August DeFi Market Review and Outlook Which Protocols and Airdrops to Focus on?

August DeFi Market Review and Outlook Key Protocols and Airdrops to Focus on

Rollbit, Maker, Lido, etc. are the income winners.

Author: THOR HARTVIGSEN

This article will delve into recent market performance and analyze the protocols with the highest income in the past month. The article will be divided into the following sections:

• Market;

  • Against the Wind How to Use Web3 to Ignite the Market and Drive Growth?
  • Detailed Explanation of New Changes in US Cryptocurrency Accounting Rules What Impact Does It Have on MicroStrategy, Coinbase, and Others
  • Nigeria Second Largest Bitcoin Adopting Country, the Cradle of Cryptocurrency Growth

• News and catalysts;

• DeFi airdrops and strategies.

Market

These three charts outline the current performance of blockchain and DeFi adoption.

These charts paint a fairly clear picture. Funds are flowing out of DeFi. The decrease is due to a decrease in demand for on-chain products, resulting in a decrease in the number of developers needed. Although prices and these indicators continue to decline, it is more due to unfavorable economic conditions rather than specific risks in cryptocurrency. If you are still here, two years into this bear market, and believe that the future will be better, let’s identify the current winners.

Income Winners

Below is a table of top protocols ranked by income in the past 30 days, along with their respective valuations.

As you can see, Ethereum is still the leading application in terms of income, with 30-day income of $166.5 million. Other protocols with income in the six-figure range include Maker and Rollbit.

Maker generates revenue by charging fees on all collateral supporting the stablecoin DAI. Currently, over 50% of the income comes from real-world assets collateralizing DAI, such as US Treasury yields. This business model is very straightforward, and to increase income, Maker must increase the supply of DAI. Relative to income, the valuation of $MKR is relatively low. Price/Revenue (P/R) is calculated by dividing the Fully Diluted Valuation (FDV) by 30-day income annualized.

Rollbit is another protocol that is impressive in terms of 30-day income, with a P/R multiple of 1.1 for $RLB. Rollbit generates income through its casino, sports betting platform, and cryptocurrency futures trading. It is worth noting that its income cannot be verified on-chain and can only be trusted through income dashboards (as shown below). Some of the income from these products is used for buybacks and burning of $RLB, thus exerting deflationary pressure on the token.

Other recent income winners include Synthetix, dYdX, Lido, and Arbitrum, as shown in the table.

News and Catalysts

This section will focus on three protocols that are about to undergo major upgrades.

Frax Finance

The Frax Finance ecosystem is about to undergo a series of major upgrades:

frxETH V2

Due to the dual-token nature of frxETH and sfrxETH, the Frax ETH liquidity staking solution continues to generate the highest returns on LSD. V2 will introduce permissionless validation instead of a subset selected by the team. V2 will serve as a lending market between ETH pledgers (lenders) and ETH validators (borrowers). Its purpose is to ensure a capital-efficient but decentralized staking system.

FRAX V3

Frax recently passed a proposal to use real-world assets as collateral for $FRAX. This upgrade (Frax V3) is expected to be launched later this month, and the earnings generated from these real-world assets will be allocated to $FRAX holders through so-called Frax Bonds with different annual maturity dates.

Frax Chain

An unnamed custom hybrid Rollup will be launched later. The chain will host various Frax applications and products such as FraxSwap, FraxLend, frxETH, FraxFerry, etc., but not limited to native Frax applications. The chain will use frxETH as native Gas, which may significantly increase the staking return for sfrxETH holders.

“Fraxchain is not an application chain. Our goal is to become the largest L2 on Ethereum. We want it to be the biggest L2. The way we are actually trying to accomplish this is by making it the most useful way to earn income from the federal rate, the best staking rate for ETH, and the best inflation protection rate. All of these incredibly valuable ways to earn income are the hallmark and core of Fraxchain.” – Sam Kazemian.

Radiant Capital

Radiant Capital is a cross-chain lending market on Arbitrum and BNB Chain. They launched V2 earlier this year, introducing new assets into the money market, as well as a new RDNT issuance structure to make it more sustainable. This has led to an increase in TVL and widespread adoption, as shown in the following figure.

Radiant will expand to a third chain in early October, namely on the Ethereum mainnet. This may attract more funds into the protocol, as the Ethereum mainnet remains the liquidity hub of the DeFi space. It is currently unclear which assets will be supported on Ethereum.

Synthetix

Synthetix is preparing to release the full version of Synthetix V3, aiming to make Synthetix the liquidity hub for all protocols in the EVM ecosystem. Front-ends such as Perps, options protocols, and decentralized exchanges will be able to easily tap into the liquidity of Synthetix across various chains.

• Potential multi-collateral staking;

• Permissionless liquidity layer;

• Developer-friendly ecosystem;

• Seamless cross-chain implementation (collateral on one chain can be used to issue debt on another chain) – integrated with Chainlink CCIP.

Kain Warwick’s recent article discusses the next steps for V3 in terms of cross-chain scalability and whether other tokens should be used as collateral. On one hand, this could create deeper liquidity, but it could also reduce the utility of SNX. The post suggests that the first cross-chain expansion should happen on Base, with Ethereum as the collateral option there:

“If we introduce ETH collateral on the new network, I believe Base is the best choice. This would allow us to increase trading volume without threatening transaction revenue on Optimism. It also has lower risks compared to Arbitrum. The counterargument is that if we have people migrate SNX to Base and do LP there, SNX will capture 100% of the fees on both networks instead of sharing them. This is true, but the risk is minimal for SNX LPs because we control governance. We can conduct this controlled experiment and then decide what is best for SNX holders based on data.”

DeFi Airdrops and StrategiesSwell Network and $SWELL Airdrop

Swell is an Ethereum liquidity provider with its native token swETH LSD. Those who hold this token will receive “pearls” over time (more ETH and longer holding period = more pearls). These pearls will be converted into $SWELL tokens when they are launched later this year or next year.

In addition, users can increase the number of pearls they receive by depositing $swETH into various DeFi protocols such as Pendle Finance, Maverick, or Balancer.

Risks: Smart contract risks for Swell and additional smart contract risks if deposited into other DeFi protocols.

Stablecoin Mining

There are several ways to earn stablecoin yield on-chain. Some of these include:

Aerodrome

Aerodrome is a recently launched fork of the Velodrome project on Base L2, attracting approximately $170 million in total locked value (TVL). There are several stablecoin pools that provide incentives by paying $AERO, with yields ranging from 8-16% and no impermanent loss.

Risks: Smart contract risks. Please note that the yield is calculated in $AERO and may fluctuate as a result.

DAI Savings Rate (DSR)

As mentioned earlier, Maker generates significant income from the collateral supporting DAI. A large portion of this income is used to provide a fixed yield of 5% for one-sided $DAI in the DSR savings vault of the SLianGuairk Protocol. The yield comes from sustainable income and is distributed in the form of $DAI itself.

Risks: Smart contract risks for the SLianGuairk Protocol.

Pendle Finance

To earn higher returns, deposit sDAI (representing liquidity of $DAI in DSR) into the liquidity pool of Pendle Finance. The current yield is an unenhanced 12% APY, which can be increased to a maximum of 22.8% APY by locking $PENDLE as vePENDLE. The returns come from underlying 5% yield + transaction fees + PENDLE issuance.

Risks: Smart contract risks of SLianGuairk Protocol and Pendle Finance.

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