🟣 A DeFi OG fundamental shift
Market trends positive on multiple fronts
Macauley Peterson & Donovan Choy
July 26, 2024
Brought to you by:
Welcome back to 0xResearch. Here's what we’ve got for you today:
Aave fee switch
Macro data positive
Uniswap on Base
Dogecoin for the degens
The lending DeFi giant Aave is the latest protocol to consider turning on a fee switch. Should the proposal come to pass, the DAO plans to use net excess revenue from its treasury to buy liquid AAVE on the open market and redistribute that back to staked AAVE users as yield.
Additionally, AAVE stakers will no longer be used to cover bad debt. Aave deals with bad debt today by slashing staked AAVE holders, then selling the underlying AAVE on the open market to recoup capital. This last line of defense "safety module" has never been activated, but if it was, it would put selling pressure on an illiquid token (which is bad).
Instead, that burden of debt relief will be shifted to individual users lending on Aave pools, who choose to opt in for the extra yield and slashing risk. In the event of bad debt, the lender’s aTokens will be burned. That is a very roundabout way of saying that Aave is moving away from the status quo of "slash and sell from treasury" in favor of "slash and burn lender collateral."
It’s also only possible thanks to Aave’s new safety module, Umbrella, unveiled all of two days ago. Umbrella would effectively isolate bad debt by pools (akin to Morpho’s model), as opposed to the current way where debt is socialized across all assets on the network. Slashing will also be done automatically via smart contract rules, freeing governance from making active slashing decisions.
The proposal is currently in the very early stages of a "temperature check." Should it pass, AAVE staking is set to become a far more attractive proposition, thanks to the removal of slashing risk plus generally better tokenomics due to less sell pressure.
— Donovan Choy (X: @donovanchoy | Farcaster: @donovan)
Uptrend forming
Each passing day of bitcoin price action lately reinforces the impression that the June-to-early-July correction is over and BTC is preparing once again to trend higher, supported by a favorable macro picture.
Longer timeframes have seen a period of declining volatility, coupled with a momentum shift back to the upside. Supply headwinds from governments, Mt. Gox and miners appear to be abating. Funding rates on derivatives remain muted.
Today’s core PCE data reinforces the narrative that inflation is cooling and the Fed will be able to begin cutting interest rates as soon as September.
All good things.
Brought to you by:
re.al is the permissionless L2 for tokenized RWAs built on Arbitrum Orbit, bringing off-chain yields onchain. re.al is the first L2 to return chain and protocol fees back to users in reETH, ensuring they benefit from the growth of the ecosystem. We’ve just launched a fully-transparent rewards program returning 10% of $RWA supply to early users. Get started, trading, borrowing, and leveraging a diverse selection of RWAs. Not investment advice or product solicitation and not aimed at US persons.
Uniswap use across chains:
An increasing number of Uniswap users are flocking to Base for its cheap transaction fees. The dapp’s deployment on Coinbase’s L2 hit a parabolic rise to 8 million monthly active users. While this dwarfs the 790k users that continue to use Uniswap on Ethereum, the crown for DEX market share on Base still belongs to Aerodrome, which processed $2 billion in volumes versus Uniswap’s $1.5 billion in the last seven days, according to DefiLlama.
— Donovan Choy (X: @donovanchoy | Farcaster: @donovan)
Everybody has an L2 these days, and there’s no reason why the DOGE memecoin — with a $19 billion market cap — should be any different. Leading that effort is QED Protocol, which raised $6 million in a seed round led by Blockchain Capital in April.
QED previously built a zk rollup for Bitcoin, and is now doing the same for the Doge Chain network. The zk execution layer for Doge Chain leverages a proposed operation code "OP_CHECKGROTH16VERIFY," which would enable DeFi and NFTs to be built atop the proof-of-work network.
"Zk proofs are a perfect match for a chain like Dogecoin, enabling the verification of a million transactions via a proof that is far smaller than a one-sentence word document. In short, this opcode means that Dogecoin can scale without requiring any increase to the block size or other changes that make it harder to run a node on the network," said QED’s founder, Carter Feldman.
— Donovan Choy (X: @donovanchoy | Farcaster: @donovan)
Solana Mobile is a highly ambitious foray into the mobile consumer hardware market, seeking to open up a crypto-native distribution channel for mobile-first applications. The market for Solana Mobile devices has demonstrated a phenomenon whereby external market actors (e.g. Solana-native projects) continuously underwrite subsidies to Mobile consumers. The value of these subsidies, coming in the form of airdrops, trial programs and exclusive NFT mints, have consistently covered the cost of the phone and generated positive returns for consumers. Given this trend in subsidies, the unit economics in the market for Mobile devices, and the initial growth rate and trajectory of sales, it should be expected that Solana mobile can clear 1 million to 10 million units over the coming years. As more devices circulate amongst users, Solana Mobile presents a promising venue for the emergence of killer-applications uniquely enabled by this mobile-first, crypto-native distribution channel.
Metaplex, the leading NFT protocol on Solana, has established a dominant position due to its comprehensive suite of tools. It has a functioning economic model with a buyback program that enhances its value through revenue generated from SOL-denominated fees. While initially focused on NFTs, Metaplex is diversifying its offerings to include non-NFT services, indicating a promising future as a comprehensive token creation suite on Solana.
The firm, known for its crypto hardware wallets, is set to bring another touchscreen option to consumers.
Solana’s biggest liquid staking provider takes a meaningful step towards restaking.
|
|
The insights, views and outlooks presented in the report are not to be taken as financial advice. Blockworks Research analysts are not registered broker/dealers or financial advisors. Blockworks Research analysts may hold assets mentioned in this report, further outlined in the Firm’s Financial Disclosures.
recent research
Research
MetaDAO offers a platform for DAOs to engage in futarchy, using conditional markets and profit incentives for improved decision-making. Conditional markets allow market participants to speculate on whether or not the passage of a proposal will increase a token’s market value. By crowdsourcing information from market actors, DAOs can utilize futarchy to identify decisions that will be most beneficial for their token’s market price. MetaDAO as an organization is explicitly engaged in decision-making on the criteria that market participants believe a decision will be accretive to the price of the META token.
by Luke Leasure
/