2023 Year-end Review: Check out the protocol innovations that are worth paying attention to

2023 is shaping up to be a big year for network activity, so naturally protocol innovation and growth will follow. Heading into the year, uncertainty about the solvency of centralized exchanges (CEXs) pushed traders to leverage decentralized derivatives, which triggered unprecedented growth for protocols like dYdX and Synthetix. Uniswap continued to innovate on its AMM model with the launch of Uniswap V4, while Curve changed the DEX landscape with the launch of its own stablecoin, crvUSD. Following the merger, the surge in Ethereum staking sparked an explosion of LST-fi protocols eager to profit from a variety of exotic yield offerings, ranging from LST-collateralized stablecoins to interest rate derivatives. We also can’t turn a blind eye to the boom in consumer-facing dApps, DEPIN, or gaming. Without further ado, let’s parse the protocol highlights for 2023.

Sustainability

Throughout 2023, the on-chain perpetual swap (perps) space has performed well and has become one of the more bearishly resilient sectors, with trading volumes remaining strong and native token holders often receiving “substantial gains” through trading fee revenue. Smart contract developers have clearly taken notice of the cash cow nature of perpetual swap protocols, which was particularly evident in 2023 as emerging protocols continued to grow in relevance in this vertical, with dYdX’s volume dominance trending downward. We believe there is still a lot of room for growth, considering that less than 2% of crypto perpetual swap volume occurs on-chain, and the overall size of CEX and DEX perpetual swap volume will continue to grow over the next few years. These on-chain trading venues are still highly dependent on token incentives to attract users, but we believe that the user experience gap between CEXs and DEXs has narrowed significantly over the past year, which could be a catalyst for the future development of these protocols. Below we detail some of the highlights and trends of the leading perpetual swap protocols in 2023.

DX

In October, dYdX launched its V4 exchange, with trading commencing in November. This release marked a shift in the protocol’s technology, moving from an Ethereum-based zkRollup to an independent blockchain built on the Cosmos SDK. Key changes included the decentralization of order book storage, moving from centralized servers to storage in validator memory. Additionally, fee revenue was re-staked, providing yield to validators and DYDX token holders, whereas previously, yield was distributed to the centralized company that created the technology. These changes increased the decentralization of the protocol and made the fundamental value accrual mechanism of the DYDX token even stronger.

More detailed innovations brought by V4 include new MEV mitigation methods built through collaborative blocks, further asset listings, and seamless bridging experiences through CCTP and Noble. In addition, the front end has been open sourced, and the necessary Oracle data for funding rate calculations has been internalized through ABCI++ and no longer relies on Chainlink.

The dYdX team has done an excellent job of tweaking the product to facilitate the best trading experience and optimize for decentralization. While V4 adoption has not yet reached the same level as V3, the $20 million in trading incentives provided in the 6 months since launch, along with DYDX token trading rewards, may help drive volume for the new version in the future. V4 has seen an increase in volume since launching last month, although the largest daily volume of around $50 billion is only comparable to V3’s worst trading day.

Gains Network

Gains Network had a strong start to 2023 after deploying gTrade on Arbitrum and deploying on Polygon, but it has since been surpassed by other perpetual swap protocols in metrics such as volume/fee/TVL growth. Unfortunately for Gains Network, it does not have a large amount of GNS inflation to incentivize trading activity like many of the other perpetual swap projects we will discuss later, so it is already at a disadvantage. Gains Network was denied an ARB STIP allocation after requesting 7 million tokens, which likely played a major role in user trading volume migrating to other dApps that received ARB funds. Fortunately, however, they received 4.5 million ARB after the reformulated Arbitrum governance proposal passed to fund more projects that were excluded from the initial allocation. This may provide the protocol with a much-needed boost between now and the end of January 2024.

In 2023, Gains Network finally adopted a more decentralized architecture, establishing a governance and grant program process that gives more power/ownership to GNS token holders. Proposals are ultimately reviewed by protocol administrators, and votes have not yet been executed on-chain, so there is still some work to be done to truly decentralize the protocol. The most important milestone in 2023 was the redesign of the GNS token, which finally increased the revenue flowing to GNS token holders. The development fund and NFT liquidation bot previously received 16.33% and 14.20% of the protocol revenue, respectively, but after the token redesign, both of these were abandoned, and the vast majority of revenue now flows to GNS token holders. However, this redesign came at a cost to token holders; 4.36 million GNS were minted to compensate the development team and the original NFT liquidation bot holders. Most of this supply is currently locked and will remain a constraint on the protocol until the end of the grant. In addition, the tokens received by the team are staked, therefore diluting the gains of other GNS token holders. This, along with declining revenue, makes GNS staking returns less attractive compared to the native tokens of other perpetual swap exchanges.

Although we believe that the core development team behind Gains Network is one of the stronger teams in the perpetual contracts vertical, the project faces a tough challenge in 2023 due to fierce competition from newly launched tokens. We do not expect Gains Network to face an easier situation in 2024.

Vertex

Speaking of shiny new tokens and projects, Vertex caught the DeFi space off guard in the last quarter of 2023, knocking dYdX off the top spot as the largest perpetual swap platform by volume. The main drivers for Vertex included launching its token through a liquidity bootstrapping auction, the continued existence of dual incentives (VRTX and ARB) due to the Arbitrum STIPs won by the project, sharing USDC.e revenue with VRTX token holders, and helping to enhance order book depth through Elixir integration. To ensure traders have enough liquidity, projects like Gains Network and GMX need to share revenue with liquidity providers, while projects like dYdX and Vertex do not have to incentivize liquidity providers in the same way and are better suited to sharing revenue with native token holders. Vertex was very lucky to have timed GMX to diversify its liquidity provider and trading user base, and dYdX to try to gradually reduce v3 incentives and attract market makers and traders to transition to v4. These two market leaders ceded ground to Vertex, but it is unclear whether this volume is sustainable or just inflated by the low circulation, high FDV token (VRTX) being used for incentives alongside the ~212,000 ARB per week.

This is a difficult situation to predict: on one hand, you have a high-quality product in a vertical that is demonstrating strong PMF on-chain, and ~$5.85M in incentives per month. However, on the other hand, you have a highly inflationary governance token, other new perpetual contract farms like RabbitX, IntentX, and Aark are also popping up, and established platforms like dYdX are relying more heavily on incentives as competition increases. Many point to the distribution between Vertex’s daily volume and open interest, arguing that all activity is organic token mining. We think this criticism is valid. However, the VRTX staking mechanism increments each user’s staked weight every block, as long as they do not withdraw any tokens, thereby increasing each staker’s share of the weekly protocol revenue. If we assume that the value of VRTX and ARB incentives remain stable, we believe that volume will remain high until January 2024. The single most important metric to measure Vertex’s overall health and its longevity is the total amount of VRTX staked. 10 million VRTX tokens will be distributed to traders and market makers each epoch, and what these participants actually do with these tokens (stake or sell) may determine the long-term fate of Vertex. The idea behind this token design seems to be that traders will continuously roll their USDC income into more VRTX tokens to increase their staking weight so that staking income always exceeds the fees users pay when trading on Vertex. Only time will tell if this token design is sustainable, but the end of 2023 is indeed a huge moment for the Vertex protocol, with all-time highs in protocol revenue and total locked value continuously set throughout the year.

Synthetix

Synthetix did not have a clear product-market fit at the beginning of 2023. Many of their previous experiments, such as spot markets and atomic swaps, had experienced strong waves of adoption and then hit a trough of low utilization. By the end of 2022, Synthetix was experimenting with a simplified perpetual contract product that required some work under the hood, despite relatively high demand. In December 2022, they launched Perps V2, using low-latency Pyth oracles, dynamic funding rates to incentivize net delta-neutral open interest, and fees of only 5-10 basis points. As a result, they now had a product that could compete with other perpetual contracts. As a result, demand for this product quickly rose, with cumulative trading volume exceeding $40 billion in 2023.

The success of Synthetix can be attributed to a few different factors. First, the oracle-based design coupled with extremely competitive fees makes Synthetix a great place for traders. When using an oracle-based design, it is critical to incentivize liquidity providers by reducing the variance of the trader's win over the counterparty, as well as paying a high enough yield to incentivize liquidity providers. The dynamic funding rate does a good job of keeping open interest neutral, so while traders are earning large funding rates, there will almost always be someone who hedges and captures the funding rate with their own delta-neutral position, minimizing potential risk.

