GameFi is showing signs of a mature landscape: Report

May 2, 2022 Coin Telegraph

New industry report on the GameFi landscape traces its development from the embryonic stages to an established industry.

Blockchain games are set to overtake decentralized finance (DeFi) as the number one contributor to decentralized application (DApp) activity in terms of uniquely active wallets. A new 18-page report by DappRadar surveys the nascent ecosystem behind this rise.

Although still dwarfed by the traditional gaming industry, blockchain games, sometimes dubbed GameFi, have seen an early spurt of exponential growth, according to the report’s data.

“The evolution of blockchain games” report, which discusses play-to-earn (P2E) as a new paradigm for gaming, is available on the Cointelegraph Report Terminal to purchase. It details how the play-to-earn model gained traction in the COVID-19 pandemic when players from emerging economies were seeking new sources of income. In Q2 of 2021, which was notable for a quarter-over-quarter growth of 503%, Wax’s successful space mining game called Alien Worlds was one of the main profiters. Other key players in the space included Axie Infinity, Decentraland, Splinterland and Upland.

The report projects that although resistance from the traditional gaming industry and mainstream media are still considerable due to negative press coverage, an improving understanding of blockchain technology could assuage those concerns. The researchers argue that increased public awareness of comparatively energy-frugal proof-of-stake (PoS) technology and the possibility of robust ownership of in-game assets could make GameFi fit for the mainstream in the long run. They conclude that “the horizon for blockchain games is opening up quickly.”

DappRadar also breaks down the development of GameFi on different layer-1 ecosystems. Some games have grown large enough to sustain their own blockchains such as Axie Infinity with the Ronin blockchain, DeFi kingdoms with the Harmony Protocol or Splinterlands with Hive. Moving to dedicated chains may be a way for blockchain games to deal with scalability issues that still plague some projects.

Download the full report complete with charts and infographics from the Cointelegraph Research Terminal

For example, Polygon, which was developed as a layer-2 solution to deal with Ethereum’s notorious scaling problems, has not been entirely able to withstand the transaction volume generated by GameFi. At the start of this year, it suffered heavily under the agriculture game Sunflower Farmers and saw transaction fees spike to 500 Gwei. Although such technical teething problems will concern developers in the space for some time, the overall conclusions of the report are positive.

The accelerating influx of venture capital investments is one of the strong signs that the field is consolidating as an industry, the report argues. While only $70 million were raised by blockchain game companies in 2020, the sector attracted $4 billion in VC investment in 2021 and has already seen an influx of another $2 billion in the first quarter of 2022. With the rise of dedicated VC companies such as Hong Kong-based Animoca Brands, GameFi is likely to gather further momentum through dedicated infrastructure.

An assessment of the interplay between DeFi, NFTs and the Metaverse completes the comprehensive analysis. The increasing interoperability, decentralization and democratization of games made possible through the symbiosis of these technologies promise an exciting future. The full contents of the report can be viewed here.

This article is for information purposes only and represents neither investment advice nor an investment analysis or an invitation to buy or sell financial instruments. Specifically, the document does not serve as a substitute for individual investment or other advice.

Can Terra blockchain sustain its growth? Research report digs deeper

April 26, 2022 Coin Telegraph

Coin Telegraph

It only took Terra one year and 22 protocols to become the second-largest DeFi blockchain. How was it achieved, and for how long will it remain on top?

Cointelegraph Research fundamentally evaluates Terra in its 50-page report to provide an in-depth analysis of its recent updates, including Columbus-5, the Bitcoin (BTC) acquisition and others.

Decentralized algorithmic stablecoins, blockchain integration in real-world payments and 20% APYs on decentralized finance (DeFi) protocols — what is all of this, and is it really doing this? The team of experienced crypto analysts from the Big Four and the best universities worldwide dives deep into the blockchain’s ecosystem, community and underlying technology, assessing the potential regulatory, market and technological risks.

Terra is a proof-of-stake blockchain ecosystem that aims to introduce cryptocurrencies as a means of payment to a broad audience. The team has successfully integrated the dual token model, where the minting and burning of the LUNA token control the supply and price of Terra’s stablecoins, including Terra USD (UST), TerraGBP, TerraKRW, TerraEUR and the International Monetary Fund’s TerraSDR.

Moreover, the fluctuations in mining rewards are minimized through transaction fees and LUNA’s burn rate variations. Notably, the rewards are programmed to increase as the blockchain’s ecosystem grows.

Simultaneously, multiple developers are working on innovative decentralized applications (DApp) on top of the Terra blockchain, including Mars Protocol, Anchor and Chai. Numerous companies, such as Kado, have established the payment infrastructure. There are some nonfungible token (NFT) market participants, too, where Levana, Talis and Knowhere are aiming to create a thriving ecosystem. Simultaneously, TFM, a DeFi and NFT aggregator on Terra, aims to unite the whole Terra ecosystem and become the ultimate go-to place for newcomers.

Read the full report on Terra to find out how the blockchain network has developed over the past year.

However, the questions rarely raised by the crypto influencers are the decentralization and regulation issues. Will Terra sustain rapid development with only 130 validators? What would happen if UST, the most abundant Terra stablecoin, was subject to the United States Securities and Exchange Commission’s regulatory measures? Finally, if one of the most popular DApps, the Anchor lending protocol, had crashed at the end of January 2022, how would the continuing development of Terra have been perceived?

