Money Flow Through Ecosystem Layer 1 Blockchain and is the Near Ecosystem Ready for Smart Money Flow?Money & Macro

Figure 1: Top tokens/coins with the highest capitalization

In the top 100 market cap on Coinmarketcap, check out a few names that can be listed as Bitcoin, Ethereum, BSC, Cardano, Polkdadot, USDT, Solana, Theta, Tron, XRP, NEO, Terra LUNA, USDC, Klaytn, Cosmos, ETC, Polygon, Hecochain, Avalanche, … The common feature of the names listed is that most of them are Layer 1 blockchain.
From this, we can draw some characteristics such as:
- The top 100 will have about 30% of Layer 1, and L2 projects are mostly in the top 200, from here we can predict the development potential of a new project.
- L1 or L2 projects both want to build their Defi.
Money flow does not flow simultaneously into all but flows slowly through ecosystems, between layers 1,2,3,… and through Dapps in that spawning system.

Figure 2: Blockchain Layer Architecture

Previously, in 2020, Defi on Ethereum was temporarily divided into 2 phases:

• 2017–2020: projects raise fund first, then build products, so this stage only has a whitepaper, and many projects only have a beautiful whitepaper without the ability to execute.
• 2020–2021: teams focus on building real products, doing real things, then issuing tokens and crowdfunding, whereby the money flows in.

Correct understanding of money flow between crypto lego at present. To do this, it is necessary to determine where the money flow is, and forecast where that money will flow, thereby helping us choose the right time to enter & exit to make a profit in the market.

Divide projects and ecosystems based on the size of the system, and what has been and is being done.

Group 1: Top 1

The top 1 must mention two names Ethereum & Binance Smart Chain (BSC), the most typical is Ethereum, the above ecosystem is the most standard, and the above Defi has been developing, so it can be considered as a model. typical for comparison. At first, BSC felt it was difficult to go long-term when at first there was only meme coin, but the way CZ builds is now too clear, in some respects it is better than Ethereum.

These are the two current large and powerful ecosystems that have fully integrated the puzzle pieces and we will use that as a standard to compare other small projects.

Group 2: Some potential projects

• Solana, this is a pretty familiar project, what they’ve been doing makes it a force to be reckoned with.
• Avalanche: its projects also grew enormously.
• Polkadot: this is also a project that everyone is looking forward to when in the second half of 2020 it has built a lot of its pieces.

Figure 3: Solana ecosystem is relatively fully developed

Group 3: New projects that form their own Defi pieces

This team is a team that needs time to build and is starting to build its ecosystem. as we know it’s just getting started so this is an opportunity to invest instead of the obvious systems as above, for example, Near, Dfinity, Carnador, etc.

Cardano has been moving fast lately, as shown in the key pieces of Cardano’s DeFi puzzle. For example, Cardstarter was Cardano’s first IDO platform.
The second is Near, which belongs to Coinbase’s power, but has not yet seen Near has its own IDO platform, however Near has some other pieces of the puzzle in terms of applications, AMM, Liquidity, and DEX, … which will probably accelerate the speed soon. future development.

However, it is necessary to prepare to receive the money flow, the important thing is the infrastructure to welcome the new money flow.

The two most important infrastructure projects on NEAR are Aurora and Octopus Network. NEAR has connections to technologies like IPFS and Ceramic for decentralized storage, Chainlink for Oracle services, and The Graph for indexing. Near builds its block exploration suite: NEAR block explorer for the Near network and Aurorascan for Aurora. A network of proof-of-stake for delegation of NEAR tokens. Compatibility has been built with the popular smart contract insurance platform Insurance.

As for the micro money flow, for example, in different industries, similar to in the ecosystem, the money flow flows to different layers, from layers 1,2,3 to Dapp end users. From there, make projections in the market.

So is NEAR a potential project?

What we need is to identify the factors to evaluate the growth of the ecosystem and receive the money flow to pour in:

• The number of Dapp builds on it & also attracts the developer community to participate.
• For the number of users using those Dapps (eg the number of Transactions, TVL — Total Value Locked, we need to look at the growth rate instead of the current figures. To grow, there must be end users, the number of trans must be large, and grow, then the dc lock property will grow).
• Influence & expansion to other ecosystems, need to build fully and firmly to receive money flow (cross-chain), if the ecosystem does not have a bridge, the fundamental problem has not been solved. is to move users to another strong ecosystem, that ecosystem is not ready to grow.

