DeFi Friday - Five New and Exciting Protocols
A dive into protocols that are trying innovative new things
👋 Welcome to the 42nd issue of The Syllabus from Invisible College—a newsletter that helps you navigate the fast-moving world of web3. To get it delivered straight to your inbox, subscribe here:
State of DeFi
Total Value Locked (TVL) across all of DeFi: $42.68 Billion (+7.66% past 7 days)
Chains with notable TVL growth past 7 days:
Algorand +86.08%
Canto +43.11%
Chains with notable TVL decline past 7 days:
Aptos (-7.78%)
Heco (-5.95%)
(Source DefiLlama.com)
Five Interesting DeFi Protocols that are trying new and exciting things
Resonate (available on Ethereum, Optimism, Polygon, Arbitrum, and Fantom)
Resonate is a revenue rental marketplace. Okay, but what does that actually mean, though? If you have a token that you are earning yield with, by using Resonate, you can choose to sell the rights to that future yield, and get paid upfront instead. On the flip side, since it’s a marketplace, if you’re willing to wait months or a year to collect yield, you can pay someone a discounted amount for the future yield they’d earn from their yield-bearing token.
This will make more sense with an example.
Let’s say that you have a Spookyswap LP token in your wallet for FTM-USDC because you deposited $1,000 of liquidity. You could choose to stake that LP token on Spookyswap and earn 25% APR paid in BOO plus earned transaction fees over the next 12 months and be paid $250. OR you could go to Resonate, and maybe you find a buyer who would be willing to pay you $150 today so that they could collect the yield on your staked LP position. If you accept that $150, your LP tokens would be locked for 1 year, the buyer would be able to collect the yield and then after 1 year, you could unlock and reclaim access to that LP position.
Why is this exciting? It’s a new way to buy future cashflows in DeFi, in a completely trustless, on-chain way. Pretty crazy.
Austin from Blockbytes recorded a great video walkthrough of the protocol if you want to learn more!Y2K (available on Arbitrum)
At a really high level, Y2K is a risk market for stablecoins. Using their protocol you can sell risk or hedge against the event in which a stablecoin depegs, meaning when it’s no longer equal (or pegged) to $1.00 USD.
Let’s say that during the next epoch (Jan 15 - Feb 12) you think that USDT won’t go below $0.98. You could deposit 1 ETH into Y2K and receive an ERC-1155 token that represents your risk. At the end of the epoch, if a depeg occurs, you will only receive 0.1447 ETH back but if USDT doesn’t depeg, you will receive your initial deposit + 0.1447 ETH, a 14.48% ROI or a 188% annualized rate.
On the other side, let’s say you wanted to bet against USDT and thought that it might have a depeg event and reach the strike price of $0.98 in the next epoch. You could deposit 1 ETH into Y2K and receive an ERC-1155 token that represents that hedge. If USDT doesn’t depeg, your payout is 0. But if it does, the payout is 4.47 ETH, a 347% ROI.
There’s a lot that happens under the hood with this protocol that can get pretty complicated. You can also stake and farm rewards with your ERC-1155 positions. If you want a really good overview, watch this video from Cezor’s Snack Sandwich.Ultimately, I don’t think the real use of this protocol will be to “bet” on a stablecoin depeg event (timing to the Epoch is almost impossible) but I think the Hedge feature will be a really useful tool for anyone who has very large exposure to a particular stablecoin and needs to be able to hedge that risk.
Tortle Ninja (only Fantom for now)
This is probably the most fun protocol on the list. Tortle is a no-code DeFi tool that enables anyone to create automated, stackable, DeFi strategies. Think visual programming language for all things DeFi.
In the Tortle recipe editor, you can build a strategy by creating LP positions, staking, setting limits, stop-loss orders, compounding farm rewards, and triggers based on price oracles or changes in APR yield.
For example, here’s a recipe that enters 2pool LP positions of FTM paired with another L1 token, occasionally sells rewards into USDC, and then deposits the USDC back into your wallet.
What’s neat is that all of the public recipes are clonable, so you could take this strategy, tweak it to your preferences, and then start using it!
Ondo (will be available on Ethereum)
Ondo is a protocol that hasn’t been fully launched yet but I think it is so important that it still made sense to include it.
They’re building tokenized US Treasuries and Corporate Bonds.For whitelisted KYC and Anti-Money Laundering-screened (AML) larger institutions, they will soon be able to start buying OSUG, OSTB, and OHYG tokens which represent Short-term US Treasuries, Short-term Investment Grade Bonds, and High Yield Corporate Bonds.
That’s cool in itself but there’s more.
Ondo is also building a Compound fork which will allow the KYC’ed institutions the ability to borrow from un-KYC’d lenders to build leverage positions.
Example time:
You—a non-institution and someone who doesn’t want to be KYC’d—will be able to go to Ondo and lend out your stables at a rate. From there, an institution will be able to borrow your stables and then purchase some treasury or bond tokens. As the institution is earning yield, they’ll also be paying interest back to you for their borrowed funds.
Because the institution is basically just a middleman in this interaction, it’s likely that the borrowing rate will only be a few fractions of a % lower than what the institution would be earning from the treasuries and bonds, they’re really just after the delta.
So what? In this high-interest rate environment we’re in for the foreseeable future, if you can earn 4.5%+ yield from a US treasury on-chain, does it really make sense to be in some fringe LP position on a small DEX only earning 8-10%? Risk-adjusted, probably not.
If Ondo works like it’s supposed to, it has the opportunity to be the risk-free rate of DeFi.Mean Finance (available on Ethereum, Optimism, Polygon, Arbitrum)
Mean is a protocol that gives users the ability to Dollar Cost Average (DCA) any ERC20 into any ERC20 with a set preferred period frequency.
What is DCA? This is a common tool investors use to build positions in assets over time with the goal of eliminating the short-term volatility of your entry. In DCA, the purchase of an asset occurs at regular time intervals, regardless of the asset price. With DCA, the goal is to get away from “timing the market”.
One of the cool things about setting up a DCA position with Mean finance is that you don’t have to pay a gas fee for each scheduled buy, rather you just need to pay a gas fee when you interact with your position (i.e. creating/modifying/terminating).
This second really cool thing is that they just recently announced “yield-while-DCA” which allows you to automatically start earning yield with both sides of your DCA position. In the example below you can see that we have set up a DCA position to convert DAI into ETH over time. We’re also earning yield via Aave on the DAI AND yield on the ETH after it’s bought via Aave.
While 2022 was a rough year for DeFi, it’s clear that there are still teams building, launching new experiments, and pushing us toward a better tomorrow. We encourage everyone to keep their eyes open during the bear market, continue to be curious, and continue to stay engaged. There is still cool stuff happening and we’re confident that DeFi isn’t going anywhere.
What we’re farming this week
The yield of GLP on GMX skyrocketed this week.
On Arbitrum, GLP is earning 31.99% paid out in ETH.
On Avalanche, GLP is earning 48.77% paid out in AVAX.
This is really insane considering that GMX is no longer paying out esGMX as rewards to incentivize GLP usage, 100% of the rewards are real yield.
Before you rush to go stake some GLP, make sure you realize:
The risks of GMX (there are some)
The yield is variable. Last week GLP of Avalanche was paying out 8-9%.
Disclaimer: This is DeFi, everything is risky. Smart contract risk is real and you should do your own research before interacting with these protocols to determine if the risk matches your personal appetite. Finally, some of these protocols have their own token, and inclusion on this list doesn’t mean that we have an opinion on their token.
Come chat about DeFi with us during our live DeFi Friday event on Twitter Spaces later today at 11 am PT 👇
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