Author: Brockchen
In the second half of 2021, we have experienced the rotation of many narrative hotspots.
NFT/GameFi, new public chain, L2, Lu airdrop, BTC ETF and other subdivisions have all staged bright moments in turn; recently, OHM has once again detonated the algorithmic stablecoin track, and various imitation disks emerge in endlessly, accompanied by DeFi 2.0 concept coins (in addition to OlympusDAO, there are also Tokemak, Abracadabra Money, etc.), in essence, DeFi 2.0 projects can actually be defined as a liquidity & capital efficiency optimization track; even MEME coins such as SHIB have started a runaway mode, It has risen into the top ten by market value.
In the process of hot spot rotation, the rise of tokens and the huge profits of others are bound to arouse the emotions of investors, or it may be the helpless self-blame of missing out, or FOMO of chasing the rise. In fact, most of the user groups who can enjoy hot spot dividends are early users who are deeply involved in this segmented track. After all, this belongs to the Alpha of the market. Perhaps for most investors, it is normal to not keep up with the hot spots, and it is already good to catch the Beta of the main track such as BTC & ETH.
In this article, we combined industry trends and track potential, selected three subdivided tracks to try to analyze, and briefly introduced the various seed players in the track.
• Decentralized derivatives trading
• Fixed rate/interest rate derivatives
• Uniswap v3 liquidity management
Decentralized Derivatives Trading
The subdivision track of decentralized derivatives trading has begun to emerge this year, but don't underestimate the upside space of this track; on the contrary, betting on this track is more certain, after all, all this is just the beginning .
In the traditional financial field, the trading volume of derivatives will be an order of magnitude larger than that of spot trading. At present, the futures trading volume of cryptocurrencies alone has surpassed the spot market, not to mention the entire derivatives track.
Although most of the current trading volume comes from centralized derivatives exchanges, we believe that with the maturity of decentralized derivatives products in the future and driven by regulation, the main battlefield of derivatives trading will shift to the chain.
So how do we expect the upside or ceiling of this segmented track?
In the short to medium term, we expect that the market value of this track leader will exceed that of the spot DEX leader, namely Uniswap.
In the long run, we expect that this track will no longer be limited to cryptocurrency derivatives transactions, but can be expanded to more traditional derivatives categories and become a CME for decentralized derivatives transactions.
At present, many contestants have poured into this track, and the more familiar ones include: dYdX, Perpetual, Futureswap, Pods, Opyn, Hegic, Vega, Globedx, DerivaDEX, Injective, Volmex, etc. Recently, Lyra, SynFutures, RiskSwap, Drift, Duet, Polynomial, GMX, CAP, Kwenta, etc.
In view of the fact that those old projects are relatively familiar to most investors, in this article we will select some new players deployed on L2 or new public chains for a brief introduction!
Lyra
Lyra is a Synthetix ecological second-tier options protocol built on Ethereum, using Optimism as a second-tier solution.
In addition to being on the potential track, the investment institutions behind Lyra are also very eye-catching. In July this year, Lyra received US$3.3 million in financing, led by well-known investment institutions Framework Ventures and ParaFi Capital, as well as various well-known institutions and founders of mainstream projects in the circle.
However, it is worth noting that since Lyra is based on the Synthetix option agreement, it is currently limited by the liquidity of sUSD, and the option market is highly competitive. Although Lyra has received investment from well-known institutions, the amount of 3.3 million is actually not large. There are still many institutions and individuals participating in the financing, and the institutions participate lightly. If it is based on the principle of random investment, it is difficult to guarantee that the institution can accompany the project's growth for a long time and provide resource support from all aspects!
SynFutures
SynFutures is a decentralized synthetic derivatives platform that allows free addition and free trading of various digital asset derivative currency pairs in a single currency. Beta versions are currently available on Ethereum, Arbitrum, BSC, and Polygon.