Move-to-earn: An active play-to-earn offshoot

April 18, 2022 Coin Telegraph

Coin Telegraph

Does it look like the move-to-earn games are the next big thing in the gaming sector? Genopets and Dustland Runner, STEPN and others are making moves to make it happen.

Play-to-earn (P2E) games continue to dominate the crypto industry as more than half of the active wallets tracked by Dappradar have connected to blockchain-based games in the first quarter of 2022. Games like Axie Infinity — even with last month’s catastrophic Ronin bridge hack — Pegaxy, Alien Worlds and others continue to put up millions of dollars in trading volume in the previous 30 days.

Despite this, the unsustainability of some P2E games grows more evident in the performance of their tokens. An example is Axie Infinity, whose Smooth Love Potion (SLP) is still at depressing levels, causing further declines in unique wallet addresses that interact with the game for a third straight month.

Now, an offshoot of the P2E model called move-to-earn (M2E) has been captivating crypto fans lately. The industry’s new buzzword follows the play-to-earn model but centers on health and fitness, where users are rewarded for their physical activity. Genopets and Dustland Runner are just some projects utilizing the M2E model, but STEPN seems to be attracting the most users at present.

STEPN is a Solana-based game that lets users purchase nonfungible token (NFT) sneakers to start playing. When users play the game, the app tracks their movement through the GPS on their mobile phones and rewards them with in-app tokens called Green Satoshi Token (GST). These tokens can later be traded for USD Coin (USDC) or Solana (SOL), allowing users to realize their earnings.

What’s the hype all about?

The interest around STEPN is due to its governance token Green Metaverse Token (GMT) going parabolic, appreciating 24,500% since its token sale on Binance on March 9. Venture capital firm Sequoia Capital and other Web3 investors have also invested in STEPN, purchasing $5 million worth of GMT in a seed funding round back in January. GMT’s rise can be attributed to its rapid user growth as the larger crypto crowd caught on. For instance, STEPN’s Twitter followers had hit 250,000 when it was just under 50,000 a month ago.

Another Axie Infinity in the making?

The common criticism of the P2E model is that it exhibits pyramid scheme elements where only the earliest players benefit immensely — and, of course, the game company. This is because newer players buy game assets from earlier players. Then, these newer players sell to even newer players, thus creating an economy where everyone’s profitability hinges largely on incoming players. As a result, token and asset prices decline as the market is overcrowded with sellers.

STEPN tries to address these issues via “strong” token sinks. GST is burned whenever a new sneaker is leveled up, minted, or repaired. The repair cost alone is mandatory to prevent a decline in user earnings. It also tries to attach as much intangible value to in game-items such as the social benefits it offers through encouraging physical activity.

Another is the aesthetic feel its NFT sneakers provide. STEPN recently partnered with Japanese sportswear brand Asics and launched limited-edition sneakers. Currently, GST trades at $4.41, which is actually a 65% increase from its price at the start of March.

Not a cheap game to play

However, for the average Axie Infinity player, STEPN is not a cheap game to play. Sure, the cost of one Axie perhaps was a couple of hundred United States dollars in 2020, which translates to roughly $600 to build a team and start playing. But, now, the bottom price for an Axie is less than $20. With STEPN, on the other hand, the average floor price of a sneaker, according to Solana NFT marketplace Magic Eden, is 13.67 SOL, or roughly $1,400 at the time of writing. Other popular P2E games also don’t cost as much to start playing compared to STEPN.

Free to roam

STEPN is not alone in this new gaming subsector. Genopets is another Solana-based game that is still in its beta phase. It is similar to STEPN but is more of a role-playing game, letting users use physical movement and cognitive exertion to progress in the game and level up their Genopet NFT. Tezos-based Dustland Runner lets users earn DOSE tokens by completing missions through their workouts.

However, when it comes to STEPN, the big question is, can it — or the entire M2E space in general — truly avoid the same pitfalls of Axie Infinity and make playing the game more interesting than playing it for cash? In other words, is sustainability in the long run on its side, or is what’s happening now just the initial phases of its hype train?

We also review the industry’s most important news, including mergers and acquisitions, changes in the regulatory landscape, and enterprise blockchain integrations. Sign up now to be the first to receive these insights. All past editions of Market Insights are also available on Cointelegraph.com.

Crypto prices enjoy a solid March relief rally. But, how and why?

April 5, 2022 Coin Telegraph

Bitcoin Price

Whales have dumped 178,150 BTC in a five-month period, which amounts to $8.39 billion at current price levels.

After a rocky start to the new year, March may finally have set the crypto markets back on an upward trajectory. Back in February, news of the war between Russia and Ukraine created significant opportunities for traders to reenter the market at diminished prices. This did not last long, however.

The market soon began to recover, and traders who hoped to see Bitcoin (BTC) fall below $40,000 once more were left on the sidelines.

Whales remain cautious

On March 28, Bitcoin rose back above $48,000 after nearly three months of consolidation. But, surprisingly, key stakeholders with 100 to 10,000 BTC held in their wallets have continued to quietly take profit.

Whales dumped 178,150 BTC over the course of five months, equating to $8.39 billion at current price levels.

Yet, shark and whale Tether (USDT) holders have also dumped $816.4 million in Tether in just three weeks, which compounds the concern further. A bullish scenario would typically need these high-tier traders to hold more USDT as it implies more buying power.

