Trending contracts – Weekly fundamentals #64

This newsletter focuses on the projects and smart contracts that are trending across blockchains. Let’s dig in!

Overview

The trending smart contracts on a blockchain reveal the popularity of specific decentralized applications (dapps) or functionalities, indicative of user demand and behavior. Analyzing usage patterns provides valuable insights to investors about market trends, potential areas of growth, and investment opportunities in the blockchain ecosystem and applications built on top of them.

Our trending contracts page ranks smart contracts based on 3 criteria: gas usage, transaction count, and active users over multiple time frames - from a day to a year.

Below are the top 10 trending dapps on popular EVM-based blockchains (L1) over the past year, ranked by gas consumption of the top 200 trending contracts.

• Ethereum Mainnet has emerged as a thriving NFT epicenter with OpenSea, Blur, and OpenSea Pro in the top positions. Collectively the top contracts of the three NFT marketplace platforms - OpenSea, Blur, and OpenSea Pro (previously Gem) have used more than $172m in gas fees and passed successfully more than 21m transactions over the past year.

• Ethereum was among the earliest blockchain platforms to support the creation and trading of ERC721 and ERC1155 tokens with OpenSea being the first, largest, and most well-known marketplace. Despite the high gas costs, Mainnet has gained traction as the go-to platform for NFTs, attracting developers, artists, and collectors, especially because of its security, ease of use, and smooth onboarding of new users. NFT trading tends to be easier to understand for new crypto adopters. This network effect has created a self-reinforcing cycle where the presence of a vibrant community attracts more participants, leading to increased activity, liquidity, and space for even more NFT marketplaces to be built on Ethereum, such as Blur and OpenSea Pro.
• High levels of NFT trading activity on multiple platforms on Ethereum could suggest growing interest and adoption of crypto. In the future, the diverse use cases of NFTs together with the competitive platform landscape are likely to attract more artists, content creators, and brands that recognize the value and possibilities of NFTs, driving the demand for NFT marketplaces on Ethereum. This presents opportunities for investors to support and participate in the expansion of the NFT ecosystem.

These rankings showcase the diverse interests and preferences of NFT traders, ranging from broad marketplaces to privacy-oriented and curated platforms.

• Avalanche stands out among the blockchains (L1) market sector with its high trading activity. Over the past 30 days, GMX’s and Trader Joe’s top trending contracts cumulatively have more than $1.37m in gas spent, 8.5m transactions, and 577k active users.

• Avalanche offers a high-performance consensus mechanism that enables fast transaction processing and confirmation times, creating an ideal environment for heavy traders. Traders can execute their trades quickly, taking advantage of market opportunities without delays or congestion. The network's scalability ensures it can handle a large number of transactions, even during periods of high demand, maintaining a smooth trading experience at a very low cost per transaction (average gas cost: 26.5 nAVAX( = 0,00000038 USD), Source: Snowtrace.io). Moreover, both GMX and Trader Joe offer competitive features, a user-friendly experience, cross-chain compatibility, and attractive token incentives that collectively drive the interest of users towards the Avalanche blockchain.
• The popularity of these platforms among traders drives the overall attractiveness of the Avalanche network for DeFi participants and investors. The diverse trading opportunities on GMX and Trader Joe combined with the network’s architecture work synergistically in positioning Avalanche as an appealing choice for traders looking to actively participate in the cryptocurrency market as well as for investors interested in cost-efficient blockchains with a large, active community.

• PancakeSwap holds the top spot on BNB Chain for all 3 metrics: gas used, transaction count, and active users. PancakeSwap’s contracts have consumed >15 times more gas than the runner-up. Looking at the other usage criteria: active users are also on top with almost 11m unique addresses having interacted with the smart contracts and more than 181m transactions over the past year.

• PancakeSwap's user-friendly interface, broad range of token offerings, and attractive yield farming opportunities contributed to its rapid rise in popularity. BNB Chain offers lower gas fees, faster block times, and quicker transaction confirmations compared to the Ethereum network. For example, the average transaction gas cost on BNB Chain is 3 Gwei compared to 29 Gwei on Ethereum (Sources: Etherscan.io, BSCscan.com). As a result, PancakeSwap users can execute trades and interact with the DEX with significantly lower costs, making it more accessible to a broader range of users. Moreover, the project's marketing efforts and community engagement have helped raise awareness and attract even more users to the platform.
• BNB Chain’s most used protocol has attracted a lot of interest towards the entire BNB ecosystem, serving as an onboarding ramp for users. PancakeSwap’s functionalities, community, and marketing have significantly contributed to increasing user interest in BNB Chain, making it a prominent player in the decentralized finance space and one of the top blockchains (L1).

For further analysis of trending projects on various EVM-based blockchains, check out Trending contracts on Token Terminal and filter By project and the desired time frame (1d, 7d, 30d, 90d, 180d, or 365d).