Figure 4: Development of the number of Developers on L1, NEAR shows impressive growth.

The dev growth on NEAR in 2021 is one of the most impressive among L 1. NEAR comes in second with over 400 devs, just behind BNB. NEAR has more than quadrupled in total devs by 2021, second only to Solana (chart below). Growth continues into 2022 with another 500+ active developers achieved in January and February.

NEAR ranks 3rd in terms of full-time dev growth in 2021 with 291%. Terra and Solana slightly outperformed NEAR with growth of 313% and 307% respectively. This has brought NEAR to over 100 full-time developers, second only to Cosmos, Solana, Polkadot, Ethereum, and Bitcoin. Much of the growth in 2021 is prior to the announcement of the ecosystem development fund discussed earlier.

To stay motivated, the NEAR Treasury is also designed to help grow the ecosystem in the long run. NEAR Treasury has a funding mechanism of 10% of transaction fees, which are reinvested in the development of the ecosystem. NEAR also organizes competitions for high school and college students to create a foundation for the long-term development of the ecosystem.

Figure 5: token allocation, which is quite large for the community and development

Figure 6: An increasing number of assets flows across the Rainbow Bridge. Money flow is moving from other systems to NEAR

NEAR has existing bridges from major ecosystems like Ethereum, Terra, and Cardano. The Ethereum bridge, called Rainbow Bridge, is the most popular bridge to NEAR with almost 750M USD in TVL. Since the launch of Rainbow Bridge, daily transaction volume on the NEAR network has increased 40-fold. The majority of Rainbow Bridge transactions are denominated in stablecoins with most of the volume spike at the end of December thanks to UST integration. There are also AllBridge, CBridge.

Figure 7: Ethereum bridge relative to TVL

And of course, the pieces of their DeFi ecosystem must be built solidly and fully, to be ready to receive the inflow of money (with real users).
Blockchain Platform Layer 1 must technically be responsive (including scalability, TPS, Block time, ..).​​

Figure 8: Comparison of specifications between the L1

The race is on between L1s for maximum network speed, low cost, and security. Each protocol takes a different approach to maximizing each speed or scaling metric while making a series of centralization tradeoffs. Ideally, the best blockchain would be fast, secure, widely used, and extremely decentralized.

Many of the parties’ statistics claim to be theoretical as the majority of these blockchains do not reach their maximum capacity. However, NEAR is currently at the top of many key metrics including transaction costs, maximum transactions per second, and staking yield. NEAR is running lower with several competitors including the number of validators, the cost to run a node, and the Nakamoto coefficient.

Layer 2 must have the following fundamentals: Stablecoins, AMM Liquidity, Lending Borrowing, Synthetics Assets, IDO Platform, Aggregator, Invest Management, Margin Trading, Derivatives, Insurance, NFT Issues, NFT Marketplaces, Payment, and Bridge.

Figure 9: Prominent Layers of the Near. Ecosystem

In addition, other criteria for evaluation such as:

Backers are the people who are supporting and supporting that ecosystem, for example Near has Coinbase.

Figure 10: Fundraisings in Near Ecosystem

Teams How they’re building the Defi puzzle pieces. Who are they working with? which pieces do these projects belong to?

Observe the community, this is a force no less backer, for example, Polkadot has a Chinese community.

Figure 11: Twitter and Telegram Activity

Micro Money flow?

Micro money flow is similar to a country, when the money flow will move through each industry, each economic region is different. Similarly, the money flow will move through each layer, the categories in Defi.

Figure 12: Only 3 Layer 1 outperformed (including NEAR) over BTC and ETH in March.

Layer Defi of NEAR

• Layer 1: this is the first layer, the foundation layer of ecosystems such as ETH, BNB, ADA, SOL, and NEAR.
• Layer 2: Dapps built directly on L1, also the layer with the most investment opportunities. Specifically in Defi are projects on stablecoins, AMM, NFT, Bridge, etc.
• Layer 3: are Dapps that use L2’s resources, such as crypto assets, liquidity, .. such as OPGames, Paras, etc.

