Blockchain explained in plain english
Understanding how blockchain works and identifying myths about its powers are the first steps to developing blockchain technologies
Crypto can mean different things to different people. For Alex Svanevik and Nansen, it means mostly smart contracts, DeFi and DAOs, with some NFTs thrown in for good measure.
Nansen is a blockchain analytics platform that analyzes 100M+ labeled wallets and their activity on Ethereum, Polygon, Avalanche, and many other Level 1 and Level 2 blockchains . Today, Nansen released its first State of the Crypto Industry Report , covering notable trends and insights across the cryptocurrency, NFT, and DeFi markets over 2021.
We caught up with Nansen Co-Founder and CEO Alex Svanevik to discuss the report’s findings, highlighting statistics and movement within key sectors of the blockchain industry as well as an outlook for 2022. Ethereum is not the only game in town
Svanevik has a background in data science and analytics, and got into the blockchain scene in 2017. Nansen is an effort to apply data science and analytics and analytics in blockchain in order to gain insights. Nansen keeps tracks of transactions and wallets on a number of different blockchains, and combines that with other data.
Overall, 2021 has been a good year both for crypto at large, and for Nansen. The company grew from 7 to 80 people, which means there now is enough bandwidth to embark on this type of analysis to publish findings for a report.
When asked about the sources that Nansen uses to correlate with blockchain transactions, Svanevik said that it’s mostly domain knowledge applied by analysts internally. Transactions and addresses on blockchains are anonymous, but people with domain knowledge and access to historical data may be able to establish patterns and derive heuristics, which is what Nansen does.
One thing which is immediately notable about Nansen’s report is the blockchains it includes . Besides Ethereum, which is an obvious choice, the analysis includes Avalanche , Binance Smart Chain (BSC), Celo , Fantom , and Polygon . Admittedly, there are some big names missing, with the most obvious one being Bitcoin.
As Svanevik explained, Nansen focuses on blockchains supporting smart contracts. More specifically, blockchains compatible with the Ethereum Virtual Machine (EVM). EVM is the software platform developers can use to create decentralized applications (dApps). This virtual machine is where all Ethereum accounts and smart contracts live.
This choice was made for a number of reasons. Some of them are practical, as focusing on the EVM enables Nansen to track transactions seamlessly across blockchains that leverage it. The underlying principle here is that smart contracts are the most interesting part of blockchains. Nansen will also include non-EVM compatible blockchains in its analysis on a customer-demand basis, starting with Solana and Terra . Nansen State of the Crypto Industry Report for 2021 The key theme that emerges is that Ethereum is no longer the only smart contract blockchain platform with real usage, as crypto decidedly went multi-chain in 2021. Ethereum, however, still remains the biggest blockchain by TVL (Total Value Locked) and Market Cap.
The report notes that since the boom during DeFi summer 2020, high gas prices on Ethereum have been fluctuating due to congestion on the base layer. This gives rise to opportunities for L1 and L2 solutions to flourish as the much needed scalable solution. Contract deployment has also remained rather low recently due to cheaper alternatives in other blockchains, with EVM compatibility enabling interoperability.
Avalanche saw a meteoric rise in transactions and price, triggered by a $180M incentive program, $230M raise from notable VCs as well as the multiple launches of quality applications on the chain.
BSC daily active addresses are the highest among all L1s. At its peak in late Nov 2021, the daily transactions on BSC was 1,345% of Ethereum’s. Transaction activity on Celo has gone up over 4x since June; its TVL reached $1.2B in late Oct.
Daily active addresses on Fantom increased 440%, TVL went from ~$1B to over $6B. Polygon has about 300% more transactions than Ethereum, but its daily gas paid in USD is often less than 0.5% of Ethereum’s. Smart contracts
Svanevik thinks that smart contracts are important for a number of reasons. First, they are unique in that they are autonomous — they don’t need to be invoked. Assuming there are no bugs and vulnerabilities, smart contracts are always up and running. Smart contracts also allow for composability and permissionless innovation:
“If you have made a smart contract, which allows people to perhaps borrow, borrow and lend […]
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