August 2024 Public Chain Industry Research Report: Layer 1, Bitcoin Layer 2, and Ethereum Layer 2 Trend Analysis

Author: Stella L (stella@footprint.network)

Data Source: Footprint Analytics Public Chain Research Page

In August, the cryptocurrency market experienced significant volatility, with both Bitcoin and Ethereum facing notable declines. Layer 1 blockchains generally suffered from the market downturn; however, Tron showed strong growth against the trend. In the Bitcoin Layer 2 space, development momentum was remarkable, with a substantial increase in the TVL of various scaling solutions. Meanwhile, the Ethereum Layer 2 network faced considerable pressure but continued to evolve, with heavyweight players like Sony joining the ecosystem as highlights. Despite a decrease in market capitalization, innovation in Bitcoin and Ethereum Layer 2 remains key to future growth.

The data for this report comes from Footprint Analytics' Public Chain Research Page. This page provides an easy-to-use dashboard containing the most critical statistics and metrics in the public chain space, updated in real-time.

Market Overview

In August, both Bitcoin and Ethereum saw significant declines. The Bank of Japan unexpectedly announced an interest rate hike at the end of July, triggering a chain reaction across various markets. Strategies such as short-term volatility trading and forex arbitrage saw a notable drop in returns, leading to a sharp decline in cryptocurrency values in the first week of August. Both Bitcoin and Ethereum hit their monthly lows on August 7.

Data Source: Bitcoin and Ethereum Price Trends

The Bank of Japan's unexpected interest rate hike at the end of July triggered a chain reaction across various markets. Strategies such as short-term volatility trading and forex arbitrage saw a notable drop in returns, leading to a sharp decline in cryptocurrency values in the first week of August. Both Bitcoin and Ethereum hit their monthly lows on August 7.

Ongoing selling pressure persisted throughout the month, exacerbated by various government actions and the Mt. Gox legacy issues, although the impact of these factors gradually diminished.

Meanwhile, Ethereum is undergoing significant changes, causing uncertainty among some investors. The blockchain plans to scale by moving more transactions to Layer 2 networks. This year, activity on Ethereum Layer 2 networks has surged, with giants like Sony launching projects such as Soneium within this ecosystem. However, the shift of activity to Layer 2 has led to a decrease in Ethereum's fee revenue, which may affect the value of Ether.

By the end of the month, following the arrest of Telegram founder Pavel Durov in France, the market increasingly focused on the relationship between blockchain technology and digital privacy. Despite Federal Reserve Chairman Powell's clear "hint" at the possibility of interest rate cuts later in the month, overall market sentiment remained negative throughout August.

Layer 1

By the end of August, the total market capitalization of blockchain cryptocurrencies had dropped by 12.1% compared to the end of July, settling at $1.74 trillion. The market is still led by Bitcoin, Ethereum, BNB and Solana, with market shares of 67.2%, 17.4%, 4.5%, and 3.6%, respectively. Notably, Bitcoin's market share increased by 2.4% in absolute terms, while Ethereum's market share decreased by 2.3%.

Data Source: August 2024 Public Chain Token Market Cap Share

Bitcoin closed at $59,017, down 8.7%. Ethereum's decline was more pronounced, closing at $2,516, a drop of 21.4%.

Among the top 15 chains by market capitalization, Tron was the only chain to achieve both token price and market cap growth this month, with TRON's price rising by 23.1% and market cap increasing by 22.7%. In contrast, other chains showed a downward trend.

Data Source: End of August 2024 Public Chain Token Prices and Market Caps

Tron stood out amid market fluctuations, benefiting from the Meme craze, which triggered a surge in on-chain activity. The launch of SunPump, the first Meme fair launch platform on Tron, significantly increased user engagement.

The BNB chain also introduced new policies and incentives to promote on-chain Meme-related activities, with Simon's Cat, TOkenFi, and FLOKI leading in trading volume over the past 30 days.

