#加密货币 #达摩院

The second quarter was indeed a turbulent period for the cryptocurrency market. The market peaked around the middle of the quarter, but the following month and a half was affected by a series of negative news, including lawsuits against major exchanges and concerns about the decoupling of USDT and TUSD.

Before we dive into the upcoming episode, let’s evaluate the protocol that has performed well over the past quarter.

In the DeFi space, several sectors continue to grow and attract organic demand. These include liquidity staking, on-chain perpetual trading, and more.

Perpetual DEX

In the second quarter of this year, on-chain perpetual exchanges like dYdX, GMX, Gains, etc. generated a total of $117 million in fees. These products have maintained high usage during the bear market. The ability to trade cryptocurrencies, forex, and other assets on-chain remains one of the most organically in-demand areas in the DeFi space.

The chart below compares transaction volumes on the largest perpetual protocols in Q1 and Q2.

Total volume is down 8.2% from Q1, which isn’t a huge drop considering the generally bearish environment we experienced in Q2. While dYdX is still a clear leader in terms of volume, the protocol saw a significant drop in market share between quarters. The same is true for other “OG” perpetual exchanges like GMX and Gains.

New protocols such as Level and Kwenta have seen a lot of growth, and the main reason for this growth is undoubtedly the large trading rebates (i.e. native token issuance) provided to traders of the protocol. Over time, as these incentives decrease, it will be worth watching whether users will continue to stay on the protocol or jump to other trading platforms.

Vertex opened their Arbitrum native exchange to the public in April and has recently seen a significant increase in trading volume. Vertex has not yet launched their native token, so some of this volume is likely generated by airdrop speculators.

Ethereum Liquidity Staking

In the past six months, liquidity staking has increased from around $7 billion to over $18 billion. With the overall DeFi total value locked (TVL) remaining at around $45 billion, an inflow of $11 billion is quite significant.

After the Shanghai hard fork, the staking was released and attracted a lot of liquidity in this area. The following is a comparison of some data on staking assets in the first and second quarters:

The projects that benefited the most from Q1 to Q2 were Lido, Rocket Pool, and Frax Finance. Not only did Lido see an inflow of 1.6 million ETH ($3 billion), but the protocol also gained significant market share despite the emergence of new competitors.

Both Rocket Pool and Frax have unique moats that attract new liquidity.

Rocket Pool launched their 8ETH mini pool, while Frax Ether consistently offers the highest staking yields due to its dual-token model.

Swell launched in Q2 and also achieved significant TVL. They are currently running a campaign where early depositors can mine the upcoming $SWELL token. Therefore, some of this new liquidity may come from users wishing to participate in the airdrop.

chain

Below are the financial statements of the largest L1 and L2 blockchains in the cryptocurrency space. The numerical values ​​are explained below:

  • Transaction fee = transaction fee paid by users on the chain;

  • Income = the remaining portion of the fee after the validator gets its share;

  • Profit = Revenue minus token emission.

  • Ethereum had its best quarter ever in terms of profitability, up more than 300% from the first quarter of the year.

  • As shown below, in the fourth quarter of 2021, Ethereum generated $4.3 billion in fees, but due to the large amount of ETH being released before the switch to proof-of-stake, this caused the returns to be largely negative.

How will these fee amounts translate into profitability in today’s environment?

If Ethereum averages $4 billion in fees per year throughout the year and has a profitability rate similar to Q2 2023, annual profitability would be around $24 billion, which puts Ethereum at a P/E ratio of no more than 9.5, given the current price of $1,900.

Arbitrum also saw a significant increase in fees generated during this period and is one of the few chains with positive profitability. Currently, L2 profit margins are quite low as most of the fees are paid to the mainnet validators.

With the launch of Proto-Danksharding later this year, profit margins are expected to increase as Rollup fees decrease.

Chains such as Solana, Polygon, and Optimism have seen large negative profitability due to large amounts of token issuance to incentivize users and pay validator nodes.

9 catalysts and narratives to watch in Q3

Cryptocurrency is an attention economy. Protocols with product updates and narratives are more likely to attract attention and outperform in the short to medium term. Here are some of the top narratives worth keeping an eye on.

Bitcoin ETF

The second quarter has been very positive for the cryptocurrency market due to the sudden institutional interest in Bitcoin. BlackRock, Fidelity, and others have applied for Bitcoin ETFs, and the market generally believes that their chances of approval are high. A few days ago, the SEC called the recent applications incomplete, and although the market initially sold off, the price quickly rebounded because the applications seemed to require only more clarity on which exchange it planned to use to offer the product. Many ETFs have already been resubmitted, such as the Fidelity Bitcoin ETF, which lists Coinbase as the exchange used.

