Who’s #1? How to Read Chain Analytics Like a Pro

For developers, creators, and brands building in Web3, identifying the most promising networks requires accurate analytics. Many lenses used to analyze chain activity are incomplete, inaccurate, and may be misleading. Comparing blockchain protocols can be difficult because different chains have wildly different infrastructures. Metrics that go by the same name across two different ecosystems may mean different things.This post will lay out a more nuanced way to understand the metrics of the Polygon PoS chain by demonstrating how the current numbers don’t capture the entire picture. Because alternative L1s are too different architecturally, we will only be examining Ethereum Virtual Machine (EVM)-based chains. Specifically, we will dive into the weeds about total transactions and wallet counts where there is more than meets the eye. With nuance, we can try to glean an accurate picture of a network’s vitality.As you’ll see, when the data is examined, and we use a more holistic lens to read on-chain metrics, Polygon PoS emerges, among all EVM chains, as: #1 for NFTs in terms of transactions and NFT transfers#1 (as of December) in terms of weekly transactions#2 in terms of DeFi value transfersCheck out a complete dashboard of the following stats, here.

Transactions vs. Value transfers, Active Wallets, and the Analytics of a Bustling Chain

Transaction counts are often used as a metric to identify thriving (or quiet) chains. These numbers are supposed to show what networks are actually being used. The number of transactions should give the pulse of ecosystem activity during a given timeframe. For much of last year, among EVM-compatible chains, Polygon PoS was second only to the Binance network in terms of overall transactions, based on current methodologies. In December, that changed. Polygon PoS now handles the most weekly transactions of any EVM chain. Polygon edged out Binance, and had about 3x more transactions than Ethereum (see graph below).

Polygon PoS is #1 when looking at transactions that involve NFTs.This is part of a larger trend: the Polygon PoS chain leads the number of NFT transactions, as well as NFT contract addresses created. For instance, in December, 1.3 million NFTs minted on Polygon PoS were sold on OpenSea–the most number of NFTs sold across all EVM chains that month.

But a simple definition of “transaction” doesn’t capture the entire picture. On the Polygon PoS chain, a single transaction published to a block may contain multiple transfers of value.In other words, what is counted as “one transaction” in this data is actually sometimes a group of value transfers. These are executed by a contract or “bulk pay” method that can send value (both tokens and NFTs) and interact with multiple wallets–the type of activity many intuitively think of as a transaction. What does this mean? For Polygon PoS, the current methodology to determine total transaction count underreports value transfers. Taking into account the nuance of value transfer, a clearer picture of the Polygon PoS chain’s activity emerges. More value moves to more wallets than one finds merely counting overall transactions.For an example of how this looks in a block explorer, take a peek here. One transaction, multiple transfers of value.So, what specific value transfers do the numbers demonstrate?

• Polygon PoS is #1 by a larger margin when looking at value transfers for NFTs.

• Polygon PoS is #2 when we look at value transfers for DeFi, only after Binance, and it is continuing to trend upward.

It is important to note that Binance also posts bulk pay transactions – meaning that some transactions also contain multiple transfers of value.

Active Wallets

Estimating the number of users actually participating on a protocol can be difficult. Analyzing the number of active wallets can demonstrate user activity in an ecosystem. But what is an active wallet? Right now, Polygon PoS ranks second for number of active wallets, after Binance–a consistent, upward trend since the middle of December, 2022. (For most of 2022, Polygon ranked third, after Ethereum.)But the current methodologies for determining an “active wallet” don’t reflect the whole picture of a chain. Wallets that focus on sending and receiving value, like NFTs or tokens, are not currently included in the “active” set. This undercounts chain users. Additionally, apps that pay gas for users do so from a single wallet. Take OpenSea, for instance: from July 2021 to July 2022, all trades were facilitated by one fee-paying wallet–OpenSea doing so on behalf of users. In reality, by July 1st, 2022, 13.1 million wallets had actively participated in trading NFTs.

In other words, the term “active wallets” as it is currently defined, doesn’t rely on a methodology that takes into account mass adoption. Use-cases with digital collectibles from major brands, for instance, are often collected without on-chain interaction. These users have a Web3 wallet and are part of the larger Polygon PoS ecosystem and Ethereum community. It is important for their activity to not go overlooked so that developers, creators, and users can get a real, accurate picture of the various user bases within the ecosystem.

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On-chain analytics are a window into the bustling (or not) interior of a blockchain ecosystem. As Layer-Two scaling efforts intensify this year–like Polygon zkEVM–it will become especially important to understand how to tune out the noise and analyze the facts. And there is more to be covered. Future posts might dive into organic smart contract creation and creators, gas fees, network revenue, estimated TVL of projects building on a protocol, and total staked amount. Looking objectively at the numbers, Polygon PoS is the stand out choice for developers, brands, and users who love Ethereum, but hope to leverage faster speeds and lower fees. Be sure to check the Polygon blog and tune in to our social channels for everything in the Polygon ecosystem. Website | Twitter | Developer Twitter | Telegram | Reddit | Discord | Instagram | Facebook | LinkedIn