Using Data to Find the Builders of the Next Bull
Jun 30, 2023
The startups that will carry the next web3 bull market forward are being built now.
Small, unassuming projects quietly preparing to disrupt (relatively) quiet markets are easy to miss. The good news is, finding them is just a matter of knowing where to look. With many developing chains specializing in key sectors, there’s no one right place to look, and the landscape is constantly changing.
But with good data and the right roadmap, matching your portfolio to potential high-growth “bull builders” can be distilled into a predictable and repeatable process that can help you lock in on future disruptors.
Step 1: Identifying Macro Industry Trends
Understand Ethereum, Understand Blockchain
As most chains are Ethereum Virtual Machine (EVM) compatible and most apps are built in an Ethereum development paradigm, beginning with a comprehensive understanding of Ethereum is crucial. It forms the foundation of the industry and is a great vantage point from which to observe broad trends. And, since most chains are bridged to Ethereum, on-chain activity can be traced from Ethereum to other ecosystems for a more holistic picture.
Why This Matters
With Ethereum data, you can identify large markets, macro trends, and the flow of traffic across the industry. Now, you should have a data-driven understanding of the addressable markets and begin to form hypotheses about their viability in your portfolio.
Step 2: Lean Into Specialization
Hone in on Key Sectors
Once you grasp the landscape, it’s important to specialize in the sectors most appealing to you, be it DeFi, infrastructure plays, community-oriented trends like gaming, NFTs, and more. Deciding on a few markets will help focus your search for the next hit.
While Ethereum serves as a foundational starting point due to its extensive traffic, smart contract standards, and reputation, other ecosystems tend to specialize and outperform in their respective sectors. User flow from Ethereum to competitive specialized chains can serve as a signpost, guiding you to the next step in the roadmap.
For example, once you’ve analyzed Ethereum data to understand macro web3 trends, you might choose one of the following chains as the likely launchpad for your ideal project:
Solana: Known for its strong NFT community and decentralized phone tech, Solana is in fact most focused on pushing crypto payments forward with "DeFi at the speed of light". As such, it's a major player in both community-oriented products and FinTech.
Polygon: Famous for collaborations with web2 giants like Starbucks and Nike, Polygon is the most popular breeding ground for integrating existing markets into web3 other than in sports collectibles, where Flow leads.
Avalanche: Notable for its scalable subnets and on-chain infrastructure targeting established institutions, Avalanche has been gearing up to power the infrastructure of the new internet (most remarkably with their recent partnership with AWS).
There are numerous other blockchains with strong specialties not listed above. By using Ethereum data to identify ecosystems well-designed for specialized use cases and then diving into the native data of those ecosystems, you’ll be able to identify where the most viable projects in your preferred sectors are launching.
Then, it’s time to dig deep.
Step 3: Get Granular
Delve into Specific Projects
Once you’ve identified your key sectors and their most viable host ecosystems, it’s time to research the local landscape. Evaluating and comparing projects calls for an understanding of the industry's key metrics, including daily activity, new wallets, user retention, market cap, etc. With comprehensive on-chain data, you’ll have all of these and more available for modeling.
Analyzing Ecosystem Health
By looking at the transaction volume over time, you can gauge the ecosystem’s health and growth over time.
After getting a sense for the general ecosystem’s growth and activity, you can identify power players with added parameters. For example, grouping the transaction volume by smart contract will show you which projects are responsible for the bulk of the ecosystem’s activity.
You can also track the progress of individual projects based on their deployments, user growth, retention, etc. This precise assessment should offer you a clear picture of the potential of the various projects in the ecosystem.
Repeat this process for each of the key sectors in each of the ecosystems you’ve prioritized according to your goals for your portfolio, and you’ve built a data-driven roadmap to success.
Web3 develops quickly, and so do its trends. Deploying smart capital comes down to interpreting good data. Whether you're a VC looking for the next unicorn or a startup aiming to stand out in a crowded market, leveraging blockchain data is necessary for creating a roadmap to success.
By the same token, startups can thrive by leveraging these same decision-making processes, so it’s worth asking the companies in your portfolio - what does the data show?
Flipside data has everything you need for insights that give you an edge in Web3. Start a free trial today.