The investment institutions behind SynFutures are quite strong. In January of this year, SynFutures announced the completion of a US$1.4 million seed round of financing, led by investment institutions Dragonfly Capital and Standard Crypto. In June, SynFutures announced the completion of a $14 million Series A round led by Polychain Capital, with participation from Framework Ventures, Pantera Capital, Bybit, Wintermute, CMS, Kronos, and IOSG Ventures.
It is worth noting that SynFutures has not yet issued coins. In view of the lessons learned from the dYdX airdrop and its multi-chain version, it is recommended that users who do not understand it experience the protocol operation for themselves, so as to further familiarize themselves with the protocol and plant a seed for the future. seed.
Drift
Drift Protocol is Solana's ecological perpetual futures trading platform, which has five characteristics: fast trading experience supported by Solana's low-latency blockchain, comprehensive cross-margin trading support, instant liquidity, permissionless design, and transparent pricing.
In October, Drift Protocol completed a $3.8 million seed round of financing, led by Multicoin Capital, with participation from Jump Capital, Alameda Research, QCP Capital, Robot Ventures, and Not3Lau.
Presumably, for most veterans, Multicoin Capital is very familiar. It is well-known in the circle for its theory-driven, vicious vision, and full of milk power. And Solana is also one of the main investment portfolios of Multicoin Capital, and the founder Kyle also has a strong milk output on Twitter. As for the decentralized derivatives track, we believe that the capital behind Solana will never let go of its opportunity to shine on Solana. So Drift, as a contestant on Solana, deserves long-term attention!
Fixed Rate & Interest Rate Derivatives
Strictly speaking, the fixed rate & interest rate derivatives track is a subset of the decentralized derivatives trading track, but here we take it out and talk about it separately.
In fact, application scenarios such as fixed interest rates, income tokenization, and leverage may not matter to ordinary investors, especially before the scalability problem of the Ethereum network has not been solved, the high friction cost of handling fees also makes ordinary investors Stay away. But for professional investors, and even professional investment institutions, the relationship is huge. Due to the high volatility and unpredictability of floating rates, it means risk for professional investors/institutions. Therefore, for them, they are more inclined to choose to provide fixed-rate lending services, which can be applied to investment strategies with a wider range, longer time span, and higher return certainty.
At present, there are many different ways to realize fixed interest rates in the cryptocurrency industry, including zero-coupon bonds (Notional, Yield Protocol, Hifi finance, etc.), income tokens (Pendle, Element, APWine, Unreal, Swivel), and some new contestants (Strips, Tempus, Sense).
Pendle
Pendle is an on-chain income aggregator that isolates the underlying assets from the income, allowing token holders to sell their income rights within a fixed period of time, thereby locking in profits and obtaining funds in a timely manner, while the purchaser of the income rights does not have to buy And mortgage the underlying assets, and don't have to worry about the risk of mortgage and liquidation. This will allow for price discovery in the interest rate market where lenders and liquidity providers can lock in rates when rates are high and borrowers can hedge rates when rates are low.
However, Pendle cannot be regarded as a fixed interest rate agreement. It can only be said that it can realize the fixed interest rate of interest-earning assets by locking in the income of a certain period in advance. It is essentially a revenue tokenization protocol. It realizes the tradability of revenue tokens through its innovative AMM, so as to meet the further needs of the market, allowing interest-bearing asset holders to lock in revenue, and traders can start transactions based on speculation about revenue Hedging, thereby making the loan market more playable and efficient.
Pendle was launched relatively early on the fixed-rate track. It was launched on the Ethereum mainnet almost in June, and it has been operating fairly well so far. The founding team also knows how to market in a timely manner based on market hotspots.
However, it is worth noting that the current Pendle tokens adopt an inflationary issuance model. At the same time, Pendle tokens have not yet been able to directly capture the value of the agreement (the fees charged by the agreement are directly deposited into the treasury). Pendle tokens are used as utility tokens. One function is to pair LPs to obtain income from market making, and the other is to obtain income by pledging.
We expect Pendle to be deployed on other public chains or on L2 in the future.
