ON–034: L1s & L2s (Part 2)

Coverage on SKALE Network, Decred, Bitcoin, and Tezos.

Aug 14, 2020

  • Custodians: The first spikes of account growth from October to December 2019 were initiated by exchanges like Coinbase and Binance who introduced custodial staking services. Today custodians secure 25% (166M) of the entire Tezos network (680M, 80% staking ratio) and managed 20% (166M) of the total supply (846M). Although custodial growth has slowed recently, they still grow 8% month over month combined, Binance alone even 42% in July.
  • Non-Custodial Staking: The success of custodians ignited a tremendous interest in Tezos staking overall which spread across all the 120+ public staking services and 250+ private staking operators. The past three months since May 2020 saw the strongest growth in new delegators ever recorded (+7,500) and almost the lowest churn rate (7%). Looking at total delegated volume we can conclude that the majority of new users are small investors. In fact accounts between 1 and 1000 tez grew by 10% (+6,200) in July suggesting that everybody who invested in Tezos also staked.
  • Adoption: Behind the scenes, a growing number of entities are working on DeFi building blocks like token standards, multiple DEXs, oracles, stablecoins, STO exchanges, real-estate tokens and governance tokens. Tezos' learning curve is steeper, but we still see a linear increase in deployed contracts and growing diversity of contract interfaces. Since Tezos smart contracts are hard to upgrade (its not impossible but still complex) most developers just deploy a new version, maybe with a slightly different interface. That's why not every unique contract interface belongs to a different project.
  • Smart Contracts: Overall activity on Tezos Mainnet is steadily growing and gas usage has reached its all-time high recently. Most of the gas growth can be attributed to regular spend transactions and higher delegation activity, while the number of contract calls slowly declined. Reason for the decline from its high in 2019 is that users are phasing out their delegation contracts and replace them by more efficient delegations from regular addresses which became possible with the Babylon network upgrade in October. The recent uptick in contract call activity can probably be attributed to the first price oracle from Kaiko which started operating in early August.

About the editor: Spencer Noon is Head of Investments at DTC Capital.