Additionally, Synthetix operating as a liquidity backend means we see frontends competing to build sticky relationships with end users. As frontends received fee share earlier this year, which recently increased to 20% of all fees, these frontends now have an incentive to bring users on board, thereby expanding market share for Synthetix. So far, Kwenta and Polynomial have been the two main frontends, but a new frontend called Infinex created by Synthetix founder Kain is about to go live and plans to compete fiercely on user experience.

There is a lot to look forward to in the future for Synthetix as they migrate to V3. Under this architecture, Synthetix becomes more modular, allowing for more experimentation at the market level while shifting risk where liquidity providers feel comfortable. So while perpetuals have clearly shown product-market fit, there will be more experimentation in other markets: options, gambling, insurance, etc. The current perpetual system will be upgraded to V3 and included in the main V3 pool called Spartan Pool.

Recently, the Spartan Council voted to remove SNX inflation, which is paid to liquidity providers in a custodial format to incentivize liquidity. Given that Synthetix is ​​mature enough to already have a lot of revenue flowing to liquidity providers, and inflation is only 5%, inflation is no longer justified due to the very high collateralization ratio. SNX inflation has historically been very high, which has caused many people to be reluctant to invest in the token due to liquidity provider risk or dilution risk, both of which are now significantly weakened compared to a year ago. This is a huge headwind for future adoption and investment in SNX, but we need to monitor the collateralization ratio to see if it will have any meaningful changes to liquidity.

In 2024, Synthetix plans to use new chains as opportunities for experimentation by scaling on many different Ethereum Virtual Machine (EVM) chains to determine where they can get the most users and liquidity providers. These experiments will be part of what they call Andromeda, which is the deployment of Synthetix V3 and Perps V3 using only USDC and ETH for liquidity provision. This will help evaluate trader demand for perpetual contracts on chains other than Optimism and assess LPs demand for assets other than SNX. The first stop for the Andromeda deployment will be Base, followed by Arbitrum. There are also some other potential experiments, including ETH-backed perpetual contracts designed for delta-neutral stablecoins and protocols on the Ethereum mainnet, and SNXChain on the OP Stack, which will be a central hub for governance and SNX LPs. It will be a very exciting year for Synthetix in 2024.

GMX

2023 marks the launch of GMX V2 and a decline in the project’s overall market share. Throughout the year, GMX lost its dominance in fees and trading volume, mainly due to new market participants and their associated incentive programs. GMX V2 was launched in August in an effort to create a better environment for liquidity providers by providing more attractive mechanisms for traders, in an effort to better compete with new exchanges.

Key updates to GMX V2 include the introduction of segregated pools, allowing liquidity providers to customize their asset exposure and support for listing long-tail assets. New fee mechanisms have been implemented, including reduced execution fees, funding rates, and a price impact fee/rebate system designed to balance positions between long and short positions and mitigate liquidity providers' exposure to traders' profits and losses. In addition, upgraded low-latency Chainlink oracle prices provide faster transaction speeds and reduce the extractable value of the oracle. Unlike its predecessor, V2 operates under a commercial license and does not allow free forks.

GMX received a notable allocation of 12 million ARB from the Arbitrum DAO to distribute to its users as part of a short-term incentive program. These incentives start in November and need to be used by the end of March. They should help drive significant usage of the platform before the incentives run out.

Options

In 2023, the on-chain options vertical has undergone a sea change, with many projects adjusting their mechanisms, launching new products, and implementing version upgrades. Options protocols have historically struggled to provide a user experience comparable to centralized providers, and many projects have adopted a rudimentary options AMM model that provides unsatisfactory execution, low liquidity, lack of tradable underlying assets, and insufficient hedging solutions. During the year, some options AMMs have attempted to improve this through mechanisms designed to unify liquidity, enable AMMs to perform more complex hedging operations, and better protect liquidity providers from toxic flows. That being said, one of the most important trends in this market this year has been the introduction of new hybrid CLOB exchanges built on application-specific Rollups, where orders are matched off-chain and trade settlement takes place on-chain. In addition to options, these exchanges can also offer derivative products such as perpetual futures. Aevo's CLOB exchange went live in April, but general access was not enabled until mid-June (it is worth noting that the dataset used for the above/below charts excludes Aevo until July 30, 2023), while Lyra is actively developing its own CLOB exchange. Outside of structured options products, Lyra dominated that vertical in terms of notional volume in the first half of the year but lost market share significantly to the Aevo CLOB exchange.

A notable new entrant in 2023 was Rysk Finance, which grew from a ~1% share of on-chain options notional volume in October to ~10% in November. It is worth noting that much of this increase in market share is likely a result of ARB incentives associated with the STIP program that began in early November. Rysk launched its Dynamic Hedging Vault (“DHV”) to the public in July 2023, a system dedicated to maintaining market neutrality for LP positions, where both call and put options can be bought and sold. DHV is unique in its hybrid design – combining an options AMM with a quote system – and a mechanism to adjust option prices based on the pool’s Greek exposure and utilization. Despite the project’s strong focus on LP returns, DHV’s cumulative returns since its public launch were ~5.5% as of December 15, highlighting the difficulty of building an options AMM that can consistently generate stable positive returns.

On-chain options trading volumes are still relatively small compared to those on centralized exchanges (CEXs). As mentioned earlier, options projects upgraded their protocol structures this year and changed the way they handle the underlying trading mechanisms to penetrate the off-chain market. In addition, new protocols based on peer-to-pool models have entered the market. In general, these solutions are built on top of spot AMMs, with some projects leveraging their own centralized liquidity pools to offer perpetual options and volatility trading products. Simply put, these new generation projects enable users to deposit and withdraw liquidity to the underlying AMM pool in a specific way to generate a return profile that simulates buying and selling options or volatility.

One of the main advantages of AMM LP-enabled options protocols is that as long as there is a liquidity pool for the underlying asset, derivatives similar to buying and selling options or volatility can be technically created as long as sellers and buyers can be matched. The above situation may help solve the problem that the crypto options vertical has been facing: low or non-existent liquidity for options on long-tail assets. It is worth pointing out that the project is also experimenting with a request for quotation system to facilitate the trading of long-tail options.

The three most popular projects in the AMM LP-enabled space are GammaSwap, Panoptic, and Dopex v2. The first two projects are still in the early stages, with GammaSwap soft-launching on the Arbitrum mainnet in late September using permissioned pools, while Panoptic’s permissioned Beta launch occurred in mid-October (mainnet launch expected in Q1 2024), and the protocol announced a $7 million funding round in mid-November. Dopex is in the process of implementing its v2 upgrade, and as the first step in a comprehensive overhaul, the protocol released its AMM LP-enabled options in mid-November. The new product generated more than $40 million in volume in about a month, making it the second-largest options protocol, but some of that volume may have been driven by the aforementioned Arbitrum incentive program.

From a technical perspective, these projects are deploying untested mechanisms. A good example is GammaSwap, which had to freeze its contracts in mid-October due to a potentially critical vulnerability. It is unclear whether AMM LP-enabled options can continue to penetrate the market. A significant friction in the adoption of these products is the complexity of these products. Although projects are simplifying the process of opening and closing positions, traders still have to consider option Greeks, strike prices, and especially base protocol-specific innovations, which may hinder adoption by retail investors, who are often the first user group to adopt new primitives.

While it is uncertain how AMM LP-enabled options protocols will perform over the next year, CLOB-based exchanges are expected to continue to expand by transitioning users from centralized exchanges and options AMMs. As mentioned earlier, the two main protocols focused on CLOB options exchanges are Aevo and Lyra.

Aevo

Aevo, formerly known as Ribbon Finance, has gone through a series of changes over the past year, rebranding the protocol and launching the CLOB derivatives exchange built on a custom application-specific OP Stack Rollup. Prior to this, the project's main product was DeFi Options Vaults ("DOVs"), which launched in 2021. At the time, the product attracted a lot of attention and was considered highly innovative, giving rise to a new class of structured options protocols. Subsequently, DOVs and protected principal vaults have shown some shortcomings that make them not very attractive to most traders. Therefore, it is not surprising that the combined TVL of Aevo's DOV and Earn products has declined throughout the year, from approximately $51 million at the beginning of the year to approximately $16 million as of December 15th.

