Why Metis grew by $600m in two weeks

The value of crypto deposited in Metis has increased sevenfold since December 20, placing it third among the Layer 2 blockchains critical to Ethereum’s scaling ambitions.

But it’s not because users are rushing to try out the blockchain, which has been around since 2021.

What appears to be meteoric growth is instead a by-product of a higher token price — a single token accounts for more than 90% of the crypto on Metis — and the company’s plan to encourage developers to build on the blockchain.

On December 18, Metis announced it would pump 4.6 million METIS tokens, worth almost $400 million at Thursday’s prices, into a grants program to lure developers.

On December 20, 4.6 million METIS tokens were minted on Ethereum, according to blockchain data reviewed by DL News. Two minutes later, 4.4 million were sent to Metis. Those tokens are now worth about $380 million, or half of the value of crypto on Metis.

Metis’s jump highlights the ease with which popular metrics, such as total value locked — the value of crypto deposited in a blockchain or a blockchain application — can change or give a potentially skewed impression of surging popularity.

To be sure, interest in Metis has spiked since the announcement. Crypto wallets using Metis more than doubled over the past two weeks, to 6,500. It suggests that projects can still lure capital using ecosystem development funds rather than promising users free money via an airdrop.

Metis’s grants program will begin distributing tokens sometime in the first quarter of the year.

On December 20, just over $100 million worth of crypto was parked on Metis, according to L2BEAT, putting it outside the top 10 Layer 2 blockchains on Ethereum. The next day, that figure was $229 million. Now, more than $700 million in crypto has been bridged to Metis, making it larger than Base but smaller than industry stalwarts Arbitrum and Optimism.

Still, relatively few people are actually using the blockchain.

Of the $680 million bridged to Metis, only $80 million is being used in its DeFi ecosystem, half of that on lending protocol Aave, according to data from DefiLlama.

That ratio is much higher on other top-five Layer 2 blockchains.

For example, of the $9.8 billion in crypto bridged to Arbitrum, almost one-third, or $2.9 billion, is being used in its DeFi ecosystem.

While half of Metis’ TVL came from newly minted tokens, much of its increase also came from a surge in the price of its METIS token, which is up more than 200% since December 20.

In fact, the amount of METIS tokens in the blockchain’s DeFi ecosystem has decreased by 40% since December 20, according to DefiLlama data, even as the value of crypto — including METIS — in that ecosystem has risen 87%.

It isn’t the only Layer 2 blockchain to enjoy explosive growth this month.

The total value of crypto locked in Manta, which debuted in September, expanded 1,250% in December.

Manta’s growth has come from airdrop hunters, people who are using the blockchain in hopes they will qualify for a future airdrop.