When might an ETF be approved?

The deadline for BlackRock and the Ark ETF is August 12, and while it could be pushed back, experts predict the answer will likely be announced on that date.

The market seems to be expecting approval in August, so a rejection or delay could have an adverse impact on prices. The deadline for the Blackrock ETF is February 23 next year.

The Importance of a Bitcoin ETF

This is the most important catalyst to watch closely in the coming months. Not only does a Bitcoin ETF allow large institutions to gain exposure to the asset, but it also kicks off a bullish period for the entire cryptocurrency market. Without proper Bitcoin price action, other altcoins cannot rally.

DeFi is also unable to receive new liquidity injections for the same reason. If an ETF is approved later this year, it is not just Bitcoin that will benefit. With this in mind, the following catalysts could cause specific assets to outperform in a more bullish environment:

EIP-4844

You may already know that EIP-4844 will bring Proto-Danksharding to Ethereum in Q3/Q4. With this implementation, Rollups will be able to send batches of transactions (called blobs) to the Ethereum mainnet, reducing fees on these secondary chains by up to 20x. The main beneficiaries will therefore not be the Ethereum mainnet, as fees here will not be reduced in the future until the full Danksharding rollout, but rather Rollup chains like Arbitrum and Optimism. $ARB and $OP are trading at much lower prices than at the beginning of the year, and if history repeats itself, they will both likely see a rally ahead of this event.

Liquidity Staking and LSDfi

As mentioned earlier, Ethereum (ETH) liquid staking was the fastest growing in the DeFi space in Q2. Here are some protocols worth keeping an eye on in Q3:

frxETH - Frax will launch frxETH V2 and the Frax Chain later this year, which includes creating a native lending market for LSD, using frxETH as a native Gas token on the chain to increase the annualized yield on staking, and more.

EigenLayer - Eigenlayer has already seen strong interest from investors and is likely to see a significant infusion of liquidity as they officially launch later this year.

swETH - Swell is running a campaign where early users who mint their native LSD swETH can earn “pearls” that can be redeemed for a native $SWELL token airdrop. As long as this campaign continues, the protocol will likely continue to grow.

ETHx - Stader Labs will launch ETHx on mainnet on July 10. Its main feature is that it only takes 4 $ETH to run an Ethereum node.

The huge growth achieved by the LSD space in Q2 is unlikely to continue at the same pace in Q3. Higher staking rates and less on-chain activity have led to a general decline in annualized yields. With lower returns, stakers are looking for ways to increase their yields, and this is where the LSDfi protocol comes in. The table below is data from last week's newsletter, showing current statistics for the top LSDfi projects.

Pendle has seen huge growth in liquidity, with its native token $PENDLE up over 100% in the past week, with the most recent high coming after announcing a Binance listing. The Pendle team likes to keep a low profile about new features on the protocol; however, I think it’s safe to assume that there’s a lot planned for the protocol in Q3. They recently applied for an OP-grant to drive liquidity on Optimism, and hinted at a launch on the BNB chain. Cross-chain expansion seems to be close.

LSD-backed stablecoin protocols like Lyra and Raft have also seen significant growth recently. It’s clear that there is demand for this type of product, but even more obvious is that much of the recent success is due to massive token incentivized/airdrop mining. There are already 3+ protocols planning to launch very similar products in the coming weeks/months, so competition for liquidity will undoubtedly increase.

Base (a second-layer scaling solution provided by Coinbase)

Just last week, Coinbase announced that Base passed all security audits and has met 4/5 criteria for mainnet launch. Base is built on OP-stack, and Optimism's recently launched Bedrock upgrade has made transaction costs on Optimism and OP chains like Base much lower. Now only the "testnet stability" condition remains, so the mainnet launch will most likely happen in the third quarter. Coinbase has over 40 million registered users, many of whom may have never been exposed to DeFi. This is likely to be one of the most important "Onboard" events of the year. Coinbase may only provide support for mainstream protocols like Uniswap, Aave, etc. that have been tested on a large scale, but having a large retail user base is very good for the entire field.

Additionally, this could be a good narrative for $OP as Base will be committing a portion of transaction fee revenue to the Optimism treasury.