The move to CLOB exchange has undoubtedly been a success for Aevo - the exchange accounts for about 70% of the notional options volume on-chain in November 2023. In addition to options on mainstream tokens, the exchange also provides an OTC service where users can trade options on long-tail assets. In October, the transition of DOVs settlement to CLOB exchange began, and options sold by the repository are fungible with options on the exchange, which means that repository positions become liquid and users can use their positions as collateral for other transactions.

Additionally, Aevo has begun to place a greater emphasis on perpetual futures, offering traditional perpetual contracts as well as pre-launched futures. Aevo Exchange has found an advantage in the highly competitive perpetual contract DEX vertical by offering perpetual contracts on a variety of underlying assets and quickly launching new assets based on market demand. The pre-launched futures have also attracted a lot of attention from traders, but actual trading volume and open interest are relatively low, and it is unclear how scalable this product is in the long term. Nonetheless, pre-launched futures appear to be an effective customer acquisition tool, and Aevo is expected to continue to penetrate the perpetual contract DEX market in 2024. As the exchange continues to innovate, it is not surprising that various key performance indicators have been growing across the board.

Regarding the operational aspects of Aevo, the project is still updating its brand and implementing a new token and governance structure. AGP-1 was approved on November 9th, and the most notable of these is the proposed updated brand timeline for RBN. The new token AEVO and its related mechanisms will be released no later than February 1, 2024. RBN will be swapped 1:1 with sAEVO, a staking version of AEVO, with a staking period of 3 months. AEVO is only a governance token, but after the team's operating expenses (a budget of $5 million per year) are covered, 75% of the protocol revenue will be used to increase the liquidity owned by the AEVO-USDC protocol. AEVO will begin trading with relatively low liquidity and limited selling pressure, which are discussed in depth in this Flashnote. It is worth noting that the DAO Treasury currently holds about 110M RBN, all of which will be converted to AEVO at the token generation event. Of the AEVO holdings in the Treasury, up to about 35% will be used for incentives such as airdrops, and up to about 10% will be used for community growth and bounties. These two allocations should accelerate the project's growth and visibility, at least in the short term.

Most recently, in early December, Aevo announced spot swaps within the exchange and implemented a new mechanism that allows users to earn yield on their collateralized assets. Passive yield is created through aeUSD, an ERC-4626 asset on Aevo L2 that is backed by a target of 95% sDAI and 5% (subject to change) USDC, meaning that the underlying 5% is immediately available for withdrawal. In other words, 95% of the underlying assets generate yield based on MakerDAO’s Enhanced DAI Savings Rate. In the event that the USDC buffer is insufficient to cover withdrawals, users will need to wait until sDAI can be redeemed for DAI and exchanged for USDC, which may become a bottleneck for withdrawals. Rebalancing of the underlying basket is performed daily to maintain the target weights. Since no other perps DEX or options protocol currently offers passive yield on deposit collateral, the aeUSD mechanism may help attract more funds to the platform.

Lyra

Lyra has launched several important upgrades this year, including the Newport upgrade and the V2 upgrade, which are now live. The Newport upgrade allows market maker reserves to partially collateralize short positions with the help of stablecoins such as USDC and sUSD, without having to exchange to the underlying assets for collateralization and hedging. Therefore, the reserve no longer needs to be collateralized and hedged with a large amount of underlying assets, saving a lot of fees for liquidity providers. In addition, the Newport upgrade enables the protocol to be integrated with any perpetual exchange on any EVM-compatible chain. With the Newport upgrade, Lyra expanded to Arbitrum, using GMX as a source of liquidity to collateralize and hedge AMMs.

Lyra V2 was announced in July 2023 and is an expansion of the protocol's functionality. V2 aims to be a decentralized settlement protocol for spot, perpetual, and options trading built with OP Stack rollup. V2 will support combined margin, cross margin, and multi-asset collateral. Finally, V2 aims to be a decentralized margin and risk engine, as well as an open source order matching engine. The order matching service will be off-chain, similar to the implementation of many other perpetual exchanges. Lyra V2 went live on December 14, 2023.

As shown in the chart below, despite various metrics, the protocol's growth in 2023 remains lackluster. Whether it is open interest, notional volume, premium volume, or total value locked (TVL), they all decline or stagnate in 2023. This is not surprising, considering the launch of Aevo in 2023, where a lot of on-chain options volume occurs. One can also attribute the decreasing TVL to the large number of alternative yield opportunities, such as stETH, LSDFi, or RWA opportunities, which eclipse traditional LP opportunities.

DEX

Osmosis

Osmosis experienced a defining moment in 2023, transitioning from a DEX appchain to a full DeFi Hub, with lending (Mars), perpetual futures (Levana), decentralized stablecoins (Membrane), and other third-party applications launched on the chain. In addition, Osmosis introduced "super liquidity", providing centralized liquidity pools to optimize capital efficiency and improve price execution for large exchanges, and released a three-pronged token economics reform that significantly reduced inflation by 67% and redistributed a larger portion of inflation from liquidity providers to Osmosis stakers.

Osmosis has also introduced a 0.1% taker fee on all exchanges, adopted a transaction fee mechanism similar to EIP-1559 to limit spam, and began internalizing MEV through the ProtoRev module built in partnership with Skip Protocol. As signs of recovery emerge, Osmosis protocol revenue is growing exponentially. Osmosis is currently paying OSMO stakers at a rate of over $11 million in annualized protocol revenue, equivalent to a non-inflationary yield of over 2.5%.

Osmosis may launch its own perps platform in 2024, as well as a trustless cross-chain exchange protocol based on the existing Thorchain codebase. Osmosis is one of the most promising projects in the crypto space worth watching.

Uniswap

In June 2023, Uniswap announced V4, the next major upgrade to the protocol. Uniswap V4 has a completely redesigned architecture, adopts a singleton contract model, uses EIP-1153 for transient storage, introduces ERC-1155, and most importantly, introduces Hooks. Hooks allow users to start liquidity pools with customized behaviors before or after performing certain actions, such as initializing LP positions, modifying LP positions, making swaps, and donating to in-scope liquidity providers. Importantly, V4 also allows liquidity pool deployers to turn on a fee switch, similar to the protocol-level fee switch, which will direct some LP fees to the deployer. Uniswap V4 will be launched with Ethereum's Dencun upgrade.

In July 2023, Uniswap also released the white paper for UniswapX, a non-custodial Dutch auction trading protocol. It is an RFQ system that outsources routing and batching to a set of fillers that can route orders to a set of on-chain and off-chain liquidity. As shown in the figure below, UniswapX's adoption rate continues to increase, although it still accounts for a small portion of Uniswap's trading volume.

Finally, in October 2023, Uniswap Labs announced the launch of an interface fee switch that will charge a 0.15% fee on some token swaps conducted through the official Uniswap interface. Tokens affected by the interface fee include WETH, WBTC, USDC, USDT, and several other stablecoins, and the fee is charged in addition to existing swap fees. In a newsletter, we outlined how, in our view, this reduces the likelihood of a protocol fee switch and negatively affects the value accumulation of the UNI token. Since its launch, as of December 16, 2023, the interface fee switch has generated a total of $2.93 million in revenue, which is an annualized revenue of $18 million.

Curve

Throughout the year, Curve released several innovations around passive AMMs. In contrast to the Uniswap V3 design, passive AMMs allow LPs to simply deposit funds and then have their positions balanced by the AMM. The protocol upgraded their AMM design to the next generation (ng) passive AMMs for the three-coin volatility pool (tricrpyto-ng) and the stablecoin pool (stableswap-ng). The main focus of the upgrade was to reduce gas costs to capture more arbitrage flows, but it also improved the pool oracle for use as a price oracle in other DeFi applications. The new contract is now 40% cheaper than the previous version, but still costs 68% more gas than processing Uniswap V3 swap logic. Since launching in May, the USDC/WBTC/ETH and USDT/WBTC/ETH pools have seen a total trading volume of over $800 million, but the new pools have failed to increase Curve’s share of USDC<>ETH and USDT<>ETH trading volume relative to Uniswap, likely due to higher gas costs.

Even with the improved DEX design, one of the biggest innovations of the protocol this year was the launch of Curve’s lending market (LLAMMA) and stablecoin (crvUSD). The mechanics of the protocol are explained in our detailed report. Since its launch in May, crvUSD debt borrowed from the protocol peaked at $160.3 million, while collateral deposits were $280.8 million, and the lending protocol generated $2.9 million in fees for the DAO. Lido stETH is the most popular collateral, accounting for 43% of deposits, followed by WBTC at 33% and WETH at 13%. The interest rate is specific to each collateral, but has fluctuated between 4% and 9% for most of the time. However, a recent governance proposal increased the base rate and effectively doubled the borrowing rate. The proposal aims to activate peg keepers so that there is a buffer against downward deviations, similar to how the PSM helped the DAI peg. So far, crvUSD has maintained a strong peg, but the team is working to ensure it stays.