Data Source: BNB Chain Popular Memecoins

Additionally, several major financial institutions expanded their blockchain investment portfolios this month. Leading asset management firm Franklin Templeton expanded its blockchain fund to include Avalanche. Meanwhile, Grayscale Investments launched Avalanche Trust and a new Sui fund.

By the end of August, the total TVL in the DeFi space was $64 billion, a decrease of 16.8% from the end of July.

Data Source: End of August 2024 Public Chain TVL

Among the top 15 chains by TVL, Sui was the only chain to achieve growth, with a monthly growth rate of 41.8%. The largest DeFi project on Sui, NAVI Protocol, offers lending and liquid staking products. Its TVL surged by 72.0%, increasing from $140 million on August 1 to $230 million by the end of August.

Although Polygon's TVL decreased by 1.3% from July, the prediction market Polymarket attracted significant attention. Influenced by the U.S. election cycle, Polymarket's monthly trading volume increased by 22.2% month-over-month, reaching $470 million, with the number of traders surging by 46.1% to 83,000. Polymarket's TVL grew by 19.6% in August, reaching $110 million, ranking third on the Polygon chain, behind AAVE and Uniswap. However, 78.0% of Polymarket's total trading volume was election-related, raising questions about its ability to maintain this growth post-U.S. elections.

Data Source: Polymarket Data Dashboard

Meanwhile, the arrest of Telegram founder Pavel Durov in France had a direct impact on TON's performance. In August, TON's TVL plummeted by 53.1%, as institutional investors exited to avoid potential risks.

Bitcoin Layer 2

As of August 31, the TVL of Bitcoin Layer 2 (including sidechains) reached $1.09 billion, growing 5.8 times since January 1, 2024, and an astonishing 18.7 times since January 1, 2023.

Bitlayer leads the field, accounting for 32.7% of the total TVL, followed by Core at 16.3%, Rootstock at 14.6%, and Merlin at 12.0%.

Data Source: Bitcoin Ecosystem Public Chain TVL

In terms of individual DeFi projects on a single chain, the top 10 projects account for 64.6% of the total TVL, with Avalon Finance (Bitlayer), Pell Network (Core), and MoneyOnChain (Rootstock) leading at 16.7%, 7.2%, and 6.6%, respectively.

Data Source: Bitcoin Ecosystem Public Chain TVL

When considering the multi-chain TVL of projects, Pell Network operates across seven chains, leading with a 22.9% market share, while Avalon Finance operates across three chains, closely following with a 22.8% market share. The top 10 projects collectively account for 77.5% of the total market share.

Data Source: Bitcoin DeFi Project TVL (Multi-Chain Summary)

For a more in-depth analysis of Bitcoin Layer 2, please refer to our latest research report jointly published with CoinMarketCap: “BTCFi: Analyzing the Bitcoin DeFi Ecosystem Through On-Chain Data”.

Ethereum Layer 2

As mentioned earlier, Ethereum faced numerous challenges in August, and its Layer 2 networks were no exception.

Arbitrum One, Optimism, and Base continued to dominate in TVL market share, holding 50.2%, 20.0%, and 8.2% shares, respectively, with little change in TVL compared to the previous month.

DeGate's TVL saw a significant increase of 20.6%, Scroll grew by 7.4%, and Taiko rose by 7.1%. However, Blast declined by 18.8%, and zkSync fell by 8.8%.

Data Source: August 2024 Ethereum Layer 2 Overview - Rollups (Bridging Related Metrics)

Overall, user activity on Ethereum Layer 2 remains sluggish, indicating a need for a new wave of innovation and more attractive applications to re-engage users. In the context of Bitcoin Layer 2 performing strongly this year, the Ethereum Layer 2 ecosystem may require a new narrative and stronger user participation to regain development momentum.

This month, Soneium became a hot topic. On August 23, the Sony Blockchain Solutions Labs, co-initiated by Sony Group and Startale Labs, announced the launch of a new Layer 2 network based on Ethereum—Soneium. This network will utilize Optimism's OP Stack technology, spanning gaming, entertainment, and finance, combining Web3 innovations with consumer applications.

