DeFi protocol.

- EVM compatibility enables faster access to Ethereum achievements, including the Fork protocol and developers. 3.7 The technical difficulties of Cosmos and Polkadot and the slow landing are one of the reasons that affect the increase

Cosmos and Polkadot, for example, didn't enjoy much of the benefits of the bull market, starting with the technical difficulty and slow landing of the common chain, and the need to build a separate bridge to connect to Ethereum.

LUCIDA thinks this explains why Cosmos and Polkadot are only 12th and 15th on the list of 1.3 biggest increases for public links.

Four, the moat of the public chain

After a bull run, the new public chain attracted developers and users, and built its own infrastructure and app ecosystem. As V god said, the future will be multi-chain pattern, then what kind of moat has been established by each public chain after this bull market.

4.1 the etheric fang

Ethereum ranks second in the crypto market by market capitalization, with a long-term market capitalization of 17%-22%, which is significant for the overall crypto market. According to data in the Ethereum Ecology Report for the first quarter of 2022, Ethereum has 4,011 dApps and 7,220 smart contracts in stable operation.

Ethereum is the highest public chain in the moat, with a high degree of decentralization and security, a large number of users and a large number of developers. Complete infrastructure (wallet, predictor, developer tools), rich application types, network effect has been formed, with soil for innovation, has been leading the trend of blockchain application:

At the end of 2015, Ethereum introduced the ERC20 standard, which eventually led directly to the bull market caused by the lCO launch in 2017. In 2017, the issuance of smart contracts expanded the boundaries of blockchain technology, and blockchain entered the mainstream as the underlying technology. This round of market, ethereum market value ranked second laid the foundation, and drove the valuation of other smart contract platform and infrastructure sector; In ETH ecology, the number of DAPP has exploded, and the rising effect of NFT, chain game and bifurcation coin plate is obvious. ETH has initially become the anchor target of the shanzhai currency market.

The total cryptocurrency market cap peaked at $3 trillion during the cycle, with transactions on the Ethereum network exceeding $3.6 trillion. Ethereum's share of market value has risen to about 20% from 11% in early 2021. In this round of market, the plate rotation of ethereum ecology includes DeFi (DEX, AMM, liquidity mining, mortgage lending), NFT, Meme, GameFi, metaverse, etc.

(2021-2022Q1) In the small cycle of the encryption market, in addition to the continuation of NFT and DeFi hot spots, the market reconstruction of the valuation logic of the public chain has promoted the rising market of the public chain.

In the above process, the projects in each cycle of the Ethereum ecosystem will undergo a shuffle in the bear market, and only 10%-20% of the projects survive and grow to become important blue chip projects and common infrastructure in the next cycle.

Despite the multi-chain trend, the share of total lock-up value (TVL) on ethereum network has been diluted, and the two-tier expansion scheme has been implemented. In the case that the new public chain continuously distributes the developers, users and applications of Ethereum, Ethereum itself reduces the GAS fluctuation and the increase rate of ETH through the upgrade of EIP-1559, which opens the stage for several L2 protocols such as Optimism, Arbitrum and dYdX.

4.2 Binance Smart Chain

BSC was officially launched in September 2020. Shortly after BSC's TVL crossed the $15 billion mark in the second quarter of 2021, it more than doubled to $35 billion in ten days due to a sharp increase in the price of BNB and its derivatives such as CAKE and XVS.

5.19 加密市场大跌之后，BSC 成为黑客最活跃的攻击平台，连续发生 6 起攻击事件，闪电贷是最主要的攻击手法，损失金额普遍较大，币价短时受到极大影响。随着一系列负面催化剂冲击市场，包括损失 2 亿美元的 Venus 清算事件和价值 4500 万美元的 PancakeBunny 闪电贷攻击事件，创下历史新高所产生的欣快感很快消失了。漏洞利用的增加耗尽了用户的信心，并导致 Token 价格和 TVL 暴跌。从 2021 年 3 月起至 9 月，平均 TVL 市场份额保持在 15% 左右。

The BNB chain has the advantage of having a large user base and Binance's financial, technical, and human resources. The downside is that the network is highly centralized and the ecosystem relies heavily on the Ethereum developer community.

4.3 Solana

The Solana Protocol Mainnet Beta was launched in March 2020. Up to now, there are nearly 2,700 projects on Solana chain, covering 8 major areas such as DeFi, wallet, NFT, infrastructure, decentralized games and 15 sub-areas such as staboin, DEX and derivatives.

Solana has developed a relatively complete NFT ecosystem, such as project tools and trading markets. Magic Eden is a Solana-based NFT marketplace. In the early stage of development, it chose Solana, which is not EVM, to build because of its high performance advantages and focus on the vertical field of the game. Current trading volume accounts for the entire Solana; The ecological & have spent More than 97%. It's worth noting that Opensea has previously only supported Ethereum and started supporting Solana in April, but the vast majority of transactions for its head project Okay Bears are still done at Magic Eden.

Due to Solana's relatively low network fee revenue, it may not be possible to support a cash flow-based valuation model unless dAPP and usage increases or fees increase. Like BNB chains, Solana networks are highly centralized. With the expansion of the user scale, Solana network showed continuous instability, and there have been many times of downtime and block production events. From last year to this year, Solana has been down for a long time for many times. In the continuous accidents, people began to suspect that Solana's innovation mechanism did not really solve the "impossible triangle", but only saved the "efficiency" at the expense of "safety".

Five, the conclusion

公链 Token 的市场表现既具有爆发性，又有很好的抗风险性，是资产配置中非常重要的板块。从这一轮牛市的公链轮动爆发来看，尽管以太坊有先发优势，但公链格局还未成定数。不论是通过生态激励，更好的连接以太坊，或是引入爆款级应用，公链都能迅速占领市场份额。在公链正式上线或生态爆发之前早早透支预期的公链市场表现稍差，可以看出公链是由需求驱动的领域。

This bull market has benefited from the DeFi, NFT app explosion and ethereum processing power shortage, and whoever can provide the performance support and financial support needed for new apps can grow quickly. This logic is expected to be slightly different in the next cycle, because after the market has settled, high-quality apps that pass through Niu Xiong will occupy more markets, and the corresponding public chain of those apps will benefit.

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