Since 2021, Curve has distributed $123M to its governance token holders, more than any protocol in the industry. Focusing on 2023, Curve has distributed $16.3M and began to see a substantial uptrend in November, pushing veCRV's yield to 5.4%. Notably, there has been a shift in revenue composition, as lending fees have surpassed DEX activity. This has been driven in large part by the growth of crvUSD and a larger share of fees, as 100% of lending fees go to the DAO, while only 50% go to exchange fees. The outlier week in March was caused by a USDC divergence, which drove over $8 billion in volume on Curve.

However, 2023 has not been without its problems. The protocol suffered a $62 million attack due to a compiler-level vulnerability in Vyper, the smart contract language used to write Curve smart contracts. The vulnerability caused a failure of a security feature, allowing the attacker to drain the four affected pools. The attack left unaffected LPs concerned about their deposits, and four months later, Curve’s TVL is still down by about $1 billion. The CRV token suffered a price drop of about 30%, which quickly spread the problem to the lending market that accepts CRV collateral. Curve founder Michael Egorov had an outstanding loan of $110 million against collateralized loans for CRV tokens and was forced to conduct an over-the-counter trade at $0.50 to liquidate his debt. More than 50 million CRV tokens were sold at $0.40, and there are rumors of a six-month lock-up period, which could lead to an oversupply in the first quarter of next year.

THORchain

THORChain launched a series of new products throughout the year, gaining strong user adoption and achieving overall market share growth. Focusing on cross-chain DEX products, THORChain's trading volume surged to over $1 billion per week in the fourth quarter, a 10x increase from the beginning of the year. There were relatively few new assets launched in 2023, most notably some Ethereum stablecoins such as USDP, LUSD, and GUSD. All eyes are on whether SOL will become the next major integration, but there are still some technical hurdles that need to be resolved before this becomes possible.

While the composition of volume share changed throughout the year, it is no surprise that Bitcoin and Ethereum were the most popular networks. BNB Chain was the biggest loser in volume share at the end of the year, decreasing from 29% to 5%. On the other hand, Ethereum stablecoins saw the biggest growth in share, increasing from 4% to 29%.

In August 2023, the protocol launched its lending platform, allowing users to borrow against ETH or BTC at zero interest and no liquidation. So far, $4.7 million and $1.1 million of loans have been collateralized against BTC and ETH, respectively. Debt is denominated in USD, but users can borrow against any asset supported by the network. Our report earlier this year discussed the protocol's mechanism design and key risks.

Since RUNE is destroyed every time a loan is opened, and new RUNE is minted when the debt is repaid, the lending mechanism has a deflationary effect on RUNE when leverage demand is large. With the recent positive changes in price action, market participants have begun using THORChain for leveraged trading, resulting in a total of 3.4 million RUNE being destroyed, accounting for 0.6% of the total supply.

The biggest risk for THORChain is regulatory pressure, as the protocol has recently become avenue for stolen funds. Given THORChain's extensive network coverage, hackers often bridge exploited funds from source chains to bitcoin and then transfer illegal funds through a currency mixing service. Although THORChain does not mask wallet addresses or acts as a currency mixing service in any way, there is a view that THORChain is not doing enough to prevent this from happening. The main DEX on THORSwap on THORChain recently took steps to prevent this from happening. Overall, THORChain is at an increased risk of negative regulatory actions due to its role in recent attacks.

Trader Joe

Despite its launch in November 2022, the Liquidity Book is one of Trader Joe's most important innovations, driving most of its growth in 2023. In addition, Trader Joe expands to Arbitrum One, BNB Chain and Ethereum, in addition to its core Arbitrum Inn.

In 2023, Trader Joe launched several new features, such as Autopools, a Liquidity Book’s automated strategy vault, a license-free liquidity pool, and an on-chain capping order. JOE tokens underwent an improvement, and veJOE was eliminated, introducing a new staking mechanism, sJOE, which can receive a portion of the transaction fee if staked. Finally, Trader Joe announced Merchant Moe, a DEX built specifically for Mantle, where 2.5% of the new token MOE will be distributed to JOE holders at TGE, and another 5% will be distributed over the next 12 months.

Yield Aggregator

Sommelier Finance

In 2023, earnings aggregators are mostly a tepid field, with leading projects such as Yearn not successfully innovating. In previous cycles, aggregators generated revenue through static strategies, leveraging unsustainable liquidity mining plans for other DeFi protocols and misalignment of lending interest rates in major lending protocols. Since leverage demand in 2023 and no large-scale liquidity mining plans, these aggregators have neither substantial TVL growth nor perform as well as simple ETH liquidity staking. Sommelier Finance is an important exception, one of the fastest-growing EVM earnings aggregators, which grew from approximately $15 million to over $60 million in 2023. Since earnings aggregators are actually on-chain asset managers, TVL is not a vanity indicator, but is directly related to potential earnings.

Sommelier is the first Ethereum coprocessor to optimize the production environment of the EVM DeFi experience using the Cosmos application chain. Sommelier’s strategists use off-chain computing to deploy on-chain dynamic earnings strategies such as UNI-v3 scale optimization and lending optimization. Sommelier currently provides the best non-inflationary returns for ETH/stETH, wBTC, FRAX, etc. With the launch of the L2 earnings strategy in the first quarter of 2024, we expect Sommelier to continue to grow and may become the largest EVM earnings aggregator in the crypto space.

Pendle

Pendle has consolidated its position as the largest interest rate derivatives protocol in DeFi, especially in the LSTFi earnings trading space. In terms of TVL, it has been one of the best performers this year, and TVL has been growing. Since the launch of the stETH pool in April, Pendle's stETH liquidity has continued to grow as a percentage of stETH market capitalization. In September, the protocol entered the RWA market for the first time, expanding the total address market by launching sDAI and fUSDC pools. Since then, Pendle has launched many other markets, including sFRAX, crvUSD, ePENDLE, etc. With the rise of stablecoins such as sFRAX/crvUSD and interest-bearing versions of stablecoins such as sDAI, Pendle has benefited greatly from these boosts.

Pledge and liquid pledge

As we mentioned in our previous report on the situation of Ethereum, LSTs have seen huge growth this year as Shapella upgrades. This is due to the reduced risk of holding LSTs. Withdrawal is now enabled, which means the price can better match the pre-determined anchor price through arbitrage, where users only have to wait a few days and the buffer of the protocol can handle the withdrawal and they can receive the full ETH balance.

Lido's dominance has basically not changed throughout the year, holding more than 85% of all circulating staked ETH. In February, Lido announced the V2 version, which includes two important upgrades to the Lido core technology stack: a new staking router and enabling withdrawal. The staking router is a new modular design for the underlying node operators being divided into “modules” from which stakers can choose. This includes a module for permissionless community stakers, DVT operators and others, as well as a traditional collection of whitelisted node operators. Withdrawals are also achieved through the ability of Lido to create ETH buffers, where rewards and new deposits are saved until they can be deployed. Then, by maximizing the buffers, as much ETH can be staking as possible while also meeting withdrawal requirements without exiting any validators.

stETH also benefits from its use as a deposit for other highly anticipated protocols, two of which are EigenLayer and Blast. EigenLayer continues to raise the cap of its liquidity mining plan, where selected LSTs are allowed for deposits. Nearly 200K stETH has been deposited into EigenLayer, with the second largest deposit being swETH of 46K. Blast is a new L2 with a selling point of "local earnings" on L2, which deposits all its bridged ETH into stETH and plans to automatically distribute the generated ETH earnings to every user's wallet on L2. This chain has received a lot of attention, with more than 368K stETH stored in the Blast L1 smart contract, which will continue to grow until it is enabled in February.

Rocket Pool

Throughout 2023, Rocket Pool continued to maintain its position as the second largest decentralized LST provider with a stable market share of 4.75%. The protocol implemented the Atlas upgrade in April 2023, introducing the LEB8 pool, which means that node operators only need to stake 8 ETHs to set up a validator instead of the previous 16 ETH requirements. Therefore, the protocol saw a 50% increase in node operators and an 85% increase in minimum pools, further enhancing the decentralization of Rocket Pool operations. As an additional benefit, LEB8 pools require more RPL staking, which helps increase RPL demand.