Dormant investments on the move

One of Santiment’s primary metrics confirming that a flat or bearish market may be ending is Mean Dollar Invested Age, and it measures the average age of investments in Bitcoin.

In short, a flattening or lowered period indicates that previously dormant tokens have been moving and reveals a greater chance of long-term bullish price movement.

An extended tapering-off period can be seen for the first time in 2022, outside of a few one-day dips in BTC’s Mean Dollar Invested Age line. In most cases, this line tapering off generally foreshadows good long-term prospects for an asset’s price.

Market woes have diminished in March

But, what propelled prices upwards in March so rapidly? For starters, the topic of the war, COVID-19 cases and higher inflation are being less talked about in crypto forums, indicating that the community may believe these market stresses are already past their worst points.

Large Bitcoin transactions show up

Whales become active when prices have had a sustained pattern of moving up or moving down. When markets are flatter, there is less activity. As March brought great returns right and left, it was only a matter of time until whales made their moves. The number of transactions exceeding a value of $100,000 or more spiked to 3,266 separate transactions just before March 28.

Unsurprisingly, this major spike on March 28 and the day before indicated that whales were taking profits, which preceded a price correction for Bitcoin and the rest of the markets and foreshadowed where traders could and should take profits optimally.

Transactions in profit leaped as whale transactions spiked

Santiment has a separate metric known as the Ratio of Transactions in Profit vs. Loss, which weighs up profitability against the number of transactions. A higher ratio indicates that more transactions result in a profit, which could eventually signal a top if the ratio gets too high and vice versa. Both Bitcoin and Ether (ETH) saw the most significant spikes in four months on March 28, meaning that both coins had more than three times the amount of transactions made while coins were in profit, compared to the loss.

Is the market ready to shift gears?

Eventually, crypto traders proved to be correct as there has been a correction down to $44,000. However, Santiment recorded a continued pattern of negative commentary exceeding positive commentary across several social media platforms. Generally, when the crowd believes prices will go down, prices may actually bounce. And, vice versa, prices tend to plummet when the crowd gets overly euphoric and excited.

March was full of negative sentiment and had stayed that way ever since the news of conflict in Eastern Europe broke out in the last week of February. Now that a mid-sized price retrace has happened, which was a rare occurrence in March, the markets should shift into speculation mode of whether this is dip buy time.

Cointelegraph’s Market Insights Newsletter shares our knowledge on the fundamentals that move the digital asset market. This analysis was prepared by leading analytics provider Santiment, a market intelligence platform that provides on-chain, social media and development information on 2,000+ cryptocurrencies.

Santiment develops hundreds of tools, strategies and indicators to help users better understand cryptocurrency market behavior and identify data-driven investment opportunities.

RUNE rally: A closer look at THORChain’s new synthetic assets

March 21, 2022 Coin Telegraph

Coin Telegraph

A THORChain synth is unique: Backed by 50% of the underlying asset and 50% of RUNE instead of 100% of the actual asset.

THORChain (RUNE) has appreciated nearly 41% in the past seven days, according to the data from Cointelegraph Markets Pro, and its recent price action is even leading the entire crypto market in the first quarter of 2021. Its mainnet launch, which was originally slated last year, is one of the main factors that led to its recent price surge. But, the other factor that provided added momentum is the integration of synthetic assets to its network. Why was this such a huge deal, and what are its implications for THORChain going forward?

THORChain is often compared to Uniswap since it provides users a way for traders to swap different tokens. The only difference is THORChain lets users trade layer-1 coins in a decentralized manner, whereas Uniswap is limited to only the tokens that are of the ERC-20 standard. Users can essentially swap their Bitcoin (BTC) for Ether (ETH) on THORChain without using a centralized exchange, and it claims to have processed more than 1.64 million transactions since inception.

The addition of synthetic assets to THORChain is expected to grow the network usage. Synthetic assets are, of course, virtually tokenized derivatives wherein it mimics the value of another asset. Synthetic assets, or synths, track real-world assets like stocks, commodities or even cryptocurrencies and traders use them for various reasons such as taking advantage of lower fees, performing faster transactions and access to 24/7 trading, among others.

THORChain synths under the hood

THORChain allows users to mint synthetic versions of cryptocurrencies ranging from BTC to Aave (AAVE). To do this, users add either RUNE or the actual crypto asset to a THORChain liquidity pool. THORChain’s synths are pretty different from other synthetic assets, as synths from THORChain are not backed solely by the underlying asset and don’t require a high collateralization ratio.

For instance, Terra (LUNA) Mirror protocol, another platform for minting synths, has a 150% collateralization ratio. A THORChain synth, on the other hand, is backed by a liquidity pool that contains 50% of RUNE and 50% of the underlying asset. This is done through collateralization via pool ownership.

No impermanent loss

One of the main advantages boasted by THORChain is it removes impermanent loss, achieved by its protocol structure. THORChain maintains a reserve pool of RUNE tokens that it extracts from to pay block rewards for node operators and liquidity providers. It is also the same pool from which the system draws out the tokens needed to offset any difference in the synthetic asset’s exact value to that of the actual asset upon redemption, preventing impermanent loss.

Liquidity providers will have linear impermanent loss protection for 100 days, meaning that it incurs 1% protection daily until it reaches a full 100% coverage. At the time of writing, the reserve holds nearly $1 billion worth of RUNE, though it was actually past the billion-dollar mark a few months ago. The reserve is depleted from such token outflows but is replenished by network fees such as transfer fees and outbound fees (the gas cost of each chain multiplied by three).

