Original author:Chinchilla

Original author:

Compilation of the original text: Wendy

There are some projects that have brought us the fire of DeFi.

Now, for some reason, they are simultaneously starting to bring innovations to the ecosystem.

How will these innovations change the field?

・Aave GHO

・Synthetix V3

・Curve CrvUSD

・MakerDAO Stark Protocol

The article will mention:

These first-generation DeFi protocols seem to work independently, but they have synergies, which once again push the field forward. They have all successfully seized their market share. While they are both rolling out new features, they can benefit from each other.

According to data from DefiLlama.com, the total locked-up volume (TVL) of DeFi is about 50 billion US dollars.

And the above agreement accounts for a large part:

・MakerDao $7.23 billion;

・Curve $4.94 billion;

・Aave $4.81 billion;

・Synthetix $444 million.

Aave

Although Synthetix has much smaller lockups, they together account for about 35% of DeFi TVL.

Aave has just launched a testnet for its long-awaited stablecoin $GHO following a V3 upgrade of the mainnet.

This is an over-collateralized stablecoin backed by multiple crypto assets. Through its Facilitators, this is minted with a basket of volatile or stable assets.

Its interest rate is not affected by supply and demand, but is determined by Facilitators and DAO.

$AAVE stakers have borrowing discounts, which could still lead to buying pressure.

But my purpose is to highlight the improvements of V3 in terms of money efficiency.

This is due to the "E-mode", which allows users to have higher collateralization rights (higher LTV - loan-to-value ratio) when borrowing tokens whose price is related to their collateral.

This means users can borrow more funds with less collateral.

Indeed, this mechanism can only be implemented for related token pairs. For example, stablecoins have their own volatility/correlation.

But that's not the whole story.

Synthetix

In addition, Aave can improve the liquidity of the entire system together with well-known projects, as shown in the figure below.

The protocol has the smallest TVL/market capitalization ratio among several DeFi projects mentioned in the article.

But we should not forget that it was one of the first protocols to discuss decentralized derivatives. Its contribution cannot be underestimated, but it fell short of initial expectations.

However, market catalysts and new releases could push it to regain market share and re-establish its position from three years ago.

For example, don't forget that its stablecoin $sUSD is being used in some major protocols.

But the most interesting thing about Synthetix is ​​that V3 was just released a few days ago.

This is the team's attempt at building a smooth permissionless derivatives platform.

As a result of this major upgrade, the protocol will now introduce:

・Possibility to create existing financial derivatives - whether they are crypto or TradFi based. This includes commodities, stocks, etc.;

・Enhancing market liquidity by enabling other protocols to source and route market liquidity from the Synthetix platform;

・Simplified staking by implementing new mechanisms regarding debt pools and collateral types.

Curve

As the Synthetix team puts it, the purpose of these changes is to enable permissionless asset creation, "liquidity as a service", and better control of the credit of stakers.

The industry giant has been a leader in providing deep liquidity and offering efficient swaps while keeping fees and slippage low.

Now, it wants to strengthen its position by launching a stablecoin $crvUSD.

This over-collateralized stablecoin comes with some impressive innovations such as:

・LLAMA, which will provide a continuous liquidation mechanism for debt positions, preventing losses from market volatility.

・$ETH and LP collateral (probably tricrypto 2 and 3 pool).

Additionally, it was recently revealed that this has the potential to apply higher LTVs to collateral (debt positions).

This will mean that users can maximize their capital from their collateral with less concern about liquidations.

MakerDAO

System liquidity will also be stronger.

In terms of TVL, this is the second DeFi protocol after Lido.

While $MKR's tokenomics and $DAI's collateralization may be hotly debated, MakerDAO has spawned one of the most used ecosystems in cryptocurrency.

Now it is expanding.

Maker’s “growth-focused offshoot,” Spark Protocol, will launch in April.

Interestingly, it is built on top of Aave V3.

Thanks to Maker's line of credit, users will be able to borrow $DAI at very low interest rates (currently 1%).

Additionally, Spark Protocol will partner with Fixed Rate Protocol to provide this important tool.

In TradFi, the TVL for such markets is about $450 trillion, while cryptocurrencies still lag behind due to their nascent lending mechanisms and their volatility.

Additionally, Maker will be launching its own $ETH synthetic asset called $EtherDAI.

Spark Protocol will help create more demand by offering $sEtherDAI, its liquid collateralized derivative.

After summarizing the innovations of these veteran DeFi projects, I would like to emphasize that these projects all hope to grow their businesses by sharing liquidity and infrastructure with other protocols.

・Aave Governance is discussing locking all their $CRV for direct release to $GHO pool;

・Spark returns 10% of $DAI market profits to AaveDAO.

・Also, as I mentioned before, Frax Finance has announced that it will help bootstrap $GHO's deep liquidity.

・Synthetix aims to be a liquidity center for derivatives.

Obviously, all these actions are not motivated by empathy, but by development.

Still, cooperating and helping each other can be overall +EV (positive expected value).

This is the spirit that has been driving DeFi so far.

But why would they build different stablecoins?

On this point, I agree with @DefiIgnas. In fact, I think these projects have different goals. Their stablecoins also have different goals.

For example, $crvUsd could help Curve increase capital efficiency while also increasing liquidity for other stablecoins.

Meanwhile, $GHO is likely primarily a tool to increase Aave's liquidity.

Although Spark can be a tool to increase the adoption rate of $DAI in DeFi.