the activity categories.
To quantify traction and activity of a blockchain protocol, we have identified four relevant categories of metrics:
User Activity
Developer Activity
Social Activity
Financial Activity
A higher score for a specific activity category means a higher level of traction & activity of that blockchain.
user activity
You can have a pretty website or app, but if nobody is using it, it's useless. End-users are proof of product-market fit. They're proof of demand. In the blockchain world, activities done by users are for example staking, swapping, transferring tokens, lending, borrowing, providing liquidity, buying, selling etc.
Why does User Activity matter?
User Activity on a blockchain is an important aspect when it comes to assessing how well a blockchain is catering to specific needs with its various applications. The higher the number of users and the frequency of their activities, the higher the likelihood that development of a blockchain and its ecosystem will continue.
More users means that uncertainty around product-market fit decreases. Critical mass is getting closer. Users attract developers and developers attract users.
From an investor’s perspective it's important to take user activity into account as it shows actual use of the protocol, not something theoretical. It's a key metric when it comes to tracking protocol adoption or traction. User growth over time shows its capability of attracting new users and keeping existing ones.
How we measure User Activity
In the context of our Chaindicator, the following metrics are currently taken into account to capture activity of users:
Daily Active Addresses (DAA) (7-Day Moving Average)
Daily Transactions (7-Day Moving Average)
DEVELOPER activity
The success of the crypto industry depends heavily on the work of developers who build, maintain, and enhance protocols and applications for others to use. The more developers who contribute and the more time they invest, the greater the potential for future value creation. As an investor, it makes sense to deeply consider Developer Activity.
Why does developer Activity matter?
Currently, the demand for skilled developers far exceeds their availability. When a developer commits to working on a particular protocol, it represents a valuable resource that cannot be used elsewhere. Therefore, it is crucial for developers to carefully choose which protocol they work on, as their contributions can greatly impact the success of the project. It also clearly signals to the outside world that people are committed to growing, developing and enhancing the ecosystem of the particular blockchain.
The best approach to analyze developer activity within a protocol's ecosystem is by examining the number of commits made. When considering the ecosystem, we differentiate between Core and Sub-ecosystem developers.
How we measure developer Activity
We use GitHub as our primary source, select all repositories based on Electric Capital’s taxonomy and extract all our data using Github’s own GraphQL API.
When we speak about Developer Activity in the context of the Chaindicator, we aim to capture all relevant data about the entire process of creating and maintaining blockchain-based applications and protocols, from initial design to ongoing maintenance and improvement. The following metrics are currently taken into account to capture the Developer Activity within a blockchain ecosystem:
Average # of Commits to Core
Average # of Commits to Sub-ecosystem
Average # of Weekly Unique Developers contributing to Core
Average # of Weekly Unique Developers contributing to Sub-ecosystem
Considerations
Although tracking commits is a useful way to gauge developer activity, we’re aware it is not a flawless measure. There are valuable contributions that are not captured by this metric. For instance, activities such as testing, contributions to technical documentation, and providing security audits are not reflected in GitHub commits.
Furthermore, it's important to remember that not all protocols and developers follow the same operational flow. Some developers may make numerous small commits in a short period of time, while others may initially work in a closed-source environment and only commit substantial pieces of code later on.
financial activity
At its core, crypto has various financial use cases. It's why it all started in the first place. We started with Bitcoin and the simple transfer of value. Nowadays, we have thousands of decentralized financial (DeFi) applications (dApps), like automated market makers (AMMs), options protocols, and borrowing platforms.
Users choose which application to use based on many factors, ranging from usability and available liquidity, to opportunity for profit and trust in the dApp. Specifically the latter is key in the world of open-source code we live in.
Why does financial activity matter?
Very few users will use a specific de dApp if it cannot be trusted. After all, its their money that is at stake. Trusted code tends to attract money. This is why consistent high financial activity on a blockchain is a positive sign: it indicates a high willingness of people to use their funds on that blockchain and the dApps living on it.
Looking at financial activity therefore makes a lot of sense for investors. It offers a good indication of the level of demand, trust, growth potential, liquidity, investor sentiment, risk appetite and overall reliability of the underlying blockchain. Therefore, the sustained capability of an ecosystem to attract high amounts of capital and financial activity should not be underestimated.
How we measure User Activity
In the context of our Chaindicator, the following metrics are currently taken into account to capture the financial activity within a blockchain ecosystem:
Total Value Locked (TVL) (in USD)
Stablecoins on-chain (in USD)
Decentralized Exchanges (DEX) volume (in USD)
social activity
The crypto space is known for its vocal, passionate and engaged participants. Almost all projects have die-hard fans and loyal communities. Having fans and people interested in what you are building is valuable for a project.
A large and engaged user base can help drive growth and adoption, and contribute to the long-term viability of the protocol. However, it is definitely not easy to build and maintain a big community.
A well-known saying in crypto is 'You can fork the code, but you cannot fork the community'. This is exactly why an investor should not ignore Social Activity.
Why does social activity matter?
Loyal community members and people interested in a project have different ways of displaying their passion or interest in a project. Some might tweet 5x per day about a project, while others write in-depth bullish posts of Reddit.
A big portion of those interested might take a more passive approach and just follow a project on Twitter, or add it to their watchlist on CoinGecko. Still, it shows that someone actively wants to follow what is going on with a project. These people are (potential) crypto owners. They are aware that a project exist, and interested enough to use their social media or mobile app to follow it.
Specifically in the world of crypto, there is a lot of value in building a strong active community:
Communities are a source of information, feedback and knowledge. They form a resource for new individuals who are interested in a project. Members share insights, ask questions, and educate each other. This leads to a better understanding of the technology, its potential, and drives its growth.
A passionate and vocal community will spread the word about the project (for free), correct wrong information about the project on social media, or even argue why this particular project is the best. A passionate community has a strong sense of belonging which leads to even more local members. They become even more invested in the future and success of the project.
Engaging with the cryptocurrency community provides the opportunity of networking, building relationships and collaboration with like-minded individuals. All could lead to new partnerships, joint initiatives, and integrations.
How we measure social Activity
In the context of our Chaindicator, the following metrics are currently taken into account to capture the relative size and activity of communities:
Twitter followers
Reddit subscribers
CoinGecko Watchlisters
CoinMarketCap Watchlisters