How synths benefit users

Aside from the trading advantages mentioned earlier, THORChain synths are also cheaper to exchange than layer-1 assets while having a 50% reduction in swap fees when swapping asset to synth, synth to asset or synth to synth. But, perhaps its main selling point on offer is an uncomplicated and more lucrative way to yield farm. THORChain also has in its pipeline the capability for synth holders to earn a return by simply locking their assets in a vault. This makes the process approachable to newer participants, as they would no longer need to understand the concept of liquidity pools and the risks of impermanent loss.

THORChain has also integrated with Terra, catalyzing RUNE’s initial March rally. Lending and borrowing are also coming to the THORChain ecosystem by June 17. This is why many have been bullish to even call an $11.50 target for RUNE. Can RUNE maintain its rally going to the second quarter?

Cointelegraph Research report analyzes GameFi’s bumper 2021 and trends for 2022

March 10, 2022 Coin Telegraph

Blockchain Game

A new report from Cointelegraph Research analyzes GameFi’s bumper 2021 and what will be in store for the future.

This March, Cointelegraph Research will release a 30-page report about GameFi — the term used to describe the marriage of blockchain-based games with decentralized finance (DeFi). The report analyzes five popular play-to-earn (P2E) games, the economics of GameFi and the future development of an industry responsible for more than 55% of all crypto transactions in the last quarter of 2021.

In collaboration with multiple partners including Konvoy Ventures, Game7, Forte, Animoca Brands and others, the Cointelegraph Consulting Research report will evaluate the strength of in-game economies, the GameFi industry’s future challenges and potential ways to overcome them.

The report dives into five popular P2E games and compares the titles on balance deposited, number of active users and volume of transactions. The games will also receive one to five scores for gameplay and tokenomics. Economic activity on GameFi exploded in 2021 and entire economies developed. This report explores the economics of digital economies. It makes a case for a free-market economic model based on strong property rights.

Visit the New Cointelegraph Research Terminal here to sign up for early access to the report.

Providing useful information about GameFi

You don’t need to be a seasoned pro to find nuggets of useful information in this report. The report gives a broad overview of the GameFi industry with easy-to-digest data on five of the most popular P2E games. You’ll find informative charts and analyses of important concepts relevant to the GameFi industry and how the early trailblazers developed in 2021. An example of the data you can expect is in the chart below:

The chart shows the balance players have invested (in USD) in each game, representing how much value players place on their in-game material. The number of daily active users (measured by unique wallet addresses) is shown over a 30-day moving average. Volume represents the daily amount of incoming value (USD) to the game. Finally, each game is scored for its gameplay and tokenomics factors.

Property rights online for the first time

Before GameFi, the game worlds didn’t let players genuinely own their in-game assets. GameFi stores in-game material as unique tokens as nonfungible tokens (NFTs) and lets owners sell them on free markets for a price of their choice. Crypto gaming has grown in popularity as players collect and trade virtual assets. This generated dependable income for the game developers at the same time that it created value for players.

In 2020, Axie Infinity gamers in the Philippines earned their regular monthly salary by just playing the game at a time when measures against the COVID-19 pandemic brought economic hardship to the country. The chart below shows Axie Infinity’s dominance in GameFi based on in-game NFT trading volume:

Axie Infinity was the first smash hit of 2021 on GameFi. All assets and data on Axie are open source and using it does not require permission from Axie’s developers, SkyMavis. Developers in the community can build what they want and let the player community decide whether they like it or not. In other words: A free and open market is baked into the game design.

Will 2022 be the Year of GameFi?

The five games’ rapid development is impressive, and 2022 promises to be a big year for P2E games. GameFi is changing the rules of gaming but is not without its share of challenges. Several regulatory concerns lie ahead for the industry. This report is an excellent source of information for anyone interested in GameFi. It showcases the superiority of open free trade over centrally planned economies.

Cointelegraph Consulting: Comeback clues from January’s crypto cold spell

February 10, 2022 Coin Telegraph

Bitcoin Price

In the past three months, whale addresses with 100–10,000 BTC have dumped approximately 150,000 BTC.

With key stakeholders taking profits and confidence in buying the dip staying high, traders who were overzealous about a quick Bitcoin rebound back to all-time high levels were punished with further price declines.

Although Bitcoin (BTC) has subtly bounced since dropping below $34,000 in late January, its price is still down 20% in the last 30 days. Ether (ETH) has fared worse, dropping 30% in this same timeframe. This edition of the Market Insight’s newsletter takes a deeper look at the data behind the cryptocurrency market’s performance in the past month.

For example, Bitcoin’s key whale trader tier, typically comprising addresses holding between 100 and 10,000 BTC, has dumped approximately 150,000 BTC in the past three months.

The supply held by this group is very often used as a primary leading indicator for where prices will head next. The current supply held by these whale addresses has dropped to 47.31%, within sight of the one-year low of 47.20% held back in mid-May when prices were declining swiftly.

NVT was bearish for BTC but turned bullish in January

Santiment’s Network Value to Transactions Ratio (NVT) model measures the amount of unique BTC circulating on the network, then calculates whether that output is above, on par, or below the expected amount of circulation to justify Bitcoin’s current market capitalization.

