Try Quests to earn cryptoThorchain will soon add support for Dogecoin. Will this new integration have an impact on Thorchain? Will it increase swapping activity or wallet creation?
To answer this question, we will look at historical data during periods when new tokens were integrated to Thorchain. But first, let's begin by looking at the daily number of new wallets created on Thorchain. Let's also look at the daily swap count.
In July 2021, Thorchain shut down to make improvements to its network. This was to to harden the network after an attacker exploited a bug on Bitfrost¹. This explains the lack of activity in the Summer of 2021.
Sources
- https://halborn.com/explained-the-thorchain-hack-july-2021/
- https://kylinnetwork.medium.com/kylin-goes-thorchain-a-handy-guide-to-the-thorchain-integration-930791757649
- https://www.investopedia.com/terms/m/movingaverage.asp
- https://twitter.com/THORSwap/status/1408062562768359424
- https://twitter.com/THORSwap/status/1481289137349083141
The charts above show high volatility in the daily number of swaps and wallets created. This will pose a challenge to our analysis. Indeed, if we see a spike in activity right after the integration of a new token, could it simply be the result of the volatility that we normally see in the data?
Later, we will use a simple technique to overcome this challenge.
On May 17, 2021 the Kyl token from Kylin Network was integrated into Thorchain ². Did this have any impact on our variables of interest, which are wallet creation and swap count?
This chart shows the swap count before and after the May 17th integration of the Kyl token. Do we see an uptick? It is difficult to tell, so how can we make sense of this?
Enter the moving average.
The moving average, sometimes called the 'rolling average' computes the average of the data over the preceding days. In our chart above, we use 10 days as the period. The 10-day moving average is calculated by adding ten days of swap counts and then dividing that figure by 10. A moving average is used to smooth out the highs and lows of the dataset and get a feel for the trends.
Moving averages are an important analytical tool in the investment world.
> A rising moving average indicates that the security is in an uptrend, while a declining moving average indicates that it is in a downtrend. ³ -Investopedia.com
Our chart above shows an uptick in the daily swap count after Thorchain integrated the Kyl token on May 17th. This is illustrated by a higher than average daily swap count, as well as an increase in the steepness of the 10-day moving average daily swap count.
We can do the same analysis for the daily number of new wallets created. This time, we see no impact on wallet creation after the May 17 integration of Kyl.
On June 24, three new pools were added to Thorchain.⁴ If the integration of new tokens on Thorchain has an impact on daily activity, we should see it here.
After the three tokens were integrated on June 24, we see a clear reduction in the daily swap count.
Similarly, daily new wallet creation decreased for three consecutive days after June 24th.
What can we conclude from these observations? The integration of new tokens on Thorchain does not lead to an increase in new wallet creation. As for the impact on daily swap count, our data is inconclusive.
Why not look at the integration of Thor and xRune on Thorchain?
This analysis was prompted by the upcoming addition of Dogecoin on Thorchain. We want to see if a new token can bring in new users or increase daily swaps. Perhaps Dogecoin owners (Dogecoin Army) will join Thorchain, create new wallets and start using Thorswap.
Thor and xRune were created by Thorchain. They are not external tokens like Dogecoin and the other tokens that we looked at earlier. If we see an increase in swap count after the integration of Thor or xRune, it may be because Thorswap is the best (or the only) place to trade these tokens. Airdrop users could be selling their tokens on Thorchain soon after launch.
For these reasons Thor and xRune were excluded from this analysis.
Contrarily to our analysis, there are reasons to believe that the addition of Dogecoin may drive an uptick in new users and swap counts on Thorchain.
Dogecoin brings not only a new token, but also an entire new blockchain to Thorchain. In this sense it is a more significant upgrade.
Another important consideration is that Dogecoin is not available to trade on many DeFi exchanges. In fact, Thorchain seems to be the first DeFi exchange to integrate native Dogecoin swaps.⁵ Investors will now be able to farm their Doge by staking it in a Thorchain liquidity pool. In doing so they will earn yield on their Doge.
The integration of Dogecoin to Thorchain could be significant enough to attract a lot of new users wanting to trade or stake Doge.
- By smoothing out the volatility in a data set, the moving average is used to identify uptrends and downtrends.
- Based on our observations, the integration of new tokens on Thorchain does not lead to an increase in the creation of new wallets.
- Similarly, we see no clear indication that the integration of new tokens leads to an increase in daily swap count.
- We can speculate that the addition of Dogecoin will be more significant, therefore it may drive an uptick in swap count and wallet creation.
What have we learned?
Bonus material: Click here to see if the public launch of xDefi wallet had an impact on daily swap count and new wallet creation.
Thank you for reading.
Update, January 19: Doge is now integrated into Thorchain. So, what happened?