Author: TechFlow
From lack of innovation to prevalence of speculation, the market has gradually fallen into an awkward situation.
Memes are rampant on Solana, Pump.fun's revenue is rising, and issuing coins has never been so direct and simple...
As a result, the crypto market has gradually evolved into a brutal "player versus player" (PvP) game. In this zero-sum game, the goal of participants is not to create value, but to gain benefits from other participants. Behind every winner, there is a loser.
Everyone is a recipient and participant of the current crypto status quo rather than a changer; and more perceptive people are engaged in the business of "promoters":
For example, yesterday, a platform called The Arena appeared on the Solana ecosystem, and its business is very "in line with" the current market --- allowing players to go long, short or hedge any newly emerging Solana tokens on the chain.
The name of the platform (Arena) has already revealed the essence of the business, further amplifying the level of PVP beyond spot trading, creating a brutal fight based on leverage.
Behind Arena is another well-known DeFi protocol, Marginfi, which provides a lending pool to support the smooth operation of Arena's long and short logic.
PVP Arena, Marginfi provides a lending pool
How is The Arena's business realized?
Simply put, The Arena is a trading platform based on an independent lending pool that allows users to perform leveraged long and short operations on new tokens on Solana.
Users can create audited, open-source lending pools with no impermanent loss.
The Arena specifically highlights its focus on new tokens on Solana. As they say, Solana is generating a large number of new tokens every day, but traders have traditionally been limited in what they can do with these new tokens.
How to understand independent lending pools?
In layman's terms, this means that each token has its own dedicated pool, rather than an AMM pairing pool like Uniswap. At the same time, the funds in the pool are over-collateralized, which means that more funds are deposited than lent to ensure security.
This lending pool originates from the decentralized lending protocol marginfi, which provides the necessary DeFI infrastructure.
Let's use a more common example to understand how this works:
Imagine The Arena is a special "game field" with many different "game rooms", each representing a token.
Suppose there is a new currency called DOGEE. In the "game room" of DOGEE:
You can become a "room owner" and put your own DOGEE or other recognized tokens (such as USDC) into this room.
Your income: When other people use this room, they will pay you some fees (interest).
Your risk: If someone borrows DOGEE and doesn’t return it, you may lose a portion of your deposited tokens.
Why be a homeowner? The answer is to earn interest, just like putting your money in the bank, but the returns may be higher.
Others can come and "play the game" (trade), going long/short DOGEE.
How exactly does the lending happen here?
Imagine The Arena had a "magic box" that could quickly lend and return tokens.
The process of going long on DOGEE is as follows:
Players put some collateral (like USDC) into the game room. They borrow USDC from the "magic box".
Immediately use this USDC to buy more DOGEE.
If the DOGEE price goes up, they make money.
Finally, they need to sell some DOGEE, repay the borrowed USDC, and pay some fees.
The principle of shorting DOGEE is similar and will not be elaborated on here.
When users trade on The Arena, the actual lending and borrowing operations are completed through Marginfi, and they can also use Marginfi’s flash loan function, which allows borrowing and repayment in the same transaction.
If The Arena is a leverage game that intensifies PVP, Marginfi is like the game engine behind it. You only need to focus on the game interface (The Arena) without having to understand how the engine (Marginfi) works.
DeFi fuels the trend, and transactions never stop
In ancient Rome, the Colosseum was where gladiators fought to the death while spectators cheered and applauded them.
In the crypto market, projects like The Arena will make Meme PVP more intense, but the project itself can benefit from collecting transaction fees. At the same time, the DeFi protocol behind it, such as Marginfi, can also revitalize its lending business and also obtain profits.
Charging "stage fees" must be a business that is sure to make a profit. The life and death of the degens on the stage is probably not the primary consideration.
Similar to the fact that smoking is harmful to health, there is a sign “Leverage is risky” at the entrance of the arena. Do you think it can stop degen from wanting to enter?
Coincidentally, we have previously mentioned in "Interpreting dumpy.fun: Solend's new product after the name change, allowing short selling of Meme coins" that dumpy.fun, which is named similar to Pump.fun, also allows short selling of Meme coins, and is also backed by another DeFi protocol Solend.
It is easy to see that one of the directions of DeFi's business transformation today is to fuel PVP.
The more frequent the transactions, the more lucrative their income. But are DeFi OGs empowering such PVP platforms exacerbating market speculation?
I'm afraid there is no correct answer to this question.
But "where there is attention, there is liquidity; where there is liquidity, there is opportunity; where there is opportunity, there is attention." In this closed loop of crypto market logic, encouraging speculation to accelerate volatility has become an optimal solution that is difficult for protocols and developers to refuse, almost instinctive, and profitable.
The trading never stops and the fighting becomes more intense.
Do a good job of risk management and watch the ups and downs of the market.