There has been a healthy and expected amount of tokens moved since October 2021. When prices were falling during the first half of January, the month lacked the necessary circulation to keep prices above $40,000. However, on average, the month of January presented a semi-bullish signal after some dip buying and increased activity.

As a bonus, February has started off in bullish circulation territory. It can be concluded that once some other metrics align with the positive circulation divergence, prices can surge in a hurry.

FOMC impact and Bitcoin’s leading indication on S&P

Traders across several different sectors held their breaths for the United States Federal Open Market Committee’s announcement on Jan. 26. and whether or not U.S. interest rates would rise and quantitative easing would be applied. It appears that it will be a foregone conclusion that these rates will be rising about a month from now. With this news, cryptocurrency and equities markets have gradually become a bit less correlated.

Even prior to the FOMC meeting, Bitcoin had already begun its decline. And directly following the meeting, BTC’s price was the first to begin to slide. The S&P 500 has been particularly volatile and polarizing for investors and still appears to be on a notable downswing since the U.S. Federal Reserve’s meeting. Meanwhile, gold has rebounded, and Bitcoin’s price has been choppy. However, according to historical studies by Santiment, BTC price breakouts tend to happen when its price is least correlated with equities markets.

BTC network realized profit/loss spike

One of Bitcoin’s quieter days, Feb. 1 saw the fourth-highest network realized profit spike in the past year. The cumulative spike of 3.65 billion indicated a higher likelihood of a potential correction, but only if traders show disinterest.

The culprit of this massive uptick in realized profit apparently was revealed to be related to Bitcoin that was stolen in the 2016 Bitfinex exchange hack. These coins were moved on the morning of the same day, and the receiving address of these coins contains 94,643 BTC.

Negative funding rates across exchanges

From the third week of January, traders began placing large quantities of short positions, as Bitcoin’s price dropped below $34,000 for the first time since July. Various projects saw an average negative perpetual contract funding rate across multiple exchanges. With funding rates, Santiment calculates the average rates across Binance, Bitfinex, FTX, Deribit and dYdX. In some assets’ cases, a smaller combination of these exchanges is used if they aren’t listed on all five exchanges.

Generally, when there is a massive contingency of assets being shorted, liquidations occur with key stakeholders pumping prices to use the negative funding rates as rocket fuel to propel assets higher. This is exactly what ended up occurring because, on Jan. 24, the markets’ local bottom (for now) and prices quickly climbed until many of these shorts dissipated and traders began going long again.

Bitcoin continues moving off exchanges

Bitcoin’s cumulative supply is down to just 11.5% sitting on exchanges at this time. Six months ago, this supply ratio on exchanges was at 13.2%. One year ago, this supply ratio was at 13.9%.

This clear downtrend in coins moving away from exchanges is generally an encouraging sign for the long-term prospects of Bitcoin’s price and market capitalization continuing to grow. With less supply of an asset available on exchanges, this limits further sell-side pressure and thus major price drop risk is mitigated.

Traders show fear, marking the January local bottom

Trader sentiment toward both Bitcoin and Ether has fallen back into negative territory from mid-December to mid-January after a long stretch of euphoria from early October through mid-December. Generally, large key stakeholders wait for this crowd mindset that prices will continue to surge forever, and this is where they take profits while assets appear to be at their peak values.

Negative trader sentiment is generally a sign that price bottoms are getting close, particularly when sentiment drops into the red “fear zone,” as illustrated above.

As trader sentiment turned positive again in the second half of January, there was another price leg down that sent Bitcoin and Ether traders again into the “fear zone.” With this crowd doubting the ability of prices to rise, the probability of positive return days rises for the smaller contingency of traders who stayed patient through the volatility.

Daily average and median ETH fees

The average fee per single transaction on the Ethereum network has come back to earth in January and early February, following sky-high costs of $62.85 back at all-time high levels on Nov. 8.

Generally, Ether price corrections occur shortly after fee rates exceed $52 per average transaction or $27 per median transaction. With average fees back down to a relatively healthy $14.39 average transaction and $4.25 median transaction, it’s a promising indication that healthy utility can exist once again.

Cointelegraph’s Market Insights Newsletter shares our knowledge on the fundamentals that move the digital asset market. With market intelligence from one of the industry’s leading analytics providers, Santiment, the newsletter dives into the latest data on social media sentiment, on-chain metrics, and derivatives.

Every investment and trading move involves risk, you should conduct your own research when making a decision.

Cointelegraph Consulting: The bigger role of LUNA in Terra

January 27, 2022 Coin Telegraph

Coin Telegraph

LUNA made headlines with its meteoric rise in 2021, but it represents something entirely more foundational to the stability of Terra.

In an interview, Do Kwon, co-founder and CEO of Terraform Labs, said that Terra’s ecosystem was built with several use cases such as savings, payments, investments and others that leverage its stablecoin assets. The previous Market Insights newsletter tackled Terra’s ecosystem growth in 2021 and how it got to hundreds of decentralized applications from just two at the beginning of last year.

And all of it is grounded on Terra’s stablecoins and the protocol’s ability to maintain the stability of their peg. Yet the key ingredient for such stability is its primary staking asset, LUNA. On the surface, investors got to know LUNA because of its rapid price rise in 2021, but according to the project’s white paper, owning and holding LUNA is meant to represent something entirely more foundational to the stability of the entire network.

