---
title: 2.7 Measuring Success Against other Ecosystems
description: How can we measure the success of 1 L1 ecosystem against one another?
---

# 2.7 Measuring Success Against other Ecosystems

It is fair to say that crypto is a war of ecosystems, in a similar way that big tech companies fought for control of user behavior and data through social network participation. Yet in the early stage of the game we are in at the present (2022), it remains to be seen what ‘success’ for an L1 ecosystem looks like comparatively: Is a rapidly increasing token price, but no real products or services (Cardano) something to be preferred over a strong social focus, but little funding and public visibility (Celo), or fantastic tech, but no community or spotlight (Elrond)? In short - how can we measure the success of 1 L1 ecosystem against one another? 

## The Analogy of Geopolitics Once More

L1 ecosystems are the digital cities and countries of the future. But analogously, there is not necessarily exceptional clarity on what it means for one country to be more successful than another: Would we say, Tibet for example, is more or less successful than Costa Rica? When both states have entirely different cultures, priorities, and foci. 

In crypto, however, things are a little more pragmatic in the following sense: Every L1 ecosystem requires active updates and development in order to be maintained. In this sense, the social or communal support for an L1 ecosystem - either via financial support or social commitment to maintenance of the protocol - is the necessary condition for keeping an L1 system operational. From there every L1 must fight to create a culture, community, and ecosystem of users and builders to inhabit and pursue their vision of the future. 

## Variables:

Much discussion and debate centers on the different metrics and analytics that should be tracked in order to gauge ecosystem health and overall performance. The following variables should all be considered and known in any discussion pertaining to measuring success in an ecosystem. 

Hint, everything is all connected here. Meaning one variable is closely linked to most other variables except on small and anomalous behavioral trends and time frames. 



  * **Total Value Locked:** The amount of value held in the ecosystem, or particular dApp or protocol. 
  * **Number of Native Tokens:** The number of unique, liquid, and tradeable tokens according to the standard of the ecosystem. 
  * **Number of Listed Tokens:** Number of tokens in the ecosystem listed on centralized and decentralized exchanges. 
  * **Non-Fungible Asset Value:** The total value in non-fungible assets, most usually PFP or art work but also music and entertainment. 
  * **Accounts Created / New Users:** The number of new accounts on a daily, monthly, and annual basis. 
  * **Daily Active Wallets / Daily active users:** The number of active wallets or accounts on a daily, monthly, and annual basis. 
  * **Active Developers Building:** Usually measured via Github Commits, or internal ecosystem polling / selection of number of active devs building. 
  * **Total Number of dApps by Category:** Total number of active decentralized applications often segmented by category as done on [awesomenear.com](https://awesomenear.com/). 
  * **Liquidity and Volume of Fungible and Non-Fungible Tokens:** The depth of liquidity in token markets, and / or the amount of daily volume on different token markets (both fungible and non-fungible). 
  * **Number of Validator Nodes:** The number of validator nodes on the network - sometimes indicative of the level of decentralization in a network. 


    * **Transaction Fee Burn Rate (Deflation):** The amount of value spent on transaction fees, and burned (in certain proof of stake chains like NEAR and ETH) to indicate an overall burn rate / ecosystem wide deflation rate. 
    * **Total Daily Transactions:** The number of total transactions executed on a daily basis on a network. This can also be expanded to average for weekly, monthly, and annually. 


    * **Bridged Value (inflows and outflows):** The amount of value brought into or sent out of the ecosystem, on a daily, weekly or monthly basis. 
    * **Institutional Exposure:** The amount of institutional value, or number of institutions actively holding, participating, LPing, or integrated with dApp’s inside of an ecosystem. 
    * **Total Native Token Supply Held in Smart Contract:** The amount of the native L1 token locked in a smart contract, either for storage, staking, or other uses. 
    * **Ecosystem Generated Value:** The amount of value natively generated inside of the ecosystem - created value, that does not originate elsewhere. 
    * **Ecosystem Exported Value:** The amount of value that leaves the ecosystem on a moving basis. 