The protocol sets some catalysts in 2024, including NodeSet, which will be supplemented by introducing xRPL and xrETH as Rocket Pool. The upcoming Saturn upgrade will also reduce the minimum ETH requirement for node operators from 8 ETH to 4 ETH, further democratizing the protocol and increasing the potential for market share. Rocket Pool's future is promising, and its decentralized philosophy makes it an important competitor in the LST market.

frxETH

Frax launched its frxETH LST at the end of 2022, and its dual token model (sfrxETH/frxETH) quickly became the third largest decentralized LST on the market with a market share of 1.77%. In just one year, frxETH’s market value has grown from zero to about $5 billion. The comboable design of frxETH allows it to integrate with Fraxlend, allowing users to increase leverage for their staked ETH positions. The team plans to launch frxETH V2 in 2024, which should help expand node operators and decentralization. The upcoming Frax rollout will bring more practicality to frxETH, which should attract interest, as we have not seen innovations in L2 design, especially with L2 with its own LST behind it.

Stride

Due to the high staking benefits in the Cosmos ecosystem, Cosmos DeFi has struggled to achieve significant developments in history. Liquid staking has the potential to release billions of dollars in staking assets in Cosmos, allowing users to speculate in DeFi without giving up staking rewards, which would be a profitable adventure for any agreement that has dominated market share.

In 2023, Stride became the first major liquid staking agreement in the Cosmos ecosystem and partnered with Cosmos Hub to become the second consumer chain to leverage Hub's security. With nearly $100 million in total locked value (TVL) and more than 85% of Cosmos liquid staking assets market share, it is the best index choice for IBC growth today.

The recent launch of dYdX and Celestia could be the main catalyst for Stride's revenue growth once Stride supports a liquid-type pledged version of these assets. While other LST providers, including Lido, will attempt to capture market share from Stride, LST is primarily a winner-take-all market structure. Stride's first-mover advantage, rapidly expanding coverage, and continuous technological innovation puts it in a good position to maintain its dominance as a de facto Cosmos LST provider.

Marinade

: : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : Additionally, the team decided to change from time-based unlocking to milestone-based unlocking so that the team would not get any MNDE without TVL growth, and the 7.5% allocation of the founding team will be fully unlocked in January 2024. After implementing these new initiatives, the protocol's TVL grew steadily in the second half of the year.

Technically, Marinade has improved its delegate strategy by narrowing the collection of validators to the top 100 validators, identifying and blacklisted commission pullers, and qualifying high-performance super-few validators for delegates, thus improving the performance of the staking pool. Marinade also launched Directed Stake, which allows stakingers to support a single validator while holding mSOL, giving users the option to delegate their SOL staking to a single validator. In July, Marinade also launched Marinade Native, which uses the same delegate strategy as the mSOL staking pool, creating more than 100 staking accounts with staking robots and keeping zero fees.

: : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : :

Jito

Jito is a protocol for building a strong MEV infrastructure for the Solana community. Their products, including the Jito-Solana MEV client, Jito block engine and Jito repeater, are now key components of the Solana MEV supply chain. However, their most publicly available product is jitoSOL, a collateralized SOL alternative that can also receive some MEV rewards in addition to the standard SOL validator rewards.

In April, Jito launched Jito Staking xNFT, enabling Backpack wallet users to manage their staking positions directly through their Backpack wallets. At the end of the year, they launched a recommendation and points program, combined with MarginFi’s points program, which could greatly facilitate the growth of the protocol. Perhaps their most important technical announcement for the year, Jito launched StakeNet in October, a smart self-sufficiency protocol for Solana LST. StakeNet is a network of gatekeepers and on-chain programs that allow protocols to operate fully decentralized staking pools. As shown in the figure below, jitoSOL achieved impressive growth in 2023, with TVL denominated in SOL increasing by more than 10 times.

Finally, on December 7, 2023, the highly anticipated Jito token JTO was officially launched. There were 90 million tokens airdrops and cashed out immediately, which means approximately US$225 million (using $2.50 per token ~ issuance price) airdropped to users, node operators and MEV searchers. This has launched an important wealth effect for the ecosystem, and from less than 10,000 recipients, it is one of the larger airdrops in crypto history from the perspective of each user.

Stablecoins

Specialization of fiat-based stablecoins is a meaningful trend in 2023. USDC from Tether (USDT) and Circle’s USDC remain dominant products, but new players such as Paypal have joined the field, launching their own stablecoins. Other institutional-level players are now trying to use stablecoins to improve settlements for cross-border transactions. SAP announced its USDC payment service tested online on Ethereum’s Goerli Testing, citing high fees, long transaction times and lack of transparency, which prompted it to rethink existing infrastructure. As evidence of the industry’s growing maturity, S&P Global recently launched a stablecoin stability assessment that evaluates the ability of stablecoins to maintain their anchor price. USDC, USDP and GUSD rank highest, while USDT, DAI and TUSD rank lower.

However, it is not to be overlooked that USDC poses systemic risks to DeFi during the March SVB bank run. Token holders sold the asset to a low of $0.90 on the weekend when they learned that Circle placed part of USDC’s backed assets at SVB Bank, anxiously awaiting more news about the security of SVB assets. The token was reanimated in the days after the incident, but it was a stark reminder of the gap between the on-chain assets and its real-world endorsement. USDC’s market cap hit a high of $5.89 billion in June 2022, hitting an annual low of $2.38 billion in November this year.

The biggest beneficiary of USDC’s break-off from anchoring is undoubtedly USDT, which has attracted considerable inflows throughout the year and currently hit an all-time high in market capitalization. Tether has focused heavily on transparency this year. BDO, a top five accounting firm in the world, is now publishing a capital verification report for funds that support USDT. The latest report states that USDT’s U.S. Treasury exposure is $72.6 billion, highlighting changes in conservative risk management. Regarding the location of USDT’s storage, 51% of the circulating supply is located in the tide. This trend began at the end of 2022, but it is not clear why this flow occurs. Ethereum holds another 40% of USDT, while other smaller primary and secondary chains hold the remaining $7 billion of stablecoins.

Frax

2023 is an epoch-making year for Frax, thanks primarily to the growth of its LST product frxETH. In addition to this new product, governance has launched Frax V3, an upgrade of FRAX stablecoin that leverages RWAs. The USDC decoupling event in March led to the transition of Frax governance from partially prepared stablecoins to fully collateralized stablecoins. Since this decision, Frax’s collateral ratio (CR) has increased to about 95%. After achieving 100% collateral, the protocol will allow veFXS holders to vote on how to use the excess protocol revenue, which could be used to repurchase FXS.

: : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : :

In addition to the updated stablecoin products and LST, Frax has launched its own testnet for Rollup. It is not clear how the network will distinguish itself in the L2 network, but there are speculations that Rollup will provide additional utility for frxETH. The protocol also begins the slow rollout of its new frxGov governance module, which further improves the on-chain governance model. The module currently controls Fraxlend, but when fully implemented, will leave the entire Frax protocol completely free of licenses. Frax has positioned itself to provide products that adapt to any market conditions, whether it is through RWA-backed stablecoins in bear markets, or LST in ETH gains in bull markets. A full overview of Frax's latest developments can be found in our latest report.

Ethereum lending market

: : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : The initial supply cap is $35 million, which has also been reached, which should also help re-fixed assets. Supply expansion may not occur until the fixed currency stabilizes.

The Spark protocol, a money market protocol built in parallel with MakerDAO, was launched in May 2023 and immediately impacted the lending industry. In just seven months since its launch, Spark's total borrowing on the Ethereum mainnet has soared to $853 million. The protocol provides the cheapest way to acquire DAI loans by charging a slight premium to the DSR set up by MakerDAO governance. Spark's codebase is forked from Aave V3, so the protocol also offers loans denominated on other approved assets. Currently, $539 million in DAI and $288 million in WETH are borrowed from the protocol.

Solana Lending Market

Solana DeFi has undergone a meaningful restructuring after the FTX crash. Although most of the protocols have died, survivors are rising from the ashes along with a bunch of new deals launched this year. Although the attention undoubtedly goes to Solana, liquidity remains insufficient. As a result, the lending space is significantly smaller than Ethereum, with the top three players, MarginFi, Solend and Kamino, with a total of $700.8 million in deposits and $166.8 million in active loans.