LUNA as mining power

Terra is a Tendermint-based blockchain maintained by validators who follow the Tendermint delegated proof-of-stake algorithm and vote on new blocks. Validators run programs called full nodes and are required to stake a certain amount of LUNA tokens to be included in the active validator list, which is made up of 130 validators at the moment. Active validators earn revenue via the transaction fees associated with each block.

Those who prefer not to set up full nodes but want to get a share of the validator’s revenue are called delegators. Delegators are fundamentally stakers who delegate their LUNA tokens to validators in order to increase the weight of staked LUNA. Essentially, LUNA represents the mining power in the Terra network, and the more its economy grows, the more LUNA stakers earn in rewards from fees.

LUNA as the volatility absorber

Another critical role of LUNA is maintaining its stablecoin peg. As mentioned, Terra’s stablecoins follow an algorithmic market module, which means the protocol adjusts its supply automatically based on the market’s condition. The protocol is able to achieve this through open market arbitrage incentives.

Take the scenario of 1 TerraUSD (UST) trading above the $1 peg. LUNA holders, in this case, can swap $1 worth of LUNA using the market swap feature of Terra Station and sell it for 1 UST. Then, users can sell this for its equivalent dollar value and profit from the difference. In this regard, the protocol effectively decreases the supply of LUNA and increases the supply of UST, which, with enough volume, could eventually pull it back down to $1.

On the flip side, when the price of UST goes below the $1 peg, the protocol incentivizes users to burn UST in exchange for LUNA. This expands the LUNA supply and reduces UST, driving its value back to $1. The volatility in UST’s price is, therefore, absorbed through the minting and burning of LUNA tokens. So far, the market has been able to respect the peg even at times when it went as high as 30% from $1. In a year, UST deviated from its peg at an average of about 4%.

Stable mining demand

With these considerations, it is understandable how crucial LUNAs role is in the Terra ecosystem and how equally important it is to keep mining demand steady. However, Terra is designed in such a way that fees generated from blocks increase along with the expansion of its ecosystem and vice versa.

Moreover, the supply of LUNA also shrinks when the Terra network grows since its supply is reduced from minting UST. Because of this, mining rewards would not be as predictable, which could discourage users from staking LUNA since it would make profitability difficult to determine.

Achieving stable mining rewards

The protocol's solution is to make the mining rewards more predictable regardless of whether Terra is in a period of contraction or expansion. It uses stability levers in the form of transaction fees and "seigniorage" (or the amount of LUNA burned) to achieve this.

For instance, when mining rewards are decreasing, indicating a contraction period for Terra's economy, the protocol kicks up the LUNA burn rate and increases the fees. This makes LUNA stakers less inclined to abandon staking LUNA altogether.

Prior to the Columbus-5 upgrade last year, seigniorage was directed to a community pool to foster more adoption during expansions. Now, all seigniorage are burned, simplifying the economic design of Terra where minting 1 UST means burning $1 worth of LUNA. All fees are also rerouted to staking rewards for LUNA, making staking more attractive as a long-term commitment.

Terra's creation of decentralized money with a dependable and stable value has encouraged further innovation on its platform. Cointelegraph Research's upcoming report will take a deeper look at Terra's ecosystem, design, community, and a whole lot more. Stay tuned!

Cointelegraph’s Market Insights Newsletter shares our knowledge on the fundamentals that move the digital asset market. The newsletter dives into the latest data on social media sentiment, on-chain metrics and derivatives. We also review the industry’s most important news, including mergers and acquisitions, changes in the regulatory landscape, and enterprise blockchain integrations. Sign up now to be the first to receive these insights. All past editions of Market Insights are also available on Cointelegraph.com.

Cointelegraph Consulting: Crypto events of 2021 in retrospect

January 1, 2022 Coin Telegraph

bitcoin regulation

With 2021 coming to a close, it might go down as the year that brought the most mainstream attention to cryptocurrencies.

The year 2021 is coming to a close, and if there’s one way to describe how the cryptocurrency industry fared in the past 12 months, it would be momentous growth.

Major cryptocurrencies shattered previous records, adoption grew, new sectors sprouted and novel blockchain use cases made significant breakthroughs.

The Market Insight’s latest edition recalls the events covered in past issues as well as deep-dive topics in Cointelegraph Research’s industry reports.

DeFi and Altcoins

Two of the top gainers of 2021 were Solana (SOL) and Terra (LUNA). SOL gained 9,500%, while LUNA gained 13,000%. Significant investments and ecosystem growth catalyzed the immense gains for the two tokens. One could also argue that the two being billed as potential “Ethereum killers” had a part in contributing to their massive rallies.

In the decentralized finance (DeFi) scene, the two tokens sit among the top five in total value locked (TVL). Solana is at No. 5 with $11.45 billion, and LUNA has recently surpassed Binance Coin (BNB) for the No. 2 spot with $18.9 billion, according to Defi Llama. Moreover, the emerging ecosystems of Solana and Terra deserve a deeper look, which is why they are the subject of Cointelegraph Research’s upcoming reports.

*DeFi followed a similar growth trajectory as the broader crypto market in 2021.*

Competition has undoubtedly increased for Ethereum. Its TVL share was 97% in January but is currently down to 62.54%, per Defi Llama. The next phase of development for the sector comes into question in 2022, especially since the growth of DeFi this year has been so substantial that authorities have switched from denying the industry to grappling with ways to deal with it.

The DeFi market capitalization remains a small fraction of the overall cryptocurrency market cap, but it underwent the same growth trajectory. Some believe that integration with legacy banking could be one of the main focuses for DeFi in 2022.