Figure 13: NEAR .’s Defi layers

Signs of money flowing through the layers

When the money starts flowing into the ecosystem, it will pour money into L1, because users who want to farm, or staking, .. in layers 2 and 3 must use L1’s coins, thereby creating buying demand for coin L1. That will create buying pressure and increase the price of those L1 coins. this is also an indication that money is flowing into that blockchain. For example, to buy & join the Near ecosystem you must have NEAR, Avalanche you must have AVAX, Sol you must have SOL, etc. However, not all cases of Layer 1 price increases are the same.

Figure 14: TVL NEAR surged in April despite market turmoil.

After that, the money flow will pour into L2, shown through parameters such as TVL, and rising tokens. Of course, L1 must be solid enough to attract and keep money flow. During this period, many projects built on Layer 1 were released. They are often the first important category pieces like AMM DEX, Liquidity, Lending Borrowing, and Aggregators. These are considered important pieces, required to form a Defi ecosystem & must be solid enough to keep the money flow inside.

Actual flow money

Near ecosystem started Layer 2 AMM DEXs like Ref, and Bastion launched and the inflow of capital helped push TVL up.

Figure 16: TVL on Near.

To evaluate the growth of L2, not only look at price but also look at TVL, price increases k linearly vs TVL. Of course, for the token price to grow with the flow of money into the project, the token design in tokenomics must also be good, for the token to increase, it must capture value.

Figure 17: To assess L2 growth, not only looking at the price but also looking at TVL, the price increase is not quite linear vs TVL.

AMM is the first and must-have piece, most importantly, to form and develop Defi. Realizing the first AMM — the piece is an early investment opportunity and knowing the inflow of money and identifying the right entry-exit points.

Signs that money is gradually withdrawing from the ecosystem Defi

A sign to recognize when money is withdrawn from the ecosystem, this sign lets us see if the systems are developing & continuing to develop, thereby deciding whether we should continue to keep it or not. leave to move on to another new ecosystem.

Again, a system must have enough basic elements, infrastructure, and puzzle pieces to develop together to attract and keep money flow. If one of the pieces or links is missing, it will be difficult to “keep” the money flow (smart money).

Similarly, if Layers 1 & 2 grow but other layers or other pieces of the puzzle are not yet complete, there is a high probability that the money flow will soon withdraw.

Existing Ecosystem Problems NEAR

Lack of many platform projects, especially from Catalog DeFi

We have seen the development of many potential projects in recent months to become a fundamental pillar for the NEAR Protocol, such as:

• Ref Finance — AMM DEXs and First Defi Hub on NEAR Protocol
  Skyward Finance — Successful IDO platform with a unique price discovery mechanism.
• Aurora — EVM High Performance NEAR Protocol Compatible
  Rainbow Bridge — Bridge to help bring Ethereum Users to the NEAR Ecosystem.
• Paras and Mintbase — NFT Marketplace Platform
  ….

Most projects fulfill their goal of getting NEAR Users (and partly Ethereum Users) to use their products. But there is not enough money market to hold the value coming from other ecosystems.

Figure 19: TVL of Top Lending/Borrowing protocols.

Specifically, at the beginning of the year, the NEAR token has grown to ATH of $ 20 (about x 10 times since July). This, in my opinion, is due to the money flow from other major ecosystems such as BSC, SOL, ETH at that time flowing to new systems to search and find profitable investment opportunities. This is the first sign of L1 growth.

NEAR-based AMM projects were also born such as REF, TRI (Aurora),… these are the two best AMM projects of NEAR/AURORA. Money flow has also poured in here, as evidenced by the rapid growth of TVL of these two projects.

However, since recently, TVL & prices have gradually decreased and NEAR has also decreased significantly. So why are prices & TVL down? This is understandable in my opinion because of external macro factors. However, it can also come from the ecosystem itself.

Firstly, talking about the NEAR system, only a few other AMM projects have just been released, TVL is still low, other pieces are few or not released.

