Original author: Crypto Ann
Original compilation: Baize Research Institute
If you’re not a crypto “specialist,” following the various sub-fields of crypto/DeFi on a day-to-day basis can be very challenging. That’s why I think it would be a good idea to hype up the “narrative” of all crypto subfields (and the interesting protocols associated with them).
Real World Assets (RWA)
While Bitcoin is trying to break into TradFi through ETFs, TradFi assets such as bonds have already penetrated the DeFi world.
Enthusiasts believe that RWA is a way to bring more institutional funds to DeFi. We have seen a lot of discussion about RWA recently, and market interest has translated into the outperformance of RWA-related tokens such as MakerDAO.
In addition to existing players such as MakerDAO, Synthetix, and Tether, a new RWA protocol called Ondo Finance has recently attracted attention. Ondo Finance aims to provide access to a variety of TradFi assets, such as the US money market and on-chain US Treasury bills. This is an extremely convenient way for non-US investors who do not have access to the US market.
Some RWA protocols in the past have attempted to bring TradAssets on-chain, a concept similar to Ondo, but things never quite worked out. The biggest obstacle isCredibility. After all, RWA is semi-custodial, because the protocol will act as a bank responsible for hosting your real-world assets (bonds, stocks). And Ondo stands out with the reach and experience of TradFi asset manager BlackRock.
Are RWAs at risk?
I have my own doubts about the concept of RWA. It’s not so much the DeFi/crypto concept as much as the asset itself. Take U.S. Treasury bills, for example. With recent credit rating downgrades and a looming debt crisis due to unsustainable debt interest payments, RWA poses yet another risk to the DeFi space - and a significant one.
Tether and DAI have faced criticism for their heavy reliance on U.S. Treasury bills. If their claims are true, Tether could become the worlds largest holder of U.S. Treasury bills. Given that USDT is one of the most well-known crypto stablecoins, forming trading pairs with almost all tokens, any possible breach by the U.S. government could trigger a decoupling of USDT and potentially disrupt the entire cryptocurrency market and ecosystem.
At the very least, RWAs arent just US T-bills, which is what some RWA agreements are currently focusing on. Ondo Finances product USDY represents short-term U.S. Treasury bills and bank demand deposits, rather than the long-term U.S. Treasuries that led to the collapse of Silicon Valley Bank earlier this year. I think this is a better approach in uncertain market conditions. Even Warren Buffett only buys short-term U.S. Treasuries.
fixed income
Recently, there has been a growing preference for a fixed ROI when it comes to DeFi liquidity mining.
A guaranteed rate of return is reassuring in times of market uncertainty. Take Ethereum’s staking yield as an example, which has been known to fluctuate. Returns during a bull market can be different than during a bear market, and it can be difficult to predict or quantify exactly how much money you will make.
The concept of fixed income is very simple. When investing, you typically earn a stream of returns over a period of time.
Pendle and Spectra
Pendle is one of the protocols with the fastest growing TVL this year. They offer fixed yields on a variety of collateral assets including Lidos stETH, RocketPools rETH, and GMXs GLP. There are even stablecoins.
Every pool on Pendle has an expiration date, which is the date when the pool of funds stops earning yield.
Spectra is a newcomer to the fixed income narrative. It works very similar to Pendle, although so far you can only stake Lidos stETH and USDC on this protocol.
fixed loan
In addition to pledged assets, another area where DeFi investors have a greater demand for fixed income is the lending market. Just like in the real world, although interest rate policy changes, youll still earn interest while you borrow—another great hedge against market uncertainty.
In the DeFi mortgage lending agreement, when the value of the mortgage deposit exceeds the borrowing value, the lending agreement operates well, allowing the borrower to obtain liquidity without selling the assets deposited in the agreement. However, when the value of mortgage deposits declines, or the value of borrowed money increases, borrowers have an incentive to avoid repayment, which may put both depositors and borrowers in trouble.