NFTs

Nonfungible tokens, or NFTs, found their breakout year in 2021 despite existing since 2014. The bulk of sales came in the past 12 months, surpassing $14 billion in December. Digital art collections and digital collectibles dominate 91% of these sales volumes, which is one of the key data revealed in this report.

The sales in the first half of the year were driven primarily by individual artists joining the space with their respective collections and some high-profile sales, while the second half brought in more mainstream brands.

For instance, Coca-Cola auctioned a wearable bubble jacket skin in Decentraland, and Visa purchased its first NFT. Such participation from these brands enabled the NFT market to come into full bloom. The report also revealed that the most profitable NFT collection in 2021 was “CryptoPunks.” A “CryptoPunk” NFT offers a better all-time average return on investment compared to NFTs on other popular collections, such as “CryptoKitties” and “Bored Ape Yacht Club.”

NFTs have also disrupted the gaming industry and become key to fully realizing the concept of metaverses through their blockchain properties. However, some critics doubt that the parabolic surge in 2021 will play out in 2022, especially with more regulatory scrutiny.

Nonetheless, this year’s amount of venture capital investments funneled into NFT companies is beyond sizable. NFT funding in 2021 is already at $2.1 billion as of Q3, yet nearly 40% of VC deal activities involve only a single firm in Andreessen Horowitz, according to PitchBook. Therefore, as sales and interest for NFTs continue to grow, it may be difficult for firms with a thirst for high growth potential to resist NFTs.

Regulation

2021 has been progressive in the cryptocurrency regulatory front. The 117th United States Congress has introduced 35 bills that focus on cryptocurrency regulation, blockchain policy and central bank digital currencies. Federal Reserve Chair Jerome Powell expressed his views that cryptocurrency is not a significant threat to the U.S. financial market’s stability. However, a likely discussion that could seep into next year is the regulation on stablecoins.

The President’s Working Group on Financial Markets has stated in a report that stablecoins could be a beneficial alternative payment option but are “subject to appropriate oversight.” Currently, there are no regulations on stablecoins, even as their market capitalization passed $162 billion as of this writing, but a bill proposed by Wyoming Senator Cynthia Lummis could be a step in that direction.

Lummis plans to introduce a comprehensive bill in 2022 that will provide regulatory clarity on stablecoins, guide regulators around asset classes and offer consumer protections. Cryptocurrency regulation will be a talking point in 2022 and will also be a topic that the Cointelegraph Research team will be examining further.

GameFi

It is almost certain that everyone in the space agrees that Axie Infinity revolutionized gaming. The play-to-earn model was a massive hit, as it added real income potential to playing video games. Data shows how play-to-earn decentralized applications (DApps) dominated the latter half of 2021 in terms of connected, unique, active wallet addresses. And since September, gaming tokens such as The Sandbox (SAND), Axie Infinity (AXS), Enjin (ENJ), Illuvium (ILV) and Ultra (UOS) have even beat out Bitcoin in gains, as revealed in this newsletter’s previous issue.

The gaming sector took the helm from DeFi that saw the most addresses connected in the first seven months of the year. The two DApp categories birthed a new sector, GameFi, which is believed to be the next logical step in blockchain development. Crypto-based games already enable users to have control over their in-game assets via NFTs, but the elements of DeFi could take it to another level. Incorporating DeFi would mean that features such as staking would be available to users where they can earn interest in their tokens.

Yet, the sector is still in its early stages, but its appeal lies within its attractiveness to users who may not necessarily be cryptocurrency holders. Attracting such users could further contribute to more cryptocurrency adoption, which will likely be its focal point for GameFi in 2022.

Adoption

With the developments in 2021, cryptocurrencies were able to captivate a much broader audience compared to the year before. In just the second quarter, global adoption has grown 880% since 2020, Chainalysis data shows. And the key events mentioned above are likely contributing factors to cryptocurrencies going more mainstream. The NFT venture capital activities stated earlier represent only 7% of the $30 billion poured into crypto-related investments in 2021.

But despite the apparent growth, cryptocurrency ownership remains relatively low. TripleA estimates the global cryptocurrency ownership rate to be at an average of 3.9%. Ukraine, Russia and Venezuela are the top countries, with at least 10% of their population owning cryptocurrencies.

*Despite growing adoption, cryptocurrency ownership remains relatively low worldwide.*

The low ownership rates imply substantial room for growth, which is why a CAGR of 60.8% from 2021 to 2026 for the cryptocurrency market may have some merit. This year, the value of the cryptocurrency market has already grown from $364.5 billion last year to more than $2.5 trillion — a 586% surge. And in the coming year, the new sectors in GameFi and perhaps assets related to Web3 could possibly be new avenues for continued growth.

Tokenization of certain securities could also happen on a much larger scale, and it is even predicted to be the norm by 2030 . Furthermore, the prevalence of cryptocurrencies for payments could also be another area with untapped potential, which will be explored further in another upcoming report.

Predicting what sectors in 2022 are poised for the same breakthrough that NFTs had this year would be difficult, if not, impossible. However, reports that carefully study and go in-depth about certain topics would offer a better way of understanding the nuances of a specific sector.

Cointelegraph Consulting: Is NFT music an untapped opportunity?

December 16, 2021 Coin Telegraph

Coin Telegraph

The sales of music NFTs on OpenSea have underperformed compared with digital artwork, collectibles and other categories.

