Messari: Illustrates the performance of 14 L1 public chains in the first quarter

In terms of DeFi, Ethereum is still the main player in TVL, followed by BNB Chain and TRON. Stacks and Cardano outperformed other public chains, rising 276% and 172% respectively.

Original title: "Data Interpretation of the First Quarter Performance of 14 L1 Public Chains: Stacks Becomes a Dark Horse, and Network Utilization Rates Generally Decrease"

Author: Excerpted from Messari

Compiled by: Felix, PANews

Key Points

• Web usage did not recover as crypto markets rebounded in Q1. While L1's market share increased by an average of 83% quarter-over-quarter, network usage decreased by about 2.5%.

• Due to the emergence of Ordinals, the market has rekindled interest in Bitcoin programmable, Stacks outperforms other public chains in multiple indicators, reflected in market value (340%), revenue (218%), network usage (~ 35%), DeFi TVL (276%) and DEX trading volume (330%).

*Ethereum still leads on most key metrics including market cap, revenue, DeFi TVL and transaction volume, NFT transaction volume and full-time developers.

• Affected by USDC de-anchoring and Paxos stopping issuing BUSD, the dominance of the stablecoin market has shifted to USDT, benefiting TRON. The market value of stablecoins on TRON increased by 30% month-on-month to US$43.6 billion; the market value of all other stablecoins issued by L1 showed a month-on-month decline.

This report summarizes and compares the financial, network and ecosystem of 14 L1 blockchains. Including: Avalanche, BNB Chain, Cardano, Ethereum, Harmony, Hedera, NEAR, Polkadot, Polygon, Solana, Stacks, Tezos, TRON, and WAX.

financial analysis

Market Value

After a tumultuous 2022, the crypto market rebounded in 1Q23. On average, L1's market capitalization grew 83% quarter-over-quarter, but still fell 58% year-over-year. Stacks’ token, STX, performed well in the first quarter, driven by Bitcoin Ordinals, which reignited interest in Bitcoin’s programmable nature. On an absolute level, the market capitalization of ETH is still more than twice that of other public chain tokens combined.

income

Revenue here refers to the sum of all fees charged by the agreement. Due to relatively high usage and gas fees, Ethereum’s revenue of $457 million in Q1 was almost 2.8 times the total of all other L1 revenues. The most notable revenue growth was Hedera, up 489% quarter-over-quarter, driven in large part by increased usage of its consensus service, which provides verifiable timestamping and event ordering for Web2 and Web3 applications. These applications include tracking provenance, counting votes in DAOs, and monitoring IoT devices.

Market Ratio

The price-to-sales ratio shows the ratio of a token compared to its revenue. In the first quarter, TRON led with a price-to-sales ratio of 16 times, followed by Ethereum at 188 times. WAX is the only public chain with a high price-to-sales ratio outside the top 20 in terms of market capitalization. While most public chains generate revenue from transaction fees, WAX's revenue is driven by a 2% tax on the NFT marketplace.

TRON, Ethereum, Polygon, and Hedera were the only public chains whose market-to-sales ratio declined in the first quarter, that is, their revenue growth exceeded the growth of the token market value. On a quarterly basis, the public chains with the largest price-to-sales ratio increases are NEAR (100%), Solana (112%), and Harmony (156%).

Inflation

Inflation from PoS reward issuance is a transfer of wealth from holders to stakeholders. The higher the inflation rate, the better for stakers and the worse for holders, and vice versa.

BNB and ETH were the only deflationary tokens in Q1’23 at -5.4% and -0.2%, respectively. Both public chains will burn part of the transaction fees. Additionally, Binance buys back and burns tokens every quarter, which is the main reason for its deflationary pressure.

Token Circulation

In addition to PoS rewards, the unlocking of genesis tokens may also bring inflationary pressure. Genesis Supply Liquid measures the percentage of genesis tokens unlocked, excluding staking rewards. The metric is normalized between networks with capped supply (a fixed amount of staking rewards included in the initial distribution) and uncapped supply (unlimited staking rewards not included in the initial distribution).

With the exception of Avalanche, Hedera, NEAR, and Harmony, the tokens of most public chains are fully unlocked:

• About 95% of Stacks will be unlocked, and about 0.5% will be unlocked to the treasury in the second quarter of 2023.
• About 95% of Harmony will be unlocked, and about 0.6% will be unlocked in the second quarter of 2023 for ecosystem development.
• About 79% of NEAR is unlocked, and another 3% will be unlocked to grants, core contributors, and investors in Q2 2023.
• About 73% of Avalanche will be unlocked, and another 2.5% will be unlocked to strategic partners, foundations and core teams in the second quarter of 23.
• About 61% of Hedera is unlocked, and another about 4% will be unlocked in 2Q23. *Avalanche and Hedera have supply caps, these unlock percentages are genesis supply (excluding staking rewards) not total supply.

