What are the highlights of Dune Analytics, an essential tool for DeFi and NFT analysis?

Written by: Spencer Applebaum and Matt Shapiro, Multicoin Capital

Compiled by: Overnight Porridge, 8btc

Today, we are excited to announce that Multicoin Capital has participated in Dune Analytics' $8 million Series A funding round, led by our friends at Union Square Ventures, with participation from Redpoint Ventures and Dragonfly Capital.

As enthusiastic users of Dune, we are thrilled to have the opportunity to continue participating in their funding (note: Multicoin Capital participated in Dune's seed round last year), as we rarely have the chance to invest in something we use every day.

1. The Power of Dune

Dune is a one-stop platform that integrates querying, visualization, sharing, and exploration of public blockchain smart contract data, decoding Ethereum smart contract data in a way that makes powerful real-time data visualization possible through simple SQL queries.

Users can visualize query results in real-time updated dynamic charts and create comprehensive dashboards showcasing any crypto protocol KPI. All charts are configurable, modular, and can be embedded into third-party services on the web.

Dune serves as a practical venue for hedge funds, venture funds, developers, researchers, protocol teams, and everyone in CeFi enterprises to create and share charts and dashboards (primarily used for DeFi and NFT smart contract systems).

There are now over 40,000 analyses published on Dune, which anyone can view, mix, and fork (more on mixing and forking below).

We read third-party research generated daily by sell-side analysts, news agencies, developers, venture funds, and other market participants. If the research is about DeFi or NFTs and includes charts, the probability that Dune is the data source or that Dune charts are directly embedded in the research is greater than 50%, making the product widely popular in the crypto space.

Dune's applications are so extensive that it has now become part of an open-source collaborative structure. It is also the gold standard data tool for treasury reporting. Below is a great example provided by the Llama team, which created a Dune dashboard to monitor Aave treasury activities:

Source: Llama's Aave Treasury Analysis - Dune Analytics

Since the initial funding in September 2020, the Dune team has been rapidly rolling out new products. In the past 12 months, they have launched:

1. Address labels—e.g., address A may be labeled as a large DEX trader, Compound core development team, and Uniswap whale;

2. Project dashboards—a list of dashboards for specific projects;

3. Multi-chain integration—xDai, Polygon, and Optimism are now live;

4. Dune V2—completely upgraded query editor and execution engine, providing higher performance and a usable version. This ensures reliable query execution and a scalable setup (previous applications simply could not handle the demand), a unified beautiful UI throughout the Dune experience, and improved setup/stack for rapid iteration.

Additionally, the company has grown from just 2 co-founders to a team of 15, and they are still actively hiring.

2. Mixable and Composable Analytics

The traditional financial market data provider industry is a mature sector: it generated $33 billion in revenue in 2019. As a result, many teams are racing to build crypto data platforms targeting various niches, including but not limited to:

1. Compliance teams of CeFi exchanges

2. Institutional investors

3. Retail traders

4. Developers

Many major crypto data providers share a common trait: they are closed platforms. That is, they generate pre-configured metrics and data packages and then sell them to investors. In doing so, they subtly tell investors and researchers which metrics are most important. This data is often hidden behind extremely expensive paywalls, available only to sophisticated market participants with substantial funds and the ability to pay.

In contrast, Dune takes the opposite approach: it is a user-driven community. The magic of Dune lies in its product itself abstracting all underlying technical complexities, making it trivial for anyone (even those just starting to learn SQL) to configure complex visualizations. It also enables other users to build upon and remix these visualizations.

The Dune team does not tell investors or developers which metrics they should focus on. Instead, they provide the tools needed for these researchers to build the visualizations and queries they require.

Dune benefits from a self-reinforcing network effect built on community participation:

1. The community creates queries

2. Then there is a rich query library

3. By sharing embedded graphics, the community grows larger

4. New users discover Dune

3. The Future of Financial Reporting and Market-Driven Insights

We believe one of the most powerful applications of crypto is DeFi, where the foundation of all finance is liquidity and trading. By providing non-custodial, permissionless, and censorship-resistant financial contracts on the blockchain to billions of people, DeFi can offer a financial track that significantly improves global financial inclusion while reducing the management costs and fees for existing market participants. This is the premise behind our open finance investment thesis.

Gary Gensler, the Chairman of the U.S. Securities and Exchange Commission (SEC), recently discussed investor protection and transparency in a speech, and how it applies to crypto and DeFi.

One of the fundamental pillars of public companies is providing transparency about the nature of their business and financial condition, and the costs associated with this transparency and reporting are burdensome (which is why companies stay private longer). According to the SEC, public companies spend an average of $1.5 million annually on compliance costs.

Moreover, the transparency of financial markets is typically updated every 90 days and is also lagged by 2-3 weeks. The entire industry has sell-side analysts from different organizations adjusting very detailed financial models in hopes of better predicting future earnings. These models support their buy and sell recommendations, which in turn influence how investors allocate capital.

Subsequently, large funds turn to alternative data sources to gain more insight into companies within that 90-day window. This includes satellite data from parking lots, in-store visits/channel checks, web traffic, credit card data, etc. Only those who can find and afford this information can access it.

But many things can happen within 90 days (both good and bad), and during that time, investment funds have limited insight into the company.

What if analysts didn’t have to wait three months to understand a company’s performance but could follow up in real-time? Analysts would have free, real-time access to management dashboards tracking revenue, users, and other KPIs without having to seek alternative data sources.

Take MakerDAO as an example. MakerDAO is a decentralized credit tool built on Ethereum that allows users to:

1. Use crypto assets as collateral to obtain loans in a trustless manner,

2. Immediately leverage their portfolio,

3. Generate a stable crypto asset called Dai. Using Dune, anyone with an internet connection can track MakerDAO user activity, revenue, outstanding loans, the facility's balance sheet, how Dai is used, and the global collateralization rate of the system in real-time, 24/7.

This is the future.

Source: @SebVentures / MakerDAO - Dashboard on Dune Analytics

4. The Road Ahead

As Dune first wrote:

"This revolution will not be reported quarterly."

Open finance and blockchain technology will undoubtedly have a lasting impact on how financial reporting occurs. Once users and analysts experience real-time financial statements 24/7, they will never look back.

Dune is the only crypto-native data company that builds everything in an open, composable, accessible, social, and community-centered way. They are the primary data visualization tool for DeFi and NFT analysis and have gained a significant lead in the market as they rapidly adopt new chains and build stronger analytical products.

We believe the future of finance will be driven by transparent, real-time insights, and Dune is leading this movement.