Defi is likely to be reinvented in this cycle, and continued innovation means we will soon be discussing the next generation of financial primitives. In the long run, it will be interesting to see which markets and protocols are able to cope with this situation.
This article is an extension of the viewpoint based on data. I will continue to update this series in the future. Thank you for your attention🙏🏻
1/First, some important objective facts on the data👇🏻
(1) Year-to-date on-chain TVL has increased by 75%, with the current total scale approaching US$95 billion
(2) The on-chain revenue track has achieved a growth of 148.6% this year, with a scale of US$9.1 billion
(3) The market value of stablecoins hit a two-year high of US$161.1 billion. Ethna’s market share soared nearly 30 times, making it the fifth largest stablecoin market.
2/Phenomena revealed by changes in data🔻
Different from the previous cycle, in the Defi sub-concept, DEX is no longer the only track that occupies the majority of the market share. With the advent of the $ETH POS era, liquidity staking has now occupied the largest share of TVL.
The TVL growth of DEX is at a normal level, but the number of projects included in the DEX track is as high as 1,320, which is 8 times the number of projects in the first-ranked liquidity staking track.
This is why I said before that the DEX track is an extremely competitive track with serious business homogeneity.
In addition, the industry trend brought about by the re-pledging track has increased the TVL of this track by nearly 40 times. Although the track has not yet fully exploded, it has already initially demonstrated the oligopolistic pattern that may emerge in the future.
The first two protocols account for 70% of the current TVL share, and the TVL share of the first three protocols is not on par with each other. The second largest growth in TVL is the focus of this paragraph - on-chain revenue, which is also the focus of this paragraph on the new Defi cycle.
3/The basics of the on-chain revenue sector🔻
The on-chain revenue sector has achieved a growth of 148.6% this year, with a TVL of $9.1 billion. The most competitive protocol in this field is Pendle, which accounts for more than half of the TVL share. Based on the original point of view in the research report: "Pendle can be regarded as the Uniswap of the on-chain revenue sector."
The fact is that, putting aside the limitations of the sector structure, Pendle's on-chain TVL share currently ranks seventh in the entire market, second only to Uniswap.
I will not go into too much detail about Pendle’s actual business in this chapter, as I have published related content before. To summarize briefly: Pendle has made Defi liquidity more composable through its debt-interest separation structural design, thereby creating more on-chain arbitrage opportunities.
(It doesn’t matter if you don’t understand this paragraph. After all, this article is not about popular science. Just get a general impression.)
Another point that needs to be emphasized is that Pendle's main mining pool transaction volume this year comes from the re-staking sector, which means that Pendle currently undertakes the middle and lower reaches of the re-staking sector market, and because the re-staking track continues to launch various PUA points plans, Pendle has also captured the airdrop value brought by these points to a certain extent.
4/Trend cases in other markets🔻
4.1/Stablecoin Market——Ethena🔻
Currently, the market share of stablecoins is mainly dominated by two parties, with Tether's USDT and Circle's USDC accounting for about 90% of the market share.
In the emerging stablecoin market, the stablecoin paradigm that brings higher capital efficiency to users is another mainstream that is more beneficial to the market.
Therefore, in addition to the Pendle mentioned above, this research report also lists the growth changes of Ethena's USDe this year in the analysis of the stablecoin market.
Among the yield-based stablecoins, basic classifications are also made based on some different implementation methods, such as RWA and mortgage. Among them, the RWA paradigm may be less popular, but mortgage stablecoins are still relatively well-known in the market.
Representative cases such as DAI and crvUSD are typical examples of collateralized stablecoins, but their low capital efficiency has prevented them from occupying a large enough market position.
Therefore, Ethena's positive capital efficiency is likely to surpass it in a very short period of time. Up to now, USDe has surpassed one-third of the TVL share of the collateralized stablecoin track.
I won’t go into detail about what Ethena does and what its principles are, because I have posted related content before. If you are really interested, you can contact me for the link.
4.2/Lending Market——Morpho🔻
In the last cycle, the on-chain lending sector surpassed DEX to become the sub-track with the largest funding capacity in the Defi track. As a track with clear market demand, it is still the second largest sector in terms of TVL on the chain.
In this market sector that I am not very familiar with, #Binance the research report lists a case - Morpho, which is currently ranked 6th in TVL in the lending market sector, which is not a very outstanding market position.
But what attracted my attention the most was the term attached to the product - [Modular Lending]
You should know that modular construction has become a main line of infrastructure development in the industry. However, before the modular narrative emerged, there were other modular cases, such as providing some packaged tools or functional modules for developers to call. This was also the industry modularization before 2023.
The modularity of Morpho is an infrastructure construction layer for everyone to develop, which is more inclined to the latter logic, splitting and packaging some functions of the application itself to provide to the demanders.
This is a relatively common protocol infrastructure product, and we can discuss it in detail when there is a chance.
4.3/Derivatives sector🔻
In the Defi category, what caught my attention the most was the introduction to the derivatives market. The current average daily trading volume in the derivatives market is 540 million US dollars, which has doubled compared to last year (from 180 million to 540 million).
In addition to on-chain contracts, another mainstream on-chain derivatives are options. The options market is a track that I have paid more attention to this year. Its financial instrument data is much safer than perpetual contracts.
However, due to the relatively high learning threshold for options, the popularity of this tool is still very small in the current Web3. However, I have initially seen the vitality of this derivatives market.
Also, I initially thought that the example cited in the derivatives market would be $AEVO , but it was Hyperliquid, which is also a vertical competitor of AEVO
But the difference is that Hyperliquid is built on L1, and AEVO is a modular build based on L2. Since I have analyzed AEVO in the past during its Binance listing event, I thought I would take some time to study some of the differences between Hyperliquid and AEVO in the near future.
It is also worth mentioning that Hyperliquid currently ranks fifth in the TVL market share, and the TVL amounts of the third and fourth are not much different, so they are on par with each other.
However, in terms of trading volume, it is the second largest market in the derivatives track, and the growth was achieved within 6 months. This kind of agreement is so attractive!!!
The above is my review of the Defi market and my views on some targets. I did not translate the entire report directly, and there are even some differences between this article and the original report.
Thank you for your reading and attention🙏🏻
