Gm Nansen Explorers,
Welcome to this week's edition of Nansen's Weekly Research Roundup, where we bring you the latest research reports from our team. Lets dive in!
1. A Primer on Bitcoin's Wild West: Ordinals and BRC-20
In our latest report, Osgur delves into Bitcoin's unique spin on NFTs - Ordinals, and the fungible BRC-20 tokens built atop them. Ordinals attribute unique identities to individual satoshis on Bitcoin that can be inscribed with up to 4MB data. This enables on-chain digital artifacts on Bitcoin. BRC-20s are fungible tokens, that despite their limitations, have gained enormous popularity as speculative assets, surpassing $1b in market cap 2 months after the first collection. Concerns around centralized businesses needing to index these tokens, and state bloat from the new activity around the chain make them controversial. Despite these, they have greatly boosted on-chain activity and transaction fees on Bitcoin. This benefits Bitcoin miners and gives life to the argument that in the future transaction fees will be able to support the network.
2. State Of Ethereum: A Post-Shapella Update
In the aftermath of the much-anticipated Shapella upgrade, the Ethereum network remains robust, with withdrawals from the Beacon Chain being largely offset by deposits, resulting in net zero impact. Despite concerns of a potential sell-off, current statistics indicate that selling pressure post-withdrawal has been minimal, thanks to the elimination of unstaking risks and the fact that a significant portion of withdrawn ETH is not intended for selling. Notably, the majority of withdrawals have been made by exchanges, accounting for about 69.3% of total withdrawals. This is led by Kraken, which has withdrawn approximately 26.3% of all ETH since the upgrade, largely due to regulatory constraints. The network currently anticipates the circulation of 25k-35k ETH per day from the Beacon Chain, while only 0.78% of ETH is scheduled for withdrawal, indicating continued strong investor confidence in the Ethereum ecosystem. Tharm and Niklas cover the impact of the Shapella upgrade and key data points.
3. Exploring the Rollups-as-a-Service (RaaS) Landscape
Rollups-as-a-Service (RaaS) solutions are simplifying the process for developers to deploy rollups, leading to the creation of application-specific chains and customizable execution layers. The five main types of rollup designs - General Smart Contract Rollups, Sovereign Rollups, Settlement Rollups, Enshrined Rollups, and Base Rollups - all have distinct characteristics and uses. RaaS projects are typically categorized into SDK and No-Code solutions, with gaming being the most popular use case. Interoperability will be a critical component in the future of RaaS and Rollup-SDKs, with projects like Hyperlane working to create a unified interface for inter-chain communication. The modular blockchain thesis, which proposes that blockchains can be divided into settlement, data availability, and execution components, is paving the way for more application-specific chains and an increasingly interconnected blockchain ecosystem. Sandra dives into the RaaS landscape and gives a comprehensive primer on it.
4. Falling Dominos
The Federal Reserve (Fed) is expected to maintain steady rates amidst weakening growth, potentially causing a hard landing and revisiting crypto's 2022 lows. However, if the Fed rescues another banking "falling domino", this could be bullish for crypto. In the meantime, turmoil continues in the banking sector, with potential significant impacts on US loan growth. Monetary and fiscal policies in the US are becoming less accommodative, which is bearish for risk assets unless the Fed pivots. The European Central Bank (ECB) maintains a hawkish stance, further intensifying the argument for a weaker US dollar. Aurelie shares key data points on the macro situation and gives us her thoughts on possible implications for the broader crypto market.
That's a wrap for this week! We hope you found this content to be valuable and informative. If there's anything you'd like to see in future issues, just let us know. To get notifications on report releases, please follow us on Telegram.
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