Actual Earnings and Eligible Supply Pledged

The distribution rate of PoS rewards is usually dependent on the percentage of staked supply and/or the number of validators. Low-inflation tokens such as BNB, ETH, and STX allow holders to use tokens freely without being penalized for not staking, thus resulting in lower staking rates. On the other hand, tokens with higher inflation rates are optimized for higher collateralization ratios. While liquidity staking allows staked tokens to also participate in the ecosystem, it often comes with poorer liquidity, smart contract risk, and different tax implications.

NETWORK ANALYSIS

User Activity

User activity is difficult to compare across different systems (such as EVM, SVM, and Antelope). Each architecture has a unique way of processing and recording transaction and address activity. In addition, the ratio of addresses to users is not 1:1, and the ratio varies from public chain to public chain.

Deal activity hasn't picked up as the market rebounded. The average seasonal flow change for daily transactions was -2%. Stacks was a notable exception: its growth in user activity slightly preceded the surge in STX price and ended the quarter up 34% quarter-over-quarter.

Note that Avalanche's data only includes C chain activity. Due to the launch of the subnet, C-chain transactions fell by 82.7% year-on-year. Including subnets, the average daily transaction volume increased by 130% year-on-year.

The average month-to-month change in daily active addresses was -3%. In terms of transactions, Stacks led the way with a 35% increase. Harmony's 28% gain was largely due to an unusual spike late in the quarter, but it didn't last.

Affected by the launch of Sweat Economy in mid-September last year, NEAR's average daily active addresses saw the largest year-on-year increase of 157%.

Only Avalanche C-Chain and WAX saw an increase in address growth in Q1. Avalanche saw a 56% increase in new addresses quarter-over-quarter. WAX grew 38% month-over-month.

Solana’s average transaction fee in Q1 was $0.0003, much lower than other L1s. The Solana development team has released several upgrades over the past year to improve its fee market and overall network performance.

Verifier

As expected during a market rally, total USD-denominated tokens staked grew month-over-month across all networks, with Stacks (403%) and Solana (125%) leading the way. The growth in total staked dollars per network was slightly higher than its market capitalization growth, indicating a net increase in native tokens staked. Ethereum’s security budget remains the largest at over $20 billion, with $32.6 billion in staked ETH at the end of Q1.

Like users, the number of validators is not fully standardized across the network. While it is easy to track the number of validators, it is more difficult to track the number of node operators. The validator ratio for each node operator varies from network to network, mainly depending on the staking weight mechanism.

• Ethereum: The upper limit of pledge weight is 32ETH (accounting for 0.0001% of the total pledge at the end of the first quarter).
• Avalanche: Staking weight is capped at 3 million AVAX (1.3% of total staked at the end of Q1 2013).
• Cardano: staking weight limit is determined by dynamic parameters, currently 70 million ADA (0.3% of total staking at the end of 1Q23).
• Polkadot: All active validators receive the same reward regardless of weight. The minimum stake weight is dynamic and is currently about 2.14 million DOT (0.3% of total stakes at the end of Q1).
• Harmony: Staking weight is limited between 85% and 115% of the median effective stake. *Ethereum has the lowest stake weight limit relative to its total stake. While there were over 560,000 validators at the end of Q1, there were far fewer node operators. According to ethernodes, there are over 3500 simultaneous physical validator nodes. This is probably an underestimate, as Nodewatch has roughly double that number, although it is unclear if Nodewatch also includes nodes other than validators.

Ecosystem Analysis

DeFi

TVL also increased in USD terms, as expected during a market rally. The quarter-on-quarter changes in market capitalization of most public chains are greater than TVL. This relationship potentially suggests that the increase in TVL is due more to price appreciation than to net capital inflows.

Nonetheless, Ethereum remains the main player in TVL, followed by BNB Chain and TRON. Stacks and Cardano outperformed other public chains, rising 276% and 172% respectively. From approximately February 17th to 22nd, the TVL of Stacks increased substantially, in line with the price increase of STX. Cardano TVL rose steadily throughout the quarter and benefited from the launch of several stablecoins detailed further below.

NEAR is an exception, its TVL declined throughout the quarter. The 22% month-on-month drop mainly occurred during the decoupling of USDC.