Therefore, there is liquidation, which is an operation triggered when your mortgage assets are not enough to cover your borrowing. Liquidation will cause the mortgage assets of the deposit to be bought by others, and a certain penalty may be required.
Most recently, the Curve founder was nearly liquidated in the Curve hack as his loan interest rates soared to 70%-88%. This liquidation mechanism is necessary in mortgage lending agreements. As market conditions deteriorate, borrowers will be forced to repay their loans.
Term Finance
I recently stumbled upon an interesting protocol. Term Finance lets you borrow money at a fixed rate for a set period of time. (eg 4% for 4 weeks). The interest rate is determined through an auction. The borrower sets an offer price, and the lender sets an offer price. The figure after this haggling on bids becomes the final rate. An auction starts/ends every Thursday.
veToken
The veToken narrative has existed in DeFi for a long time, probably because it is one of the results of continuous experimentation by DeFi developers. More importantly, in a bear market like this, veTokens are one of the best strategies to accumulate assets for the bull market and earn income from it.
At present, most of the veToken protocols are those blue-chip DeFi projects that have survived the bear market, such as Curves CRV, Balancers BAL, Fraxs FXS, etc.
However, Im not interested in these veToken native protocols, but the protocols built on top of them.
Because unless you are a whale, the veToken mechanism is not that profitable. From yields to voting rights, these aspects often appear less impressive to individuals with smaller positions.
So, what is the solution? You can mortgage your veToken through agreements such as StakeDAO.
StakeDAO
In the veToken narrative, stakeDAO is at the top. The goal of the protocol is to serve as the final destination for your veTokens.
In StakeDAO, you have the opportunity to combine your assets with those of others, thereby increasing your yield and receiving additional benefits from a larger pool, such as increased voting rights.
StakeDAO supports a variety of veTokens, and the APR often hovers in the 2-digit range. For example, the current annual interest rate for staking veCRV through StakeDAO is 38%. Another thing I find attractive about this protocol is that they are constantly adding more pools from new veToken players. Recent additions include Pendles vePendle and new NFT platform BlackPools veBPT.
LSDFi
The DeFi community is constantly working on maximizing the use of staked ETH.
For example, EigenLayer proposed the concept of re-pledging, which allows you to pledge ETH twice to protect other protocols (eg, data availability chain).
Recently there is a new project in LSDFi that piqued my interest, Prisma Finance. Although it is currently only in the pre-launch stage, the project is enough to pique my interest and raise a question: Is it possible for Prisma Finance to become the final protocol for LSD, something like To convert DAO to veTokens?
As the projects official website is not online, their plans can only be learned through their blog. Highlights:
Users will be able to mint stablecoins backed purely by LSD tokens. Therefore, the underlying asset poses no additional risk other than ETH itself.
veToken mechanism. (Will stakeDAO also support the project?)
Various LSTs from Lido, Frax, RocketPool, etc.
Conclusion
In addition to the above-mentioned DeFi narratives, there are many popular narratives in the broad encryption industry at present.
Projects such as AI + Crypto, Giza Tech and others are trying to turn machine learning models into smart contracts. But projects in this narrative usually consist of tools, so its not really worth the investment.
You may have also noticed that I didnt cover the recent trending but unpopular narratives. Not only are these narratives susceptible to rumours, they do not support sound investing beyond hype. Examples include Base Chain’s one-way bridge and unverifiable DEX that allowed hackers to exploit vulnerabilities (LeetSwap), as well as people desperate to send cryptocurrencies into wallets created by bots (Telegram Bot).
risk warning:
The above items and opinions should not constitute investment advice, DYOR. According to the Notice on Further Preventing and Dealing with the Risk of Hype in Virtual Currency Transactions issued by the central bank and other departments, the content of this article is only for information sharing, and does not promote or endorse any operation and investment behavior. Participate in any illegal financial practice.