Soneium

In the week following the announcement, Soneium made rapid progress, including the launch of the "Minato" testnet, the initiation of the "Soneium Spark" program for developers, and a partnership with Transak to provide global fiat deposit services. As industry giants like Sony continue to enter the blockchain space, there is growing optimism about bringing more users into the Web3 ecosystem.

Blockchain Games

In August, a total of 1,492 games were active across various blockchain networks, a decrease of 5.45% from July. The BNB chain, Polygon, and Ethereum led the market with market shares of 20.2%, 17.4%, and 17.0%, respectively.

Ronin, opBNB, Nebula (SKALE subnet), and NEAR performed well in terms of DAUs, averaging 1.34 million, 691,000, 349,000, and 321,000, respectively, over the month. By the end of August, these chains held DAU market shares of 28.0%, 23.8%, 8.8%, and 6.6%, respectively.

Data Source: Daily Active Users of Blockchain Games on Various Public Chains

Ronin's DAU market share continued to decline during August, dropping from 38.1% on August 1 to 28.0% on August 31. Nevertheless, Ronin's average DAU in August remained nearly double that of the following opBNB. This downward trend was primarily caused by the performance of the game Lumiterra, whose DAUs fell from 600,000 at the beginning of the month to 150,000 by the end.

Additionally, on August 6, the Ronin cross-chain bridge was paused due to a white-hat hacker attack that revealed a critical misconfiguration in the cross-chain bridge upgrade proposal. Approximately $12 million worth of cryptocurrency was transferred. Although the issue was quickly resolved and all funds were recovered, this incident had some impact on the activity within the Ronin ecosystem.

In contrast, opBNB's DAU share increased from 17.5% in August to 23.8%. By August 31, its market share had nearly doubled from 13.1% on July 1. The game SERAPH: In The Darkness, which launched on opBNB in mid-July, gained significant attention, with its DAUs rising from 187,000 on August 1 to 515,000 by the end of the month.

Nebula also saw an increase in market share, rising from 7.6% to 8.8%. As a SKALE subnet operating on a "zero Gas Fee" model, Nebula's growth was driven by games like Yomi Block Puzzle, moteDEX, and Haven's Compass.

For more trends in the blockchain gaming industry, you can read “August 2024 Blockchain Gaming Report: User Growth Amid Cryptocurrency Market Volatility”.

Funding Situation

In August, there were 12 funding events in the public chain space, totaling $118 million, an increase of 20.1% from July. Notably, four of these funding events did not disclose specific amounts.

August 2024 Public Chain Funding Events (Data Source: crypto-fundraising.info)

The increase in total funding this month was primarily due to a significant funding event. The largest funding round in July was Caldera's $15 million Series A, while August saw a substantial boost in overall data from Story Protocol's $80 million Series B funding.

PIP Labs, the core contributor to Story Protocol, received this funding with the support of venture capital giant Andreessen Horowitz (a16z). Story Protocol aims to revolutionize intellectual property management by transforming IP into modular, programmable "IP Legos." These assets can be authorized, managed, and monetized through smart contracts on the blockchain. Story Protocol empowers creators to directly embed licensing and royalty terms into their intellectual property, allowing for greater control over data. The project's mainnet is expected to launch later this year, generating significant anticipation.

Story Protocol

In addition to Story Protocol, three Layer 1 blockchains, including Quai Network, U2U Network, and Particle Network, secured new funding in August. In the Layer 2 space, several projects also successfully raised funds, including Ark and Nexio for Bitcoin Layer 2, Essential, Corn, and Reddio for Ethereum Layer 2, Soon for Solana Layer 2, and other Layer 2 projects like Rivalz Network and Lync.

A noteworthy emerging trend is the increasing attention on Move Stack. Two Layer 2 blockchains, Nexio and Lync, powered by Move Stack, completed new rounds of funding this month.