Both MarginFi and Kamino were just launched this year, and their points program successfully attracted liquidity into the protocol. MarginFi currently has the vast majority of user deposits, at $362.9 million and has $81.3 million in active loans, while Kamino has $156.9 million in user deposits and $51.9 million in active loans. Given that Kamino just launched in November, it has grown rapidly. Solend, on the other hand, was launched in 2021 and experienced the boom and recession of the previous cycle. The protocol has $181 million in user deposits and $33.6 million in active loans.

As these protocols continue to mature, risk management and product depth will be key differentiators. It is likely that one or more of these protocols will launch stablecoins like MakerDAO or Aave to internalize the revenue generated by borrowers.

Cosmos Lending Market

2023 is the year of Cosmos’ resurgence after Terra collapsed. Mars, a promising project on Terra, has been rebooted as a Cosmos appchain and unfolded on CosmWasm chains such as Osmosis. In addition, Umee is a cross-chain lending Cosmos appchain that leverages its own version of Gravity Bridge to gain liquidity in Ethereum. Umee has been the dominant lending market in Cosmos due to the higher loan-to-value ratio (LTV) of USDC and other major Cosmos assets and historically lower borrowing rates.

In October, Mars launched a v2 version of their platform, introducing quarantined credit accounts similar to CEX sub-accounts. Through these credit accounts, all forms of collateral, including LP positions, can be used for margin trading and leveraged LPing to provide maximum on-chain capital efficiency. Additionally, due to the unnecessary burden of maintaining a collection of validators, Mars recently decided to phase out its appchain and consider using Neutron as its headquarters to control other external deployments. Although Mars lags behind Umee in total lock value (TVL), Mars is expected to become a leader in 2024 with increasing leverage demand and interest in Cosmos.

RWA

Over the past year, RWA (real-world assets) and tokenization have experienced huge growth, with the total value of tokenized products currently being approximately US$74 billion. Among them, most of the tokenized assets are stablecoins. However, the growth of non-stablecoin RWA products is also significant, as the total locked value of the RWA DeFi protocol has exceeded US$6 billion.

One of the fastest growing verticals in RWA is tokenized debt. In a high interest rate environment, tokenized debt products have flourished, successfully attracting users seeking relatively low risk and higher irrelevant returns, even higher returns than blue chip protocols offer.

Agreements like Ondo Finance and MatrixDock provide access to U.S. Treasury bonds, and their AUMs have grown rapidly. MatrixDock's TVL has nearly doubled to $108 million since April 2023, while Ondo has hit $200 million since its launch in February 2023.

In addition to the agreement that provides access to U.S. debt, we have also seen governments in Asian countries issue on-chain treasury bonds. The Hong Kong government issued HK$800 million (valued around US$100 million) in tokenized green bonds under its green bond program earlier this year. The Philippine Treasury Agency, the Philippine Development Bank and the Philippine Land Bank recently announced that they will issue one-year tokenized treasury bonds worth 10 billion pesos (valued at US$179 million) on-chain. In addition to Treasury bonds, some companies have recently begun trying to issue corporate bonds on-chain; for example, Siemens issued €60 million digital bonds on Polygon in February this year.

Similarly, tokenized credit protocols have also seen significant growth over the past year. In particular, Centrifuge has had a brilliant year with a total asset management scale of more than $250 million. In addition, since its launch at the end of 2020, they have launched a total of $482 million on-chain, with a total of 1,341 assets tokenized.

Currently, approximately 47% of the loans issued by Centrifuge are initiated by BlockTower and used by Maker to fund investments in real-world assets. BlockTower Series 3 and Series 4 structured credit pools hold $185 million.

Recently, Centrifuge focused on collaboration with the DeFi protocol, DAO is part of its new product, Centrifuge Prime, which provides RWA infrastructure and services to the DeFi protocol. Recently, they partnered with Aave to invest RWA through Centrifuge Prime using Aave’s stablecoin vault, allocating $1 million USDC to Anemoy LTF (a short-term US Treasury bill pool on Centrifuge). In addition, they are exploring the GHO, a stablecoin that supports Aave with RWA.

In addition to Centrifuge, there are some emerging tokenized private credit agreements worth looking forward to in 2024, such as Huma Finance. Huma provides a comprehensive infrastructure for decentralized risk assessment and lending, backed by revenue and accounts receivable. It focuses on high-performance, low-risk accounts receivable and is one of the leading RWA protocols that enable remittance financing use cases through partners such as Arf, Circle and Stellar. The protocol stands out through its signal-driven underwriting approach, leveraging different data. Revenue, assets, liabilities, etc. are key indicators for assessing borrower risk. Its signal-driven underwriting approach is achieved through a decentralized signal portfolio that is at the heart of Huma’s lending infrastructure and collects and manages a wide range of signals to assess borrower risk.

DSP collects a variety of information, including revenue, assets, and liabilities from on-chain and off-chain channels. Its role goes beyond mere data aggregation—it can authenticate these signals and welcomes the integration of new signal sources through dedicated signal adapters. Essentially, the combination acts as a comprehensive repository that ensures the collection of critical financial data.

Since its launch in June 2023 at Polygon, Huma has issued nearly $84 million in loans with zero default rate. Huma recently launched on the Celo Test Network and will integrate with decentralized reputation systems that combine on-chain and off-chain data points in the future. Over the past six months, Huma has launched a variety of solutions including Arf Credit that provides remittance financing for financial institutions, Rain, USDC-backed corporate cards, BSOS green financing, on-chain credit supported by EV charging station accounts receivables, and ImpactMarket, which uses stablecoins to provide UBI and microfinance.

: : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : :

In terms of infrastructure, we have seen many TradFi institutions explore different bridge and chain solutions over the past year. Chainlink recently partnered with ANZ (Bank Group Australia and New Zealand) to explore how its clients use CCIP to settle tokenized assets across public and private blockchains. The team also worked with SWIFT and large financial institutions including ANZ, BNP Paribas, BNY Mellon, Citi, Clearstream, Euroclear, Lloyds Banking Group, SIX Digital Exchange (SDX) and The Depository Trust & Clearing Corporation (DTCC) to explore how to use the existing SWIFT infrastructure to transfer tokenized assets between public and private blockchains using CCIP.

Axelar and LayerZero and Avalanche are both involved in a proof of concept led by JPMorgan to explore messaging and asset transfers between private and public blockchains. As part of this POC, Axelar provides message verification and messaging by deploying licensed Axelar testnets and private off-chain repeaters. LayerZero provides oracles and repeaters to receive off-chain messages and transfer them to the LayerZero endpoint contract on Avalanche.

Despite Chainlink's explicit focus on institutional adoption of CCIP, Axelar and LayerZero's participation in JPM Onyx POC shows that the competitive environment for interoperability providers remains very equal. Given that tokenized asset interoperability between private and public chains is still relatively underexplored and in its nascent stage, the ideal solution may not have been implemented.

MakerDAO

: : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : :

Not all MakerDAO's RWA investments are successful or considered appropriate. For example, Fortunafi, ConsolFreight and Harbour Trade Credit Treasury debt ceilings have been lowered to zero over the year, while HVB Treasury has been instructed to terminate future investments and return excess available cash to the DAO. As for Harbor Trade Credit, its outstanding DAI is backed by loans provided to a single borrower who defaulted in April 2023, and a similar default occurred in the largest debt position of ConsolFreight Treasury. This means MakerDAO may lose some of its investment capital, although the project is a senior debt holder and the investment amount is relatively small. This illustrates the risks of deploying collateral assets into RWA loans.

Nevertheless, short-term Treasury collateral has become the main source of revenue for MakerDAO and facilitates the project to deliver a high yield of 5% through the DAI savings rate (“DSR”), at least until the interest rate environment begins to recover. At the end of June, the market began to realize the revenue potential brought by Treasury bond treasurys, and MKR performed very well in the third quarter. The price of the MKR token outperformed its kind of tokens, up about 100% at the end of the quarter. That being said, DAI, the core product of MakerDAO and the enabler of RWA investment, has been working to attract more demand.

: : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : :

: : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : :

: : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : :

: : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : :

12 月，Coinbase 金库的债务上限从5 亿DAI 提高到1.5B DAI，可能是为Endgame 做准备，其中SubDAO 目前将被要求持有至少18% 的总投资组合现金稳定币（定义为USDC 和USDP） 。 MakerDAO 似乎开始准备将资金从其他RWA 金库转移到Coinbase 金库，以便SubDAO 能够快速获得稳定币流动性。 这意味着该项目对RWA 金库的混合利率显着下降，因为在当前利率环境下，国库券金库的回报率约为5%，而Coinbase 金库的收益率稳定为2.6%。

然而，这可能无意中成为降低MakerDAO 流动性风险的决定。 受到严格审查的L2、Blast 和Aevo 将使用DSR 为存入上述项目的资产创造被动收益。 Blast 是一种新颖的实现方式，已经积累了大量的TVL，当启用此功能时，用户可能会突然想要批量提取资金。 由于此实施将使用USDC PSM 进行提款，因此如果MakerDAO 的大部分资产处于较低流动性级别，则可能会遇到流动性问题。

最后值得一提的是，MakerDAO 在7 月份通过智能燃烧引擎（“SBE”）的实施重新激活了MKR 的价值累积机制。 MakerDAO 的利润被发送到剩余缓冲区，这是一个包含DAI 的保险基金，以防协议产生坏账。 在SBE实施之前，自2022年1月MKR的买入销毁机制被停用以来，剩余缓冲区中的资金就没有得到积极利用。 通过SBE，当剩余缓冲区中的DAI 通过预定水平时，缓冲区中额外资本的一半将用于定期从Uniswap V2 DAI/MKR 池中获取MKR 代币。 获得的MKR 与额外的DAI 的另一半合并，并且位置LPd 回到同一个Uniswap 池中。 按照目前的情况，当剩余缓冲区达到超过50.03M DAI 时，SBE 每隔约4 小时激活并使用30K DAI 来获取MKR，直到缓冲区回落到阈值以下。 由于某些RWA 利润是一次性支付的，盈余缓冲区最近DAI 不时出现显著增长。

NFT 市场

Blur

Blur 在2023 年全年主导了以太坊上的NFT 交易量。Blur 团队不仅打造了一款能够吸引收藏家的优质产品，还吸引了更成熟的NFT 交易者，他们以与山寨币类似的方式交易NFT。 Blur 还能够通过源源不断的积分和空投来激励NFT 交易者。 尽管OpenSea 具有先发优势，但自2023 年2 月以来，Blur 一直主导着以太坊上的NFT 市场空间。 例如，在过去的几周里，Blur 一直促进了以太坊上超过70% 的NFT 交易量。

今年5 月，Blur 宣布推出Blend，这是与Paradigm 合作构建的NFT 点对点借贷协议。 Blend 允许NFT 所有者以其NFT 为抵押借款或借出以赚取利息，而借款人或贷方无需支付任何费用。 自推出以来，Blend 已促成近40 万笔贷款，借入超过130 万ETH（截至12 月24 日近3 亿美元）。

OpenSea

虽然Blur 度过了美好的一年，但OpenSea 却陷入了困境。 据报道，早在11 月份，投资经理Coatue 就将其对OpenSea 的投资减记了90%，这表明OpenSea 的潜在估值为1.4B 美元或以下，较2022 年13.3 美元的估值大幅下降。

在过去的几个月里，OpenSea 引入了一些有意义的变化来吸引更多用户。 8 月，OpenSea 宣布他们正在为可兑换NFT 开发新的开放标准- 用于兑换其他数字或实物物品。 10 月，OpenSea 推出了OpenSea Studio，这是一个无代码平台，可供创作者轻松启动和管理NFT 项目，包括创建和管理Drop、直接将NFT 铸造到钱包，以及使买家能够使用信用卡从收藏品中铸造NFT。 尽管进行了这些更新，并试图通过去年收购Gem 来吸引NFT 交易者，但OpenSea 的市场份额仍在稳步输给Blur。

Tensor 和Magic Eden

Tensor 是为NFT 交易者（类似于Blur）量身定制的，今年的交易量出现了突破，这可能是由于其奖励计划和对Solana 兴趣的增加。 自10 月中旬以来，Tensor 一直主导Solana 上的NFT 交易量，高峰时占据80% 的市场份额。

Tensor 在过去几个月中实施了一些小的更新。 10 月份，他们推出了新的报价系统和新的警报系统，11 月底，Tensor 开始支持Solana 铭文并实施推荐。 尽管Tensor 是一款强大的产品，并且反映了当前参与者希望从NFT 市场中获得什么（类似于Blur），但他们的大部分交易量很可能来自他们的积分/奖励系统。 目前，Tensor 奖励计划第三季已上线。

面向消费者的dApp

在今年早些时候，friend.tech 成为加密领域中最广泛采用的消费者应用之一，自推出以来已经吸引了超过5.25亿美元的累积流入，并在峰值时拥有近7.3万活跃用户。该应用表现尤为出色，因为它简化了注册流程的许多方面- 通过成为渐进式Web 应用程序，绕过了Apple 的App Store 限制，并通过允许用户使用手机号码、Google 或Apple 账户进行注册，并立即创建钱包。在friend.tech 取得成功之后- 不仅在人气方面，而且在财务收入方面（近2,700万美元），通过其费用系统赚取的财政收入创下了一个月的新记录，几乎每个L2 和链都看到了一个新的friend.tech 衍生版的推出。

除了friend.tech，另外两个值得注意的去中心化社交媒体应用是Farcaster 和Lens。两者都类似于Twitter，允许用户公开发布文本和媒体，供他们的关注者或其他用户查看。Lens 今年早些时候推出了Lens v2，将应用转变为以个人资料为中心的方法，并禁止通过地址进行关注。NFT 已经优化，以提供更好的用户体验，现在允许包装和未包装状态以增强灵活性，并与其他协议兼容。此外，Lens V2 实施了高级推荐系统、出版行动模块和委托执行者。

Farcaster 在去年十月推出了无需邀请码即可注册的功能后，应用用户达到了4.6万。此前，用户需要邀请码才能使用该平台。此后，Farcaster 在其平台上举办了一些有趣的AMA 活动- 其中一次与Vitalik Buterin 和一次与Balaji Srinivasan。最近，Farcaster 推出了一种名为POINTS 的Farcaster 本地Memecoin，随后看到了兴趣的激增。自那时以来，帖子的数量已经趋于正常。

game

今年早些时候，加密货币游戏面临着重大挑战，部分原因是加密货币活动减少，部分原因是许多用户（尤其是北美和欧盟的用户）对游戏项目持怀疑态度，常常将其视为没有真正兴趣的蒸汽软件。 不幸的是，这在相当长的一段时间内都是现实：P2E 游戏经常遭受不可持续的代币经济学或不合理的承诺（它们未能兑现）的困扰。

Parallel TCG

最近，随着冒险条件的回归，我们看到加密货币游戏获得了一些动力。 Parallel TCG 在2023 年下半年表现尤其出色，有可能成为今年最受欢迎的GameFi 项目。 Parallel Alpha 卡（用于玩游戏）在OpenSea 上的数量已超过80,500 ETH（截至12 月22 日价值约为1.85 亿美元）。 Parallel 还在12 月初推出了Planetfall（他们的第一个扩展包）的开放包。 该扩展包包含120 张新的可玩卡牌，交易量接近50 万美元。 Parallel 最近还表示将很快推出他们的手机游戏。 此外，他们还准备推出Parallel Colony，这是一款使用人工智能的游戏，允许用户与他们的人工智能化身互动，该化身根据其记忆和传记自主行动。 Parallel Colony 也将使用PRIME 代币，并允许用户使用现有的Parallel Avatar NFT。

Star Atlas 和Aurory

除了《平行》之外，旧游戏也有一些重要的更新。 Star Atlas 于9 月份推出了SAGE Labs 游戏的抢先体验版。 SAGE Labs 是一款基于Solana 构建的完全链上开放世界游戏，允许用户在深空提取资源和工艺。 自推出以来，Star Atlas 已稳定增长至6K 日用户，过去4 个月的总交易量已达1.5 亿笔。 Solana 上的另一款热门游戏Aurory 宣布与Seekers of Tokane 一起推出头像定制、土地探索、全面闪电战、新货币等。 Aurory 于11 月为Aurorian 和抢先体验代码持有者推出了Alpha 版本的Seekers of Tokane。

除了上述项目之外，还有一些有趣的游戏即将推出，例如Project Awakening（由EVE Online 发行商CCP Games 开发）、Shrapnel（一款Avalanche Subnet FPS）和Pudgy World（一款由zkSync 驱动的开放式游戏） 矮胖企鹅队(Pudgy Penguins) 的世界比赛) 明年应该受到密切关注。

