The NYALA Next 11 Index
The main purpose of NYALA’s Next 11 index is to track 11 crypto assets that are on the cusp of mainstream adoption — not just would-be Ethereum killers but protocols that could propel the value created by blockchain technology to the next level — there is a rough analogy here to Jim O’Neill’s attempt to identify the next 11 superstar emerging economies (after the BRICs) in 2005.
Since its inception in August 2021, the N11 index has had a spectacular performance (145%) and has easily outperformed Bitcoin and Ethereum. In order to maintain this positive track record, the index composition is revisited on a quarterly basis. At the end of Q1 2022, a number of new constituents were added and some were retired. We want to quickly present these assets to readers and followers of the NYALA blog.
New N11 Constituents, as of Q2 2022
Chainlink — LINK
Chainlink is the current gold standard of blockchain oracle networks, the primary purpose of which is to feed smart contracts with off-chain, real-world data that cannot be tampered with. For example, a smart contract that facilitates the trading of synthetic equities might rely on Chainlink to provide the current price of the FTSE 100 index. As the number of smart contracts and blockchains hosting them rapidly proliferates, so grows the need for a secure and standardized cross-chain messaging protocol that allows assets and data moving across blockchains with heterogeneous security guarantees to be treated as fungible. Chainlink’s Cross-chain Interoperability Protocol (CCIP) will leverage the existing network of Chainlink nodes to meet this need, while also improving their off-chain computational abilities to enable cross-chain smart contract execution. Cross-chain smart contracts would host different parts of their codebase on multiple blockchains, analogous to hosting different parts of a software stack on multiple cloud environments for efficiency. LINK is currently a payment token, used to pay node operators for providing oracle services. LINK staking is currently slated for 2022 release; node operators will need to stake LINK tokens as collateral before being able to provide oracle services.
NEAR Protocol — NEAR
NEAR is a Proof-of-Stake (PoS) smart contract platform that aims to be as developer-friendly as possible and support high transaction throughput, at any scale. The latter is achieved with “dynamic re-sharding”, a scaling solution which adds and removes throughput-boosting blockchain “shards” as needed. In addition to Ethereum Virtual Machine (EVM) compatibility, NEAR supports next-generation WebAssembly (Wasm) environments for smart contract execution. NEAR tokens are used to pay network transaction fees and vote in protocol governance measure. They can also be staked or delegated to nodes validating transactions. An uncommon feature of NEAR is that 30% of transaction fees spent interacting with any smart contract are rewarded to the creator(s) of that smart contract, with the intent of further incentivizing the development of applications on NEAR that increase network use.
Fantom — FTM
Fantom is an EVM-compatible PoS smart contract platform with a novel consensus model, named “Lachesis”, which enables very fast transaction finality. Fantom aims to be a hub for Decentralized Finance (DeFi) and enterprise blockchain services. Despite the recent departure of two key technical advisors from the Fantom Foundation, Andre Cronje and Anton Nell, Fantom still has an active development community and a growing number of DeFi applications that manage several billion US dollars’ worth of assets. FTM tokens are used to pay network transaction fees and vote in protocol governance measures. They can also be staked or delegated to nodes validating transactions.
Maker — MKR
Maker is the progenitor of one of the earliest DeFi primitives, the cryptoasset-collateralized stablecoin. Maker has two native tokens: MKR and DAI. DAI is a stablecoin that aims to maintain a 1:1 price peg with the US dollar. New DAI tokens can be minted by locking up cryptoassets, such as ETH, in a smart contract as collateral and borrowing DAI against them. MKR tokens are used to maintain economic equilibrium in the Maker ecosystem by being burned or minted to absorb any excess or shortfall in DAI supply. MKR can also be used to pay the “Stability Fee”, a variable interest rate charged to DAI borrowers that supports DAI’s peg to the US dollar. With increasing regulatory scrutiny trained on stablecoins and nation states more frequently targeting the assets of individuals for financial sanctions and seizures, DAI and other stablecoins that purport to be decentralized enough to resist seizure will continue to grow in popularity.
Theta Network — THETA
Theta Network is a decentralized media streaming network which uses token incentives to crowdsource excess computational, storage, and network bandwidth resources that are used to provide high quality streaming video at low cost. Theta Network has a dual network design: the Theta blockchain provides payment, reward, and smart contract capabilities, while the Theta Edge network is responsible for the storage and delivery of media. The THETA token can be used to vote in governance decisions and staked to nodes that earn TFUEL tokens. Theta Fuel (TFUEL) is the “gas token” of Theta Network, used to pay for media content streams and smart contract interactions.
Unchanged N11 Constituents
Kusama — KSM
Kusama is a canary network, a production network with real value on it that is used to test the impact of software upgrades and other changes before rolling them out on the economically consequent Polkadot blockchain with which it shares it codebase.
Polygon — MATIC
A platform aimed at being a sort of Swiss army knife for Ethereum scaling, integrating support for all possible scaling solutions instead of focusing on one or a few.
Filecoin — FIL
Filecoin is the incentivization layer of the InterPlanetary File System (IPFS), creating a marketplace for data services which aims to be competitive with centralized incumbents such as Amazon Web Services.
Algorand — ALGO
A smart contract platform with the unique Pure PoS (PPoS) consensus mechanism, which does not reward nodes for validating transactions and aims for immediate transaction finality.
Helium — HNT
A decentralized wireless network which self-propagates by rewarding Helium Hotspot operators with HNT tokens in proportion to their contribution to network size and signal strength.
Aave — AAVE
A decentralized money market which offers non-custodial borrowing and lending at both variable and fixed interest rates on many blockchains.
N11 Constituents Removed, as of Q2 2022
Please note that the removal of an asset from the N11 index should not be perceived as a negative judgement against it, unless otherwise stated. NAM follows a rules-based process to select new index constituents during each quarterly rebalancing, which leads to ongoing turnover of existing constituents.
Curve — CRV
A decentralized exchange with the deepest liquidity for stablecoin-to-stablecoin trades and such a core piece of DeFi infrastructure that many vie for control over its governance in what has been dubbed “The Curve Wars”.
Terra — LUNA
An algorithmically governed stablecoin platform which mints and burns its native LUNA token as needed to maintain the price peg of the stablecoins it issues, the most popular of which being the US-dollar-pegged UST. LUNA is now a constituent of the Core index.
Cosmos Hub — ATOM
The Cosmos network is an ecosystem of independent blockchains that increasingly communicate via IBC, an interoperability protocol that allows secure data and value transfer; Cosmos Hub is the locus of IBC packet routing among blockchains within the Cosmos network.
THORChain — RUNE
A blockchain in the Cosmos network that serves as a cross-chain decentralized exchange, allowing for non-custodial trades of the native assets of different blockchains.
Decentraland — MANA
One of the earliest “metaverse” blockchain projects, Decentraland is a virtual world which settles in-world commerce and real estate transactions on the Ethereum blockchain.
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