Should optimism be optimistic of Sushi prospects ?

    Open Analytics Bounty: Optimism (November 5)

    Introduction

    Introduction to Sushiswap

    What is SushiSwap (SUSHI)?

    SushiSwap (SUSHI) is a decentralized exchange (or DEX) built on the Ethereum network. Originally forked from Uniswap, SushiSwap leverages smart contracts in order to provide liquidity pools that allow users to directly trade crypto assets — with no intermediary. Users can also become liquidity pool providers, supplying an equal value pair of two cryptocurrencies in order to receive rewards whenever anyone utilizes that pool. It is a decentralized finance (or DeFi) protocol.

    How does SushiSwap work? 

    You can use Sushiswap to trade one cryptocurrency for another directly — it can’t be used to trade fiat for crypto or vice versa. It uses the Automated Market Maker model pioneered by Uniswap.  

    To add liquidity, users send equal-value amounts of two cryptocurrencies to SushiSwap. In exchange, they receive Liquidity Provider (or LP) tokens and begin receiving rewards. Users can deposit their newly created LP tokens into yield farms to earn further APY rewards. This creates extra incentive for users to continue to be part of the liquidity pool over time. reference

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    Introduction to Layer 2 and optimism

    Layer 2

    Layer 2 refers to a secondary framework or protocol that is built on top of an existing blockchain system. The main goal of these protocols is to solve the transaction speed and scaling difficulties that are being faced by the major cryptocurrency networks.

    For instance, Bitcoin and Ethereum are still not able to process thousands of transactions per second (TPS), and this is certainly detrimental to their long-term growth. There is a need for higher throughput before these networks can be effectively adopted and used on a wider scale. reference

    Examples : Optimism, Arbitrum , zkSync

    Optimism

    Optimism is a Layer 2 scaling solution for Ethereum that can support all of Ethereum’s Dapps. Instead of running all computation and data on the Ethereum network, Optimism puts all transaction data on-chain and runs computation off-chain, increasing Ethereum’s transactions per second and decreasing transaction fees. Tests have shown a 143x decrease in transaction fees on Synthetix Exchange and up to a 100x decrease on Uniswap. Since transaction data still stays on the Ethereum network, this scaling solution does not sacrifice Ethereum’s decentralization or security for scalability.

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    Sushiswap and optimism

    The happy ( optimism) lunch (sushiswap) combo started very recently. That is on May 13 2022. Reference

    Hence for this reason, the number of features available on Optimism is low and is restricted to swaps, deposits and withdrawals for Liquidity pools.

    Objective

    The objective of this article is to analyze the new sushiswap users on optimism and their actions and also to look at how optimism fares with another layer 2 solution , Arbitrum.

    Note though the number of product features available on Arbitrum are much more, we only restrict ourselves to swaps, deposits and withdrawals.

    Overall Analysis

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    Observation

    Arbitrum has the highest share of users and the trend appears to be growing. Adding on, ==Arbitrum has on boarded the highest number of new users== in the last 3 months. Of all the new sushiswap users, ==Arbitrum accounts for 80% while optimism accounts for only 1% of the new users.==

    Analysis Optimism

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    Observation

    The number of users who make an account (wallet) just to interact with sushiswap in the initial transactions is extremely low. only ==0.155 % of the new accounts on optimism interact with sushiswap.== The ==biggest crowd puller== on optimism is Hop Protocol and optimistic explorer which drew in 18.7% of the new users.


    New users

    We now look at all the users who have interacted with sushiswap in the past 3 months and analyse what percent of them were new users

    Observation

    1. ==New users make up about 10% of the sushiswap user base.==
    2. The ==number of new users peaked on September 28, 2022== due to which 47 new users interacted with sushiswap. This is because of the optimistic explorer NFT hunts. So, they are not technically “new” users but rather just farmers.
    3. The number of “experienced” users interacting with sushiswap peaked on August 18 2022.
    4. By looking at the week-on-week growth chart, we can conclude that ==sushiswap recorded consecutive growth term in September.== This translates to a very good month for sushiswap.
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    Loyal (new) users

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    Alright, in the previous section we looked at how many new users were coming in to sushiswap.

    But wait, how many of the new users are “Real users” , users who have been active for at-least 7 days and made at-least 5 transactions in the past 3 months.

    Observation

    Around ==72% of the users were one-time users,== they interacted with sushiswap only once, while ==only 1.8% of the new users became a loyal users== who interacted at-least 5 times.

    New user actions

    Well, the section header gives it away, In this section, we look at what new users do on Sushiswap and also see if there have been any deviations in anything they do from what the OG’s have done.

    Observation

    1. ==Almost all the new users use sushiswap for swapping== whereas the experienced users also participate in deposits and withdrawals.
    2. Close to 10% of the users are involved in providing liquidity in the sushiswap app.
    3. ==During the first week of September 2022, While the new users only swapped, the OGs(experienced) involved more in providing liquidity.==
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    Okay, new users use swap function. But what more ?

    What pools do the new users use ?

    ==New users majorly use the WETH-USDC and WETH-OP pools.==


    Analysis - Arbitrum

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    Observation

    The number of users who make an account (wallet) just to interact with sushiswap in the initial transactions is among the top 5 protocols. ==Around 5 % of the new accounts on arbitrum interact with sushiswap.== The ==biggest crowd puller== on arbitrum is Hop Protocol and arbitrum explorer which drew in 10% of the new users.

    New users

    1. In the past 3 months, ==10% of the wallets that interacted with sushiswap were new== (aka, the first 2 transactions were made with sushiswap) and 90% of the wallets that interacted with sushiswap were “old” or experienced users.
    2. The ==last week of August 2022== was particularly favorable for arbitrum-sushiswap as it recorded ==highest on boarding of new users==, activity of both new and experienced users peaking.
    3. It appears that the last week ( October last week ) is showing signs of increased activity.
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    Loyal (New) users

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    New user actions

    As you could guess from the section header, in this section we will be looking at what the new users have been doing.

