How High Can The Graph Go in 2024? A Fundamental Approach

Accessing decentralized data is a vital but challenging undertaking in a world where blockchain innovation is increasingly defining the landscape. This problem was addressed in 2017 when Yaniv Tal, Jannis Pohlmann, and Brandon Ramirez launched The Graph. The Graph’s indexing system, initially centered on Ethereum, swiftly expanded to encompass several blockchain networks, such as Polygon, AVAX, and Binance Smart Chain, making data inquiries easier across decentralized platforms. By the time The Graph launched its mainnet in 2020, it had not only decentralized data indexing and querying but also gained significant traction in the crypto community.

For investors, The Graph presents a unique opportunity to back a technology at the core of Web3 infrastructure. With over $69 million in funding and a steadily expanding user base, The Graph plays a critical role in powering applications by enabling seamless access to blockchain data. This post dives into what makes The Graph a valuable investment, its expanding ecosystem, and the long-term potential it holds within the rapidly evolving blockchain landscape.

Fundamental Metrics

The Graph currently has 600 daily active users (DAU), which is less than the 10,000 DAU it had earlier in the year. However, in the second quarter of 2024, GRT processed an astounding 2.9 billion queries, an 84% increase from Q1 that demonstrated strong levels of engagement. Indexing rewards and query fees generate money, with demand-side revenue rising 160% to $113,000 in Q2 and supply-side revenue falling 7% to $17.6 million. The Graph has a strong market position in the blockchain data arena, as seen by the native token GRT’s $1.3 billion market cap, which is still much more than competitors like Covalent at $68 million, even though it has dropped 69% since March 2024.

Market Analysis

The Graph targets developers and teams building decentralized applications (dApps) who need efficient, reliable access to on-chain data without managing their own data infrastructure. The market for decentralized indexing and querying solutions is expansive and rapidly growing alongside the adoption of blockchain technology across industries.

With over 75,000 projects reportedly using The Graph and a significant demand for its querying capabilities, The Graph has positioned itself as a leading solution in this space. The projected market growth is driven by increased interest in Web3 applications, signaling substantial future demand. However, The Graph’s pioneering position also subjects it to potential regulatory scrutiny as data management on blockchain networks becomes more widespread and scrutinized.

The Team and Management

The Graph’s founding team—Yaniv Tal, Brandon Ramirez, and Jannis Pohlmann—brings a wealth of technical expertise and industry experience to the protocol, having successfully launched GRT as a pioneering solution in blockchain data indexing. The team’s background in software engineering and blockchain development has been instrumental in building a protocol that is both innovative and reliable.

Complemented by specialized groups with deep technical knowledge, the team has effectively maintained and grown The Graph without any major controversies, showcasing their integrity and commitment to the platform’s mission. This combination of experience, technical intelligence, and ethical standing positions The Graph’s team to lead the protocol to sustained success in the blockchain ecosystem.

Tokenomics

The design of The Graph’s utility token, GRT, is moderately favorable to long-term investors, as it plays a crucial role in network operations by facilitating payments for indexing and query services while rewarding participants. The decentralized governance structure, led by the Graph Council with community input via The Graph Advocates DAO, promotes a balanced approach to decision-making and protocol evolution. Although GRT’s function mirrors that of other utility tokens, its integration into The Graph’s established protocol and listing on major exchanges like Binance, Coinbase, and KuCoin enhances its accessibility and liquidity.

However, with an initial supply of 10 billion tokens and a 3% annual inflation rate, GRT’s value growth may face some dilution, a factor long-term investors should consider within the broader context of The Graph’s expanding ecosystem and utility.

User Adoption and Partnership

The Graph’s potential to grow its user base is strong, owing to its technical reliability, consistent expansion across over 40 blockchain networks, and a focus on addressing developers’ needs. Despite the complexity of its technology, The Graph is purpose-built for its core audience of dApp developers, who rely on it for efficient data access. The project’s backing by prominent institutional investors like Tiger Global Management adds credibility, reinforcing confidence in its long-term viability.

Additionally, with an active social media presence, including 337,000 Twitter followers and 24,000 subreddit members, The Graph has a solid foundation to further expand its user community, supported by its growing network reach and ongoing technical improvements.

Competitive Advantage 

The Graph has a strong competitive advantage, largely built on its first-mover status as the leading decentralized protocol for indexing and querying blockchain data. Its extensive integration with prominent blockchain networks like Ethereum, Polygon, and Avalanche, alongside partnerships with influential projects such as Chainlink, has solidified a robust and defensible market position.

This head start not only established The Graph as the go-to solution for decentralized data indexing but also created a technological moat, making it difficult for competitors to replicate its infrastructure and network. While the space is growing, The Graph’s deep-rooted connections and established presence give it a substantial advantage in maintaining its leadership in the evolving blockchain data ecosystem.

Conclusion: Long-Term Bull Case vs. Bear Case

The Graph’s first-mover advantage in decentralized data indexing, combined with a robust network supporting 75,000 projects and increasing demand-side revenue, forms a compelling bull case for its long-term potential. However, the bear case highlights notable concerns: the market cap’s sharp drop in 2024 signals high volatility, and although The Graph currently lacks significant competition, future entrants could disrupt its leadership.

Intelligent investors might remain cautious due to The Graph’s limited transparency in financial reporting, the regulatory uncertainty of its U.S. headquarters, and the platform’s recent decline in daily active users, which may impact sustained engagement.

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