Momentum

Below are some of the most interesting trends in smart contract usage among key Ethereum Layer 2 scaling solutions over the past month.

• The most popular use case of Layer 2 scaling solutions for Ethereum, such as Arbitrum, Optimism, and Starknet, is exchanging assets. Looking at the most gas-consuming contracts on blockchains (L2), interoperability platforms such as LayerZero, StarkGate, and Stargate take the leading positions by gas usage over the past month across all 3 chains. They ensure the safe cross-chain transfer of assets from Mainnet. On the other hand, Router and Swap contracts are the entry point for users on decentralized exchanges (Uniswap, SushiSwap, 0x, Camelot, Velodrome, 10K Swap, JediSwap, MySwap) and DEX aggregator platforms (Odos, 1inch).
• The combination of scalability, cost efficiency, improved user experience, interoperability, and security make Ethereum L2s widely used for token bridging and asset exchange. L2s are inherently designed to remove the pain points of high gas costs and limited transaction throughput on Ethereum Mainnet, offering a more efficient and accessible environment for users to interact with contracts. For comparison, a simple swap transaction via Uniswap’s Universal Router costs on average 11.86USD on Ethereum while being only 0.27USD on Arbitrum and 0.33USD on Optimism (Source: Etherscan.io, Arbiscan.io, Optimistic.Etherscan.io). With their enhanced user experience and reduced transaction confirmation times, naturally, they are attracting greater user participation.
• With the increasing number of DEXs and DEX aggregator platforms on L2s, the future looks promising for these scaling solutions - opening up opportunities for a broader range of users, including retail investors and smaller participants, as well as more dapps. With more users bridging their tokens and participating in trading activities, the overall liquidity of tokens across different networks increases. This enhanced liquidity fosters a more vibrant and efficient market, allowing for better price discovery, reduced slippage, and improved trading experiences for users. Furthermore, this competition will foster innovation and drive the development of novel decentralized applications, financial products, and services, further advancing the capabilities and maturity of the blockchain ecosystems.

For further analysis of trending contracts on various EVM-based blockchains, check out Trending contracts on Token Terminal and filter By contract and the desired time frame (1d, 7d, 30d, 90d, 180d or 365d).

For further analysis of market, financial, and alternative KPIs data for specific blockchains and dapps, visit individual Project dashboards and corresponding Financial statements.

Other key highlights from trending contracts

• MEV Bots tend to be among the top gas consumers on Ethereum despite them not being user-facing applications. MEV Bots have a characteristic usage pattern of very high gas consumption and contrasting low active user counts. For example, the top 3 MEV Bots on Ethereum have spent almost $35m in gas fees over the past month while only transacting with 5 or fewer accounts.
• Gas consumption of MEV Bots is influenced by the specific tactics and mechanisms utilized in their custom algorithm. Fundamentally, MEV Bots aim to exploit the transaction ordering and block mining process to maximize their profits. To ensure success, they often use higher gas fees, which increases the likelihood of their transactions being included in the next block. Moreover, as seen from the transaction pattern on Etherscan, MEV Bots could be designed to attempt multiple transactions within a minute, which again leads to both a lot of gas spent and a large transaction count.
• MEV Bots' high gas usage can have a significant negative impact on Ethereum gas fees and network congestion. The bots’ competition for block space drives up gas fees for all users on the Ethereum network. In addition, by rapidly submitting multiple transactions to exploit arbitrage opportunities or manipulate prices, MEV bots generate a significant number of pending transactions in the mempool. This congestion results in longer confirmation times and delays for other non-MEV transactions, negatively impacting the overall user experience across the blockchain.

Disclaimer: Note that all screenshots were last updated on 21/05/2023 for both the 365d and the 30d view.

Video of the week

In this episode of the Fundamentals podcast, we’re joined by Shawn Tabrizi, Lead Developer at Polkadot. Polkadot is the first fully-sharded blockchain, i.e. it is a multi-chain environment. Polkadot enables scalability by allowing specialized blockchains to communicate with each other in a secure, trust-free environment.

00:00 Introduction
00:59 Polkadot’s core value proposition
02:17 The optimizations Polkadot has focused on
04:25 The problem that Polkadot solves for blockchain developers
08:55 The bet against blockchain maximalism
11:52 Building an unstoppable blockchain ecosystem
17:10 What is best suited to be built on Polkadot
20:02 The current Parachain landscape
21:20 The Substrate blockchain development framework
23:42 Polkadot's core contributors
28:04 Polkadot's economic model
32:18 What role do fees and revenue play in a blockchain's value accrual
35:27 What are the best metrics to measure/value a blockchain?
35:27 Quantifying the utility of a blockchain's native token
38:27 Current challenges
43:37 Growth drivers
43:16 What's next for Polkadot?

Product tip of the week

Tips for getting the most out of Token Terminal

We've added a search function to the Trending contracts data table. This should ease the discovery of project-specific contracts a lot.

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