    Alright, in the previous section we looked at how many new users were coming in to sushiswap.

    But wait, how many of the new users are “Real users” , users who have been active for at-least 7 days and made at-least 5 transactions in the past 3 months.

    Observation

    This is surprising, very different from optimism. ==Only 12% of the users were one-time users ( it was 71.5% in optimism), and a quarter of them have become active users ( 2.6% in optimism).==

    From this we can clearly say that, sushiswap on arbitrum is much stronger force than sushiswap on optimism. It clearly is able to convert more users to long time users.

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    Observation

    1. While ==new users on arbitrum mainly go for swaps== (94% of them), there are ==sizable number of users who become liquidity providers.== Optimism, On the other hand had new users going only for swaps.
    2. The ==number of pools being used by new users is higher and more distributed in arbitrum than on optimism.== New users on arbitrum interact with WETH-USDC, MAGIC-WETH and DPX-WETH in almost equal terms. ( Optimism → only 2 pools, WETH-USDC and WETH-OP)
    3. The share of deposits and withdrawal have increased in the month of September 2022.

    Key takeaways

    1. Arbitrum has on boarded the highest number of new users. Arbitrum accounts for 80% while optimism accounts for only 1% of the new users.
    2. 0.155 % of the new accounts on optimism interact with sushiswap. On the other hand, Around 5 % of the new accounts on Arbitrum interact with sushiswap.
    3. sushiswap on optimism recorded consecutive growth term in September.
    4. On optimism, 72% of the users were one-time users while they make up only 15% on arbitrum. Users on optimism are not sticking long enough.
    5. Almost all the new users(99%) use sushiswap for swapping while on arbitrum , it’s 94%. New users are more comfortable providing liquidity on Arbitrum than on optimism.
    6. Top pools on optimism, WETH-OP and WETH-USDC

    Conclusion

    1. Arbitrum has on boarded the highest number of new users. Arbitrum accounts for 80% while optimism accounts for only 1% of the new users.
    2. 0.155 % of the new accounts on optimism interact with sushiswap. On the other hand, Around 5 % of the new accounts on Arbitrum interact with sushiswap.
    3. sushiswap on optimism recorded consecutive growth term in September.
    4. On optimism, 72% of the users were one-time users while they make up only 15% on arbitrum. Users on optimism are not sticking long enough.
    5. Almost all the new users(99%) use sushiswap for swapping while on arbitrum , it’s 94%. New users are more comfortable providing liquidity on Arbitrum than on optimism.
    6. Top pools on optimism, WETH-OP and WETH-USDC

    Final Conclusion : Sushi on Arbitrum is miles ahead of Sushi on optimism. Being released early on Arbitrum, sushi has made a good share for itself there.

    Methodology

    1. Identifying users.

      1. We identify users based on the contract they interact with. Users who interact with any of the sushi contracts are termed as sushi users. The complete list of contract address used was derived from sushi docs . We use the core.fact_transactions of the respective chain to identify.
    2. Identifying new users.

      1. We define new users as Users who have made a call to a protocol ( sushiswap contract address) in the first three transactions.
      2. Using the nonce as parameter, (the nonce indicates the number of outgoing transactions made by the address) . That is, it increments by 1 every time an outgoing transaction is made. Using this as a proxy, we identify the initial transaction as those having nonce < 3 (0,1,2).
      3. We use the core.fact_transactions of the respective chain to identify.
    3. To identify users who interacted with other projects, we use core.dim_labels tables using to_address as the foreign key.

    4. Calculating week on week growth : subtract the first week from the second week and then divide that by the last week's total.

    5. Identifying Active/one-time/regular users : We identify the user type by looking at the number of days they have been active and transactions made.

      1. using : date_diff(max(block timestamp), min(block_timestamp))
      2. count( distinct transactions)
    6. Classifying user action

      1. Swaps : to identify swap actions, we use the optimism.sushi.ez_swaps tables. ( joining it with fact_transactions on origin_from_address allows us to get nonce parameter and further identify swaps from new user)
      2. Deposits : To identify deposits we look at the mint of LP token. We achieve this by identifying all transactions that take place with sushi contracts that have “from"='0x0000000000000000000000000000000000000000'. We use the fact_event_logs to identify mints and joining it with fact_transactions on tx_hash allows us to get nonce parameter and further identify deposits from new user)
      3. Withdrawals : To identify withdrawals we look at the burn of LP token. We achieve this by identifying all transactions that take place with sushi contracts that have event_name=’Burn’. We use the fact_event_logs to identify burns and joining it with fact_transactions on tx_hash allows us to get nonce parameter and further identify withdrawals from new user)
    7. To identify the pools used, we use the optimism.sushi.ez_swaps tables.

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    Glossary

    1. New user → Users who have made a call to a protocol ( sushiswap contract address) in the first three transactions .

    2. Experienced user (OG)→ Users who have made a call to a protocol ( sushiswap contract address) in the fourth or later transaction.

    3. One time user → Made a call to sushiswap contract address only once.

    4. Active or loyal user → Made a call to sushiswap contract address more than 5 times over a period of 7 days at-least

    5. Regular user → Made a call to sushiswap contract address either less than 5 times or were active for less than 7 days.

    6. Week on Week growth : the change in the value of a specific metric as a percentage of the previous Week's value.

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    Parameters

    1. Number_of_months : the number of months to consider. ==The default is set to 3 months.== All the analysis and commentary is made with reference to 3 months unless mentioned in the report.
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