*Note, SWOT is an analysis of operational/fundamental elements. This is not a model to be used for technical or trading purposes. (NFA, DYOR)
Composed of four elements, Strengths, Weaknesses, Opportunities, and Threats, a SWOT analysis framework provides excellent insight for evaluating the state of a project’s well-being through the lens of a birds-eye view.
It can help formulate decisions on what areas might require more attention, set performance goals, and organize a foundational understanding that a project is headed.
Rarely (if ever) used in crypto, it is time to apply this timeless method of evaluation to the digital asset space.
Today, The Graph (GRT), the leading Indexing protocol for blockchain data will get a SWOT.
Strengths (Internal) (Helpful)
1. Strong business Model
Tokenomics are vital for the proliferation of any crypto project. They are the foundation of fostering rapid innovation and a tool of coordination for human effort. The Graph’s unique position/service is very well designed. Composed of Indexers, Curators, and Delegators, a wide range of technical aptitudes are welcome to participate. Each one of the three roles plays a distinct and useful function in contributing not only to the security of the project but also to its application to real-world use cases. Flexible reward structures create cohesive relationships between all three categories of participants. Combined with its intelligent slashing mechanism to disincentive malicious behavior from indexers; balances the responsibility of consequences and protects well-intentioned end users from being vicariously harmed.
2. Aggressive Initial Vesting schedule is Over
Launched in December 2020, GRT was able to proliferate alongside the greater market range and enjoy price action upwards of 10x. However, besides the shift of tides that took place industry-wide, one of the largest sources of economic pressure on the project has been the aggressive vesting schedule for early investors. For the first 24 months after launch (which ended in December of 2022) over 70.33% of the total available supply completed vesting and has made its way into circulating supply. Whether it was sold or staked is not the matter here, what is important is that now there is no more ticking clock overshadowing investment considerations from future market entrants.
3. Over 840 subgraphs deployed and growing
The total amount of subgraphs reflects the potentiality of the project to find broader use cases and attract a wider base of potential clientele. Given how technically demanding it is to implement a subgraph, what is most important about this number is that it doesn’t just represent the growth in terms of raw amount, but it also expresses the rate of growth in the amount of subgraphs. It is accelerating.
4. Over 11,390 delegators
When considering that the last year was brutal for prices/investors, it is fascinating to see that the amount of unique GRT delegators grew by >33% (Q1 2022 — Q1 2023). Coupled with the 1.9 Billion GRT that is delegated, means that the average amount of tokens delegated is ~166,812. Even at today’s discount prices which is in the ballpark of $18,000 USD per delegator; to me that qualifies as a strong community.
5. Over 25% of Total GRT supply is staked
Over 2.6 Billion of the currently outstanding 9 billion GRT tokens are staked. I anticipate this number will grow over the next 12 months outpacing the rate of inflation and relieving sale pressure. Higher percentages of stake shower deeper levels of commitment from the project’s community and in turn, strengthens its open market dynamics.
6. Infrastructure focused, non-hype project
When compared to the traditional fugazi marketing tactics employed by other crypto projects, The Graph stands out with its strong commitment to being focused on developing quality product and honestly presenting it.
Weaknesses (Internal) (Harmful)
1. Perpetual Inflation Rate
The Graph’s native token GRT has an unlimited maximum supply; even though it has a ~1% burn rate, the annual inflation rate of 3% will reflect itself as a constant pressure on price.
2. Strong dependence on Emission rewards for Incentives
The Graph nodes have two income streams, Indexing Rewards and Query rewards. Indexing rewards are obtained through token the protocol issuing new GRT tokens to subsidize costs. Query rewards are earned whenever end users pay to access a subgraph. The current ratio between INDEX:QUERY is 99:1. While this doesn’t put the project in any immediate danger, it does show its still young phase of adoption.
Opportunities (External) (Helpful)
1. On-Chain Data is becoming More Requested
As the industry grows it’s only natural for the data it purveys grows with it. More users, more apps, more data, more demand for data. Blockchain-based information has become a point of interest for a broad range of entities, from startups to tech behemoths to legacy financial institutions. GRT is able to provide them this data in a decentralized way.
2. No Direct competiton
Considering how saturated the competitive landscape generally is in the crypto industry it is stunning to find out that there is no project directly competing with GRT. It is the only project specifically focused on the provision of difficult-to-obtain on-chain data from blockchains to the outside world (like an inverted oracle).
3. Migration to Arbitrum Network
Initially planned for a full mainnet rollout on Ethereum, after diligent examination, the ETH gas fees deterred many potential use cases due to (such as micro-queries). Therefore, the operational/economic side of The Graph has been ported over the lower cost, higher throughput Arbtirum network.
Threats (External) (Harmful)
1. Very low demand-side income for the protocol
Recording its highest income of ~$89,000 in Q1 of 2023, the protocol might not have been sustainable (in terms of attractiveness to developers) without its subsidized $GRT indexing rewards.
The Graph is easily considered to be a fundamentally sound project. Intelligence is oozing from the intricate design of the tokenomics as it relates to the product's application. Negatives are few and not lethal. The strongest information I have extrapolated from this has been the commitment to quality, the rate of development, and the unique market positioning of the project.
I am biased AF. While I have a very calm response toward the potentiality of another sideways year, I also have a gnawing feeling that the sooner I stake GRT, the sooner I earn rewards and the sooner the bull market springs back to life.
Disclaimer: I own GRT and believe in the project's potential.
Thank you so much for reading,
I hope this serves you well on your journey.
Live long and prosper 🥂
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