DeFi diversification measures the number of protocols that make up the top 90% of DeFi TVL. Ethereum scored 22 points for DeFi diversification, followed by Polygon (19), Solana (18) and BNB Chain (16). The ranking is broadly similar to that of TVL, with TRON being the notable exception. TRON ranks third in TVL ($5.4 billion), of which over 70% is in JustLend.

The average daily transaction volume of most public chains has increased month-on-month. Like TVL, Stacks and Cardano saw the largest quarter-over-quarter increases of 330% and 101%, respectively. On March 11, during USDC’s unpegging period, daily transaction volumes on DEXs soared, driven by Ethereum’s over $20 billion in transaction volume. This spike is almost double the peak during the previous Terra/Luna, Celsius, and FTX crashes.

Overall, stablecoin market capitalization continued to decline steadily over the past quarter, with several large stablecoin-related events:

The run on Silicon Valley Bank caused USDC to temporarily depreciate between March 10 and March 13, falling to a low of approximately $0.87. From March 10 to the end of the quarter, USDC’s market capitalization across all chains fell by 24%.

On Feb. 13, regulators directed Paxos to stop issuing BUSD, then the third-largest stablecoin behind USDC and USDT. From February 13 to the end of the quarter, BUSD’s market capitalization across all chains dropped by 52%.

Before the USDC unanchoring event, USDC was the head stablecoin of each blockchain, and Ethereum, Polygon, Solana, Avalanche, and Hedera all had native USDC issuances. Similarly, BUSD is the main stablecoin on the BNB chain, causing its stablecoin market cap to drop 31% month-on-month.

The aforementioned events caused some BUSD and USDC holders to convert to USDT, which increased USDT market capitalization by 17% from February 13 to the end of the quarter. TRON is the biggest beneficiary of this migration (since one of TRON's main use cases is holding and transferring USDT), its stablecoin market capitalization increased by 30% month-on-month.

Only Cardano’s stablecoin market capitalization increased by 262% month-on-month. Cardano does not have any USDC, USDT or BUSD and thus is not affected by the above events. Cardano's top two stablecoins by market cap, IUSD and DJED, launch in Q4 2022 and Q1 2023, respectively. Their continued growth is vital to the Cardano ecosystem.

The loan-to-value metric provides additional context for DeFi activities on public chains. Borrowing is generally where users trust borrowing and where the protocol makes money (from liquidation and borrowing fees), although heavy borrowing leads to more volatile liquidations. Note that DefiLlama's borrowing data does not include CDP debt. As such, Cardano, Stacks, and Tezos have been excluded from this analysis as all or most of their DeFi debt comes from CDP protocols.

Across all public chains, the total value of lending increased by 17% month-on-month. Along with TVL and DEX volume, Ethereum still dominates with nearly $4 billion, followed by BNB Chain at $735 million. Unlike these metrics, Avalanche leads Polygon, although the gap narrowed over the course of the quarter.

NFTs

Despite higher gas fees, Ethereum remains the premier venue for NFT activity. Blur established itself as a dominant player in the Ethereum market in 1Q23, gaining a strong foothold through a token offering and an airdrop in mid-February. According to hildobby's Dune dashboard, Blur's average weekly volume share increased from 31% to 59%. Only Polygon outpaced Ethereum in terms of quarterly average daily transaction volume, with a 101% quarter-over-quarter increase.

Ethereum also leads the way in terms of daily unique NFT buyers, up 88% month-on-month. At the end of February, Coinbase launched a commemorative NFT on Ethereum to celebrate its Base launch. The "Base, Introduced" series was minted for free within a few days, reaching a peak of over 122,000 unique buyers on February 26.

Only Polygon surpassed Ethereum in quarterly average daily unique buyers, up 89% quarter-over-quarter.

While this metric for Tezos has declined sequentially, Tezos’ NFT buyers increased to an average of over 10,000 in the week following the launch of the free McLaren F1 collection at the end of the quarter.

Developer

Developer data is always imperfect, but Electric Capital's developer report sets the best bar for measuring developer activity. It defines a developer as an author who contributes original, open-source code to the ecosystem, and a full-time developer as a developer who contributes original, open-source code more than 10 days per month.

Across the 14 chains, the number of full-time developers decreased by 4% month-on-month. Ethereum is down only 0.1% and remains the top ecosystem for developers. The number of full-time developers on Ethereum is 1976, which is almost equal to the sum of all other public chains. Hedera saw the highest increase in the number of full-time developers, up 28% quarter-over-quarter to 64.