The Layer 2 wars are heating up π₯
The ultimate thread evaluating some of the top Ethereum L2 projects.
L2β£π§΅π
The ultimate thread evaluating some of the top Ethereum L2 projects.
L2β£π§΅π
I have looked at all projects related to Ethereum layer 2 solutions, including generalised L2s (Polygon) and application specific L2s (dYdX). To keep the length of this thread down, I have had to exclude some great projects that didnβt quite make my top 5.
For my research framework, I have decided to use @thedefiedge method to evaluate projects. I then provide a scorecard for each project based on my analysis. So be sure to read through to the end for the results!!
1. Are they generating revenue?
Taking a dive into @tokenterminal reveals some really interesting stats. Total revenue (fees) paid over the last 180 days
- dYdX $212.2m
- Arbitrum$13.7m
- Polygon $8.8m
- Optimism$8.5m
- Loopring$2.5m
Taking a dive into @tokenterminal reveals some really interesting stats. Total revenue (fees) paid over the last 180 days
- dYdX $212.2m
- Arbitrum$13.7m
- Polygon $8.8m
- Optimism$8.5m
- Loopring$2.5m
As you can see in the charts, dYdX is absolutely crushing it compared to the other projects. Arbitrum comes in 2nd place but you can see that over the past month, Polygon has been on a tear and has been gaining significant momentum.
2. Whatβs in the protocolβs treasury
Some improtant factors regarding treasuryβs are
- Are they diversified with different assets or is it just their native token (more risk)
- How big is the treasury and how much runway does that give the project?
Some improtant factors regarding treasuryβs are
- Are they diversified with different assets or is it just their native token (more risk)
- How big is the treasury and how much runway does that give the project?
Polygon- Itβs quite difficult to find any information about the size and contents of the Polygon treasury. However, we know that $1bn was recently committed for ZK proof development projects. We can assume the total treasury is much larger than that.
Optimism- 30% of the initial token supply (1.29b OP) will be allocated to the community fund (Ecosystem fund + RetroPGF) = approximately $1.85b worth of OP tokens (based on current price of $1.43).
dYdX- 5% of the initial token supply (50m DYDX) was allocated to the community treasury. At todayβs price ($2.27) this is around $113m.
Loopring- 20% of token supply (275m LRC) was allocated to the LEAF = approx. $110m worth of LRC tokens (based on current price of $0.40)
Loopring- 20% of token supply (275m LRC) was allocated to the LEAF = approx. $110m worth of LRC tokens (based on current price of $0.40)
3. Locked up funds
If most of the tokens are still locked up in vesting schedules, this could cause significant sell pressure in the future (you donβt want to be VCs exit liquidity). Graphs and info from @MessariCrypto and @coingecko
If most of the tokens are still locked up in vesting schedules, this could cause significant sell pressure in the future (you donβt want to be VCs exit liquidity). Graphs and info from @MessariCrypto and @coingecko
Polygon- approx. 92% of all supply has already been unlocked. The final 800m tokens will be unlocked by May 2025. Current liquid supply = 9.18m out of total supply of 10b.
Optimism approx. 5% of all supply has already been unlocked through the airdrop. Current circulating supply = 215m out of total supply of 4.29b.
dYdX- approx. 11% of all supply has already been unlocked. Current liquid supply = 112m out of total supply of 1b
Loopring- approx. 90% of all supply has already been unlocked. Current circulating supply = 1.245b out of total supply of 1.374b.
4. Utility and use case
Polygon- The MATIC token is used for paying transaction fees in the network. You can also earn staking rewards on your MATIC as reward for securing the network.
Polygon- The MATIC token is used for paying transaction fees in the network. You can also earn staking rewards on your MATIC as reward for securing the network.
Arbtirum- Does not have a token yet but the network itself has huge utility and offers cheaper transaction fees and scalability whilst maintaining Ethereumβs security.
Optimism- the right to blockspace is the sustainable source of revenue that drives OPβs economic model and grows with the network itself.
dYdX is essentially a governance token and holders can also receive trading fee discounts based on the size of their positions.
dYdX is essentially a governance token and holders can also receive trading fee discounts based on the size of their positions.
Loopring- Protocol fees are distributed to both Liquidity providers, insurers and the DAO. Incentivizing good behaviour for holders of the token.