Up to now, when the NEAR System is going very fast and completing the other pieces, it has enough elements for the money flow to stay and profit from it. The typical sign is that the TVL system of the whole system increases, the token price also increases. For me, the NEAR system goes very fast & is gradually completing the puzzle pieces.

Speaking of NEAR now there are AMM, Aggregators, IDO. Besides, one of the things I appreciate very much about this system is that they use it to attract top tier projects in other ecosystems, as a multichain & crosschain solution to be the same Dapp, but serve it well. for users of the NEAR — is Rainbow Bride and Aurora. This is the factor that helps this system go much faster than other systems and at the same time keep the money flow.

On August 18, 2021, NEAR Protocol revealed that Sushiswap “may” come to the NEAR Ecosystem. This action increased the price by 1$ NEAR on the same day.

As can be seen, attracting attention and money into the ecosystem has never been a big deal for NEAR. However, the problem is that the current projects are not of sufficient quality and quantity to keep the money flow. AMM is not working properly; The newly launched Lending Protocol, as well as derivatives and asset management, are the Top Protocols that attract TVL in an ecosystem. The price of NEAR increased but the categories inside did not, which is not a good sign.

Lack of stablecoin issuers

All existing Stablecoins on the NEAR Ecosystem have been moved from Ethereum via Rainbow Bridge. However, it is a good thing to attract Ethereum users, but it is still less effective than other blockchains when it comes to issuing stablecoins directly.

For non-Ethereum users, an interesting insight is that they want to move their USDT from a Centralized Financial Platform, especially for newbies.

NEAR Protocol has a good relationship with Coinbase Venture because they invested in NEAR in the first place, so it should be easier. Or maybe they’ve done it but haven’t announced the news yet.

But, why do we need stablecoins on NEAR Protocol so much ?

Stablecoins in an ecosystem represents real-world fiat money. Also, without stablecoins, how can NEAR Protocol disrupt and attract value into the ecosystem.

The released stablecoins can also be a good signal representing the beginning of the upcoming expansion. Solana has been attracting attention recently since $SOL broke its ATH. The whole Solana ecosystem has raised a huge amount to pump all the categories inside like Raydium, Serum, Cope, Orca, etc.

An interesting insight: the time that stablecoins are released a lot on Solana matches the time the ecosystem grows.

On March 18, 2021, Tether issued about 90 million USDT into Solana and continued to grow to 200 million in April 2021. Immediately after this event, we can see the price of SOL with the new ATH of it.

Next, on August 8, 2021, another signal appeared: 400 million USDC minted on Solana Blockchain, bringing the total amount of USDC deposited into the Solana Ecosystem from 785 million USDC to about 1.19 billion USDC.

An ecosystem with all the basic categories like AMM, Lending, Oracle, Indexer, Synthetic, NFT, etc.

The amount of fiat money in the ecosystem is flowing into the ecosystem and is the bridge between retail users and the ecosystem.

Above are the two foundational segments that NEAR Protocol needs to bring together first. If an ecosystem lacks these conditions, then inflows will get stuck and may change their direction as soon as better ecosystems are noticed.

KEY INSIGHT:

NEAR doesn’t have one major differentiator from its competitors but instead tries to take the best pieces of all the L1s available.

The team and technology behind NEAR are extremely high quality, NEAR has an attractive investment opportunity, despite some of the difficulties it faces.
Although there are still some pieces of the puzzle missing, the basic infrastructure is sufficient for the inflow of money.

NEAR has Octopus and AURORA forming solid pillars of the infrastructure to help develop a robust ecosystem.

Currently, the only basic money flow in Layer 1 is NEAR/AURORA, not pouring into L2s, if applications on L2 develop explosively, this is an early investment opportunity with a good discount price.

With the issues mentioned above, I believe that the ecosystem still has a lot of work to do to start developing:

• Ref Finance needs to work efficiently and smoothly.
• At the same time, start working and partnering with stablecoins issuers to start bringing those stablecoins to NEAR. Maybe start with USDC and USDT, and also attract Ethereum users. Includes private stablecoins issuance like USN.
• Continue to launch ecosystem incentive program, create more projects than all basic categories and attract more developers to the ecosystem Example: Create Ref Finance farm to incentivize existing users present in the ecosystem.