## The Traditional and The Emerging Game

From 2014 to 2020 crypto analytics concentrated on on financial metrics including market cap, daily volume, number of fungible tokens, stock to flow, tokens locked in smart contract, trading volume, and total value locked. This _traditional game was_ largely focused on the financial component of crypto, due to the growth in payment tokens, as well as the lack of product market fit for other verticals. 

However, since that time, with the emergence of new products and infrastructure, there is ongoing debate as to which variables are indeed indicative of ecosystem health and success. This _Emerging Game_ focuses beyond the financial components of an ecosystem’s success, and looks at active developers, types of dApps being built in the ecosystem, the number of dApps being built, as well as ecosystem generated value (EGV). 



* **The traditional game:** 
    * Token market cap 
    * Total Value Locked
    * Active Users.
* **The emerging game:** 
    * Developer commits. 
    * dApps in the ecosystem. 
    * Daily active users. 
    * Ecosystem Generated Value (EGV)

**A Note on Exchanges, Custodians, and Institutional / Retail exposure:** 

Notably, some of the largest institutions and infrastructure providers in crypto, have not successfully ‘kept up’ with the _emerging game _and tend to focus strongly on the _traditional game._ This means that tokens are listed on Coinbase, Kraken, and Binance not necessarily due to their innovative design, but rather the number of users, the volume on the token, and the belief in the token’s ability to grow and strengthen over time. 

Despite this lag, L1 ecosystems remain incredibly dependent on listing, custodians, off-ramps, and institutional exposure to fungible tokens inside of their ecosystem: Ecosystems with large exposure via exchanges and custodians, naturally tend to perform better, than ecosystems with minimal or singular exposure (usually in the form of the L1 token). 

## Main Takeaways on the Evaluation of Ecosystems

Some of the most unresolved questions to date in evaluating an ecosystem could be summarized in the following questions: 

* **_Are these all variables arbitrary?_** Yes and No. Different ecosystems may prioritize different variables, or specialize in certain variables. This aligns quite nicely with Haseeb’s thesis on L1 cities, whereby Solana is LA, NEAR is SF, and AVAX is Chicago. Each ecosystem can foster a specific culture by focusing on certain variables. However, all ecosystems are dependent upon a healthy token price and active users participating in the dApps within that ecosystem. 
* **_Does token price matter_**? Yes. And this answer could be argued from two perspectives: First, on its own, token price matters because of the psychological effect and the establishment of flywheels (explained below). In short, a strong and rising token price attracts attention from the outside world, and prioritizes the ecosystem in the eyes of newcomers, Web2 devs crossing over, and new entrepreneurs. Second, an L1 token is a lot like a national currency - and in this case - it refers to the purchasing power of an ecosystem relative to other products, and assets in other ecosystems. A strong token price, like a strong currency makes it easier for that ecosystem to bring and maintain value inside of it. 
* **Flywheels and How They Can Be Leveraged:** The flywheel in simple terms, is summarized in the following sequence: 

_Brand → Users and Builders → Products, Services, and Communities → Native Value → Original Innovation → token appreciation → Brand._

To break this down fully: The brand and visibility of an ecosystem brings in users and builders, who product, collaborate, and service the ecosystem (dApps, DAOs, LPs, traders, gamers, etc.), from which value is created and exchanged, and eventually from which new forms of value and dApps can be created. If executed well this should lead to token appreciation, which enhances the visibility of the brand, and brings more users into the ecosystem, from which the process can repeat itself. 

## Conclusion

Success of an ecosystem is an open discussion today that revolves around a number of key variables. Ecosystems generate cultures and communities around specialization in certain variables. While all of these different variables are connected, token price still plays an exceptionally important role. It is up to the ecosystem itself to decide what variables it would like to prioritize and how it would like to strategically develop its community and brand. 