Frax Chain

Frax Finance has developed a variety of products, including the $FRAX stablecoin, $FPI price index, Fraxswap, FraxEther, FraxFerry (cross-chain bridge), and more. Frax also announced that they are building a second-layer blockchain based on Ethereum, which aims to unify all of these products into one DeFi hub. This is a hybrid Rollup, meaning it adopts the Optimistic Rollup architecture and utilizes zero-knowledge proofs for state consensus. The goal is to provide high scalability, fast finality, and strong security for end users. The chain is scheduled to launch in Q3/Q4 of this year, but the most important part of the announcement is that frxETH will become the token for transaction fees. This could lead to a significant increase in the supply of frxETH if demand for new second-layer solutions arises. However, more frxETH used to pay gas fees will also result in less frxETH being staked as sfrxETH, which in turn increases the staking yield. However, switching to another token to use the chain may be a burden for some users, and in the worst case, may slow down adoption. I am a little skeptical, but generally excited to look forward to this result.

Polygon 2.0

Polygon recently announced "Polygon 2.0", which brings together the various innovations that the team has built over the past few years. It includes both Optimistic Rollups like Arbitrum and Optimism, combined with cross-chain security mechanisms similar to Cosmos. Polygon 2.0 consists of four layers.

  • Staking layer: Validators stake MATIC tokens in a similar manner to PoS chains.

  • Interaction layer: A shared cross-chain bridge that allows chains to mint and destroy assets on Ethereum in an interoperable manner.

  • Execution layers: Polygon 2.0 will run two different execution layers.

  1. Supernet: An application-specific blockchain, similar to Avalanche’s subnets or Lisk on Cosmos.

  2. Public Chain: zkEVM will use Ethereum for data availability and is the most secure but also the most expensive Rollup solution. PoS-based zkEVM uses Polygon for data availability (with MATIC providing security) and then simply publishes proofs on Ethereum for higher scalability.

$MATIC has been falling recently due to forced selling as Celsius sold its assets to buy BTC and ETH. Therefore, the price may rebound once Polygon 2.0 is launched in the second half of this year.

dYdX V4

The goal of V4 is to make dYdX decentralized by launching the exchange on a custom appchain in the Cosmos ecosystem. The orderbook that was previously operated in a centralized off-chain manner will now be managed by validators on the appchain through an in-memory orderbook. Validators will submit transactions for each block, ensuring that all transactions go through and that they have the same version of the orderbook/chain. Current testing has reached over 500 transactions per second. $DYDX has been criticized in the past due to high inflation rates and low token utility. With V4, the token is likely to gain more significant use and potentially include a revenue sharing aspect. The protocol has mentioned this in a previous post.

“Beginning with dYdX V4, dYdX Trading Inc. will no longer operate any part of the protocol. As such, it will no longer receive revenue based on the protocol’s trading fee revenue. The same is true for all other centralized parties, unless the community decides otherwise.”

The unlocking plan for $DYDX is as follows:

  • 30% unlocked on December 1, 2023;

  • 40% in equal installments on the first day of each month from January 1, 2024 to June 1, 2024;

  • 20% in equal installments on the first day of each month from July 1, 2024 to June 1, 2025;

  • 10% in equal installments payable on the first day of each month from July 1, 2025 to June 1, 2026.

The public testnet will be launched, which indicates that the mainnet launch is near. If there is an announcement about the fee sharing mechanism for $DYDX, this could become a strong narrative for the token. However, it is important to remember the large unlocking plan starting in December this year.

GMX V2

With the public testnet going live a few weeks ago, GMX V2 seems to be closer than ever. This upgrade brings many new features, one of which is the adoption of Chainlink’s custom low-latency price oracle for better trade execution. Another major change is the independent liquidity of each trading pair and the possibility to create synthetic trading pairs.

Each trading pair will have its own liquidity pool, for example ETH/USDC will have ETH as long collateral and USDC as short collateral. A synthetic trading pair can also be SOL/USDC, with a liquidity pool of ETH as long collateral and USDC as short collateral. This model is designed to simplify the deployment of new liquidity pools, and the main benefit of independent liquidity is the reduced risk of providing liquidity.

Synthetix V3

Synthetix is ​​a DeFi liquidity hub that powers various derivatives protocols on Optimism such as Kwenta, Lyra, Thales, Polynomial, and more. Trading volumes have increased significantly this year, with the majority of the volume coming from Kwenta traders.

Synthetix V3 is an upgrade that has been underway for the past two years and is designed to make the protocol the liquidity layer for all DeFi. Currently, all synthetic assets are collateralized by the native governance token $SNX.  V3 will introduce multiple upgrades including multi-collateral staking, risk-isolated permissionless pools, cross-chain liquidity, and more.  V3 is technically already on mainnet, but core innovations such as Perps V3, Pools V3, Teleporters, and Cross-chain Synthesis are all in development.