When people think of nonfungible tokens (NFT), the most popular collectibles such as CryptoPunks, Bored Ape Yacht Club and Decentraland usually come to mind. Beeple’s digital artwork that sold for millions will most likely ring a bell, and most recently, gaming came together with the Metaverse to usher in an altcoin season.

However, one particular type of nonfungible token that rarely gets looked at is music NFTs. With NFT sales raking in billions of dollars across other categories in 2021, music NFTs seem to have lagged behind.

According to Cointelegraph Research’s recent report, the global awareness of NFTs has increased over time. This is evidenced by the fact that the term “NFT” continues to trend upward in the volume of Google searches.

However, two surveys explored in the report reveal that many are still in the dark when it comes to these tokens. What’s more, many of those who had previously transacted with cryptocurrencies had no prior experience with NFTs. In one of those surveys, 57% of the respondents stated they had not used NFTs before, while only 3% used NFTs daily. Such data illustrates the market’s nascency.

Music NFTs vs. streaming services

Like NFT artworks, music NFTs have been touted as a revolutionary way for artists to connect with their fans and monetize their work. They embrace the concept of ownership, which has proven to be essential in building a loyal fan base. Tokenizing an artist’s work also makes it tradable, providing another way for them, along with their fans, to make money. Kings of Leon was the first band to release an NFT album, which generated about $2 million in revenue, marking one of the more successful music NFT projects.

Music NFTs also provide a much more cost-effective alternative for artists. For instance, music NFTs allow fans direct access to the artist’s music without needing streaming giants and record labels, which are known to take substantial revenue cuts. However, for most music lovers, particularly those not in the cryptocurrency space, the $9.99 price offered by streaming services is still a no-brainer, especially when Ethereum gas fees are factored in. In the music streaming arena, Spotify is the dominant force, with 32% of streaming subscribers worldwide opting for its platform. Apple Music comes in second with a 16% share.

Download the full report here, complete with charts and infographics

For artists who still depend on these platforms, NFTs serve as supplemental revenue, and some artists have generated decent sales numbers with their NFT collections. One example is 3lau, whose “Ultraviolet Collection” garnered $11.6 million in sales. On a per-Spotify-listener basis, 3lau’s NFTs are the most bankable. With 2.5 million listeners on Spotify, the total sales equate to about $4.64 per fan. On the other hand, A$AP Rocky’s “Rocky Gateway” didn’t see the same success, with just $200,000 in sales. A$AP Rocky’s 17 million subscribers on Spotify would mean that the NFT sales translate to only $0.01 per fan.

While the data above shows the success of an artist’s NFT collection relative to their Spotify fanbase, it doesn’t reveal how far behind the sales of music NFTs actually are. Looking at just the top 10 music NFTs on OpenSea, only about 223 Ether (ETH) ($835,000 at the time of writing) in sales was generated from Nov. 14 to Dec. 13, making up only 0.03% of OpenSea’s 30-day sales volume. Bored Ape Yacht Club had far better sales over one month, with 42,956 ETH ($161 million) — compared with the all-time volume of 6,396 ETH ($24 million) of the top 10 collections in the music category.

Royalty model

The paltry sales on OpenSea can mean one of two things: Either this use case has yet to make its mark or NFTs are just not a suitable medium for music. However, a platform that offers royalties for fans could help music NFTs gain more traction. 3lau announced a new blockchain-based music platform, Royal, back in August. The platform has already attracted $16 million in seed funding from investors like Paradigm and Peter Thiel. Royal will enable fans to be part of the success of their favorite artists by allowing fractional music ownership through its version of NFTs.

Introducing a royalty-sharing model coincides with most users’ interest in NFTs. According to the surveys reviewed in Cointelegraph Research’s report, the reason many users purchase NFTs is financially motivated. This is akin to the way the play-to-earn model brought significant growth to the gaming sector, where games like Axie Infinity have thrived. Aside from the monetary incentive, Royal can also pave the way for other models to emerge, ones in which fans can fully finance an artist’s new album.

Earlier in December, Saxo Bank made a bold prediction about the future revenue of streaming services. The Danish investment bank has a particularly bleak outlook for Spotify in 2022, as it believes that NFT-based platforms will cause a paradigm shift in the music industry. While a drop in revenue could be likely, it might be hard to imagine so presently, considering that the company continues to pile up more revenue.

Still, one thing is for sure: Artists will go where it makes the most financial sense. Whether they find that with NFTs or somewhere else, the deal that will let them maximize their earnings will ultimately prevail.

Cointelegraph Consulting

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Dormant investments on the move

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Large Bitcoin transactions show up

Transactions in profit leaped as whale transactions spiked

Is the market ready to shift gears?

THORChain synths under the hood

No impermanent loss

How synths benefit users

Providing useful information about GameFi

Property rights online for the first time

Will 2022 be the Year of GameFi?

NVT was bearish for BTC but turned bullish in January

FOMC impact and Bitcoin’s leading indication on S&P

BTC network realized profit/loss spike

Negative funding rates across exchanges

Bitcoin continues moving off exchanges

Traders show fear, marking the January local bottom

Daily average and median ETH fees

LUNA as mining power

LUNA as the volatility absorber

Stable mining demand

Achieving stable mining rewards

DeFi and Altcoins

NFTs

Regulation

GameFi

Adoption

Music NFTs vs. streaming services

Royalty model

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