Strips Finance
Strips Finance is a decentralized fixed income trading platform, and its first product is an interest rate swap trading platform built on Ethereum.
In traditional finance, interest rate swap transactions (such as changing floating interest rates to fixed interest rates) account for 80% of OTC derivatives transactions, and the transaction volume of the US interest rate swap market is 24 times that of stock transactions. In the field of cryptocurrency, such an interest rate derivatives trading platform has just emerged, which also shows that this track has a wide enough upside space.
Naturally, capital will not miss this huge growth field. In June this year, Strips Finance completed a $2.5 million seed round of financing, led by Crypto.com Capital, Finlink Capital and Mechanism Capital; in October, Strips Finance raised $8.5 million through a token sale, with investors including Multicoin Capital, Sequoia Capital India, Fabric Ventures and Morningstar Capital. Even the public offering quota of Strips Finance in MISO was covered by 14 addresses within 6 seconds, and an Ethereum user paid a transaction fee of 123 ETH, but failed to grab it.
Uniswap v3 liquidity management
Some friends may have learned that among the recently popular DeFi 2.0 concept coins, there is Visor Finance. The reason why it was shortlisted may be because it is currently the leader of the Uniswap v3 liquidity management track and is a representative of improving capital efficiency.
Perhaps the ceiling of the Uniswap v3 liquidity management track is not as high as the above two subdivided tracks, but relying on Uniswap's leading position and the market's strong demand for capital efficiency optimization, this track is not inferior in the short to medium term. certainty.
Of course, the certainty of the track also attracted many contestants, which virtually increased the selection cost of investors. At present, the main players in the Uniswap v3 liquidity management track are: Visor Finance, Method Finance, Lixir, Charm Alpha Vault, YIN Finance, Multiple, sommfinance, Teahouse, etc.
YIN Finance
YIN Finance is an active liquidity management protocol for the Uniswap V3 market. Users can subscribe to CHI in the agreement, which is YIN Finance's active liquidity management strategy, to achieve better liquidity management and higher returns.
In addition, YIN has many optimizations. For example, after the agreement matures, YIN Finance allows high-level DeFi players, KOL, etc. to become strategy providers; transaction fee income is automatically reinvested; assets participate in liquidity mining, further improving capital efficiency and strengthening returns.
In addition, YIN Finance will try to provide users with proactive liquidity management services in different public chains and DEXs. It will be launched on Ethereum soon, and it is planned to be deployed on Arbitrum, Polygon, and Solana.
Multiple
The goal of Multiple is to aggregate the liquidity provided by small investors, and through professional liquidity strategies, help small investors achieve higher returns that only large investors can enjoy. Unlike Visor, which has a dedicated market maker (such as gamma) to provide market-making strategies, anyone in Multiple can become a strategy provider. Following the "Proof of Income Model", the better the strategy's income performance, the more market-making funds allocated , the higher the income obtained.
Multiple completed its seed round of financing in June. Participating institutions include Youbi Capital, Pluto Digital Assets, NGC Ventures, Puzzle Ventures, Oasis Capital, Jubi Labs, etc.
Summarize
Summarize
In fact, the diversification of hot spots is a sign of the industry's gradual maturity. The industry already has certain infrastructure services that can support the innovation and evolution of various applications. We must also admit that the current state of the industry is quite different from that in 2018. In the past, individual investors might be able to understand and follow up all the projects in the circle with ease; Already overwhelmed, and distracted by other hot projects from time to time.
The volume of the cryptocurrency market is close to 3 trillion, and it is still in the early stage. With the improvement of future infrastructure, the playability of the industry is bound to increase sharply, which means that more subdivisions will emerge , There will be more skyrocketing hotspots that you can't catch or even hear about, and it will be a normal thing to miss it. Unfortunately, it is actually unnecessary to pat your thigh.
We just need to choose the subdivision track that suits us, dig deep into the ambush in advance, and seize the hot bonus that belongs to us.