5. Roadmap
Polygon have just announced that they will be implementing the first EVM-equivalent ZK L2. @sandeepnailwal is also targeting full decentralisation of the chain in 2-3 years. A strong pipeline of product development is in the works including decentralised digital IDs.
Polygon have just announced that they will be implementing the first EVM-equivalent ZK L2. @sandeepnailwal is also targeting full decentralisation of the chain in 2-3 years. A strong pipeline of product development is in the works including decentralised digital IDs.
Arbitrum has not published a full roadmap yet but there is speculation that they will also release a native token through air-drops at some point.
Optimism lays out its roadmap in the below graphic.
Optimism lays out its roadmap in the below graphic.
dYdX is planning to become fully decentralised by the end of 2022 with their V4 release. This seems to be their main focus and would be a huge milestone for the project.
Loopring has a few big upgrades planned for 2022- Loopring earn and zkEVM.
Loopring has a few big upgrades planned for 2022- Loopring earn and zkEVM.
6. Success breeds copycats
The 5 projects on this list all are very similar in nature. Polygon, Optimism and Arbitrum are all competing for the same slice of the pie to be the best layer 2 scaling solution.
The 5 projects on this list all are very similar in nature. Polygon, Optimism and Arbitrum are all competing for the same slice of the pie to be the best layer 2 scaling solution.
At this stage, Polygon is the clear number 1 from a marketcap and βmoatβ perspective. However, both Arbitrum and Optimism have gained significant adoption and are growing quickly.
7. Team and funding
Total funding stats I have sourced from @crunchbase
The Polygon team is fully doxxed (Anurag Arjun, Jayant Kanani, Mihailo Bjelic and Sandeep Nailwal) and has backing from some of the most prominent investors in the space ...
Total funding stats I have sourced from @crunchbase
The Polygon team is fully doxxed (Anurag Arjun, Jayant Kanani, Mihailo Bjelic and Sandeep Nailwal) and has backing from some of the most prominent investors in the space ...
..(Alameda, Binance Labs, Coinbase Ventures). Total funding of $451.5m.
They also have announced some huge partnerships recently (Disney, Reddit, Meta, Stripe, Draftkings) showing their business development is on point.
They also have announced some huge partnerships recently (Disney, Reddit, Meta, Stripe, Draftkings) showing their business development is on point.
Arbitrum also has a fully doxxed team with prominent backing (Pantera, Alameda, Mark Cuban, Coinbase). Offchain labs- the parent company has a total of $123.7m of funding.
The man himself Vitalik is a big fan of Optimism and has shown support for their new governance structure. They have some heavy backing from a16z, Paradigm and IDEO forming a total of $178.5m of funding.
dYdX has $87m of funding from some prominent investors including Hashkey, Starkware and a16z. Their team is also fully doxxed.
Loopring has $45m of funding from Kosmos ventures, G2H2, Neo, Fundamental labs and Obsidian.
8. Conclusion
I have given each project a rating between 1-10 for each category based on my research and analysis. As you can see, the clear winner is Polygon.
I have given each project a rating between 1-10 for each category based on my research and analysis. As you can see, the clear winner is Polygon.
The project is the most mature, has the biggest market cap and is really gaining some momentum of late due to the upcoming Ethereum merge. However, the other projects are extremely promising and also have great potential for success in the long run.
These are NOT simple buy recommendations for any of these projects. This is just my objective opinion and research that I have conducted to learn more about the L2 space. Please do your own research before you invest in any project.
Let me know what you think of this evaluation method? Do you agree with the scores I have given and ratings? Drop your thoughts in the comments below.
If you enjoyed this thread, please like, retweet and follow me @jake_pahor for more content like this.
If you enjoyed this thread, please like, retweet and follow me @jake_pahor for more content like this.
Original thread below.
Tagging some people who might find this interesting- appreciate a retweet π
@rektdiomedes
@Prof_Crypto_B
@Dynamo_Patrick
@0x_illuminati
@shivsakhuja
@brew_defi
@shadibarhoumi
@burstingbagel
Tagging some people who might find this interesting- appreciate a retweet π
@rektdiomedes
@Prof_Crypto_B
@Dynamo_Patrick
@0x_illuminati
@shivsakhuja
@brew_defi
@shadibarhoumi
@burstingbagel
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