This is our first newsletter in a series focused on evaluating the top Layer 1 ecosystems. We’ve built out a MVP product (GokuStats) that tracks the core metrics for each chain. Going forward, this newsletter will attempt to unpack the movement we see in these metrics, though in our first letter we wanted to introduce the product.
We’re adding breadth and depth to GokuStats at a rapid pace, and we’d love your feedback as we continue to build the product and create content. Whether you’re a fundamental investor, or just interested in understanding crypto / blockchain / web3 metrics more deeply, email us at email@example.com and connect with us @Artemis__xyz on Twitter. We can’t wait to hear from you!
Our Initial Metrics
We are in the process of building out detailed content on the key metrics in crypto, why they matter, and what nuances to consider when valuing and comparing chains, protocols and projects. In the interim, we wanted to provide a brief explanation of the metrics we cover today, and why we chose to start here.
Daily Active Addresses
What is it? The number of unique addresses on the sending or receiving end of an on-chain transaction in a rolling 24 hour period.
Why does it matter? While it is not a perfect proxy for unique users (a user may have multiple addresses), looking at unique addresses over time is a generally helpful indicator of the size, health, and growth, of a blockchain’s community. In this way, it is a helpful “top of the funnel” metric, and can be viewed akin to how traditional investors might view active users, buyers, or sellers in the context of analyzing an internet or marketplace business.
What is it? The total number of transactions registered on-chain in a rolling 24 hour period.
Why does it matter? Transaction count is an indicator of the quantity and velocity of on-chain activity (but not the value). Given that it can be quite volatile, one can consider rolling averages which will smooth the trend, such as averaging the daily transactions in a rolling weekly or monthly period (we are currently building this functionality). Looking at address and transaction data together can also be helpful in dis-aggregating growth from new users vs. existing users.
Total Value Locked (TVL)
What is it? TVL represents the value “locked” in an L1’s DeFi platforms, generally in the form of tokens used for lending, staking, or liquidity pool participation. In that sense, TVL represents the value of the tokens currently attempting to capture token rewards and interest on various protocols.
Why does it matter? TVL is a helpful proxy for the size and health of an L1 chain’s DeFi ecosystem. But, TVL is often denominated in USD rather than an L1’s native currency, meaning that swings in a token’s price relative to USD will highly correlate to swings in TVL. For this reason, it is helpful to consider net flows into or out of TVL in native token terms (also available on Goku Stats!). There is much more nuance to this metric that we will unpack in a later deep dive.
What is it? The most straightforward metric, price is simply the token’s trading price.
Why does it matter? This represents how the market values a unit of the L1’s native token. While much of the price action in crypto has historically has been driven by speculation and technicals, we believe that fundamental valuation frameworks will become increasingly relevant and important.
What is it? Market cap is derived by multiplying the token’s price by the number of circulating tokens (cumulative issued - cumulative burned). It is also important to consider the fully-diluted market cap, which considers the maximum # or long term estimate of circulating tokens instead of the current number (we are currently incorporating this view).
Why does it matter? Market cap is the simplest proxy for the overall economic value of a network. It is one of the most popular points of comparison across crypto assets, and between crypto assets and traditional financial assets. It also serves as the basis for many multiples based valuation paradigms (such as Market Cap / TVL, seen below). That being said, unlike traditional ownership shares, L1 tokens often have commodity and currency like characteristics. Therefore (and depending on the chain), market cap can also be considered the monetary base servicing an L1’s economy, very different from the market cap of a traditional company. This introduces complexity around comparing and valuing chains. As with TVL, Market Cap is a nuanced metric that we will break down separately in a future post.
Thank you for tuning into our first newsletter, and we can’t wait to share more content with you going forward. As we said at the top, we’d love honest feedback on any and all of the above, and are excited to continue building things with the crypto community.