游戏基础设施

12 月初，Offchain Labs 开发的Arbitrum L3 Xai Network 进行了节点销售，允许用户为网络的运行做出贡献。 Xai Network 主网预计将于2024 年初推出。Beam 是一个基于Avalanche 的游戏新子网，于2023 年第三季度推出了主网。除了提供游戏基础设施和工具外，Beam 还提供AMM（Beam Swap）和NFT 市场（球体）。 截至目前，Beam 只提供了十几款游戏（包括即将推出的游戏），其中大部分是较小的卡牌决斗游戏，但已经发布了一些更有趣的游戏； 例如Walker World，一款基于虚幻引擎5 构建的开放世界游戏。Lattice 目前正在开发Sky Strife，一款完全链上的实时战略游戏，以及Primodium，一款完全链上的工厂模拟游戏，使用MUD（他们基于以太坊的游戏） 应用程序框架。 此前，Lattice 早在2022 年10 月就使用MUD 在OP Stack 上构建了OPCraft，这是一款体素制作游戏（类似于Minecraft）。最后，Argus Labs 于2023 年6 月宣布了世界引擎（WE），这是一款专为链上游戏设计的区块链WE旨在为游戏开发者提供工具和基础设施来推出可互操作的游戏，使用第2层分片架构，允许游戏拥有自己的可扩展链。

DePIN

Akash

对于Akash 来说，2023 年是突破性的一年，推出了GPU 市场，提供商现在可以为LLM 训练和推理工作负载提供未充分利用的GPU。 通过将GPU 纳入其市场，Akash 可以创造网络效应，并通过加入愿意在各种产品中提供额外计算资源的新提供商来“做大蛋糕”。 尽管处于熊市，但Akash 提供商的销售额仍处于历史高位，并且没有放缓的迹象。

此外，Akash 目前正在进行一项多阶段计划，旨在为AKT 质押者带来应计价值，激励网络的发展，并消除AKT 采购资源的需求。 2024 年第一季度，Akash 将开始一项试点提供商激励计划，以搭载Nividia A100s、H100s 和L40s 等需求旺盛的GPU。 按照目前的AKT 价格，该激励计划可能会超过3 亿美元并持续多年，有可能成为加密货币领域最大的人工智能相关激励计划。 Akash 的服务完美地定位于作为通用计算平台的交叉点，并且正处于扩展其GPU 市场的早期阶段。

2023 年五项高影响力治理提案

Sushi Kanpai 2.0

成功的Kanpai 2.0 提案彻底改变了SushiSwap 的代币经济模型。在Kanpai 之前，由DEX 产生的交换费用的一部分（总费用的30个基点中的5个基点）被分配用于在公开市场上购买SUSHI 代币。然后，这些代币按比例分配给将其抵押以获取xSUSHI 的持有者，从而为SUSHI 代币创造了直接需求。

这种机制在SUSHI 的价值和协议增长之间提供了根本性的联系。然而，在新的Kanpai 2.0 提案下，Sushi 协议生成的所有收入都被重定向到国库，而不是用于市场购买SUSHI。这一变化代表了从奖励SUSHI 持有者转向为枯竭的国库和团队提供必要资源的转变。

尽管这一决定对SUSHI 的短期价格走势产生了负面影响，但由于项目迫切的财务需求以获取任何时间窗口，这被认为是必要的。这种情况突显了治理提案对代币经济和价格可能产生的重大影响，展示了治理在加密投资者投资组合中的影响力。

Tornado Cash 治理攻击

5 月20 日的Tornado Cash 治理攻击揭示了为什么DAO 需要经验丰富的参与者作为代表，以及加密货币治理的困境。 一项看似无辜的提议，旨在削减系统中恶意行为的中继器，但该提议的附加代码中隐藏着恶意可执行文件。 代码中隐藏了一个功能，使利用者能够在Tornado 治理中使用120 万张选票，超过真正的70 万张选票。 随着它的通过，利用者获得了对治理和许多协议合约的完全控制。 坏人开始倾销大量TORN 代币并将其不义之财收入囊中。 该提案是治理攻击的警示故事。

MakerDAO Endgame

2022 年10 月，MakerDAO 创始人Rune Christensen 成功推动了一系列治理提案，启动了备受争议的Endgame 计划。 Endgame 最初由Christensen 于2022 年5 月提出，此后不断发展并进行了大量修改，Christensen 于2023 年5 月发布了对即将发生的变化的广泛更新概述。尽管全年对Endgame 计划提出了调整，但其核心思想保持不变：通过称为SubDAO 的更小、专门的实体进行权力下放。 当治理最初对该提案进行投票时，这一愿景将社区分成了两半，支持者倾向于通过董事会建立更传统的公司结构。 许多反对Endgame 的著名治理参与者和核心开发人员因此退出了MakerDAO，这也许可以解释为什么Endgame 距离启动似乎还需要一段时间。

该计划由五个阶段组成，除其他外，将建立一个新品牌、治理代币、稳定币、专有区块链和六个SubDAO，每个都有各自的原生代币。 MakerDAO 已准备在2023 年全年推出Endgame，但尚未确定具体日期。 然而，今年实现的与Endgame 相关的一个显着变化包括Spark 协议的部署，这是一个从Aave v3 分叉的货币市场，引入了sDAI 的用例——存入DSR 中的DAI 的代币化版本。 Spark Protocol 连接到一种名为SparkDAO 的新SubDAO，用户目前可以通过在Spark Protocol 上提供ETH 或借用DAI 来预耕SparkDAO 原生代币的空投。 此次空投将持续到SubDAO 代币挖矿开始（第2 阶段）或2024 年5 月。Spark Protocol 目前是TVL 的第四大借贷协议，自10 月底以来增长显著。

根据治理论坛活动，当前大多数Endgame 开发工作似乎都集中在一般文档更改和第3 阶段，其中MakerDAO 将引入旨在增强和优化治理任务的AI 工具。 第5 阶段——围绕引入用于托管治理安全后端逻辑和SubDAO 代币经济的专有区块链——在这一年也得到了广泛讨论。 9 月，Christensen 发表了一篇论坛帖子，宣布他认为Solana 是用于MakerDAO 新链的最有前途的代码库。 MakerDAO 是以太坊上最成熟的DeFi 项目之一，被视为与生态系统高度契合，因此毫不奇怪，Solana 的公告在社区内引起了争议。 如需对Endgame 进行相对最新的深入研究，请参阅我们在8 月份发布的关于MakerDAO 的研究报告。

Uniswap 桥崩溃

Uniswap BNB 桥崩溃完美地体现了2023 年许多DAO 中猖獗的政治行为，并且很可能持续到未来。 故事始于在BNB 链上推出Uniswap 的提议。 它通过了Snapshot，但在该提案准备好在链上上线之前，DAO 需要决定使用哪个桥来促进跨链消息传递，以便BNB 上的UNI 能够对治理提案进行投票。

随后的提案提出了Wormhole、LayerZero、deBridge 和Celer 作为Snapshot 的选项； 虫洞赢得了有争议的投票。 值得注意的是，UNI 的巨大持有者a16z 无法参与投票，因为其托管人尚未与Snapshot 集成。 a16z 是LayerZero 的大力支持者，如果他们能够在快照中投票，就会将投票转向他们的桥梁投资组合公司。 当该提案以Wormhole 作为选定的桥梁进行链上投票时，a16z 很快投了反对票。 其他持有UNI 的风投公司，比如ParaFi，都是Wormhole 的支持者。 随后在论坛、Twitter 和私下聊天中进行的游说和争论将成为DAO 的历史书籍之一。 快照中的其他桥接提供商大多被忽视了。

尽管论坛上有100 多条评论，但许多在最初的快照中投票支持LayerZero 的人选择支持Wormhole 的链上提案，以便Uniswap 可以在BSL 到期之前在BNB 上快速启动。 如果该提案没有通过，Uniswap V3 的分叉很可能会抢先运行BNB 链的真实协议，并巩固自己的先发优势。 也就是说，这种情况是DAO 治理的政治性和重要性的一个很好的例子。

结束SNX 通胀

12 月17 日，SNX 治理投票决定消除SNX 通胀。 虽然这次投票时的通货膨胀率仅为5%，但供应量的不断增长是过去人们犹豫购买该代币的一个重要原因。 因此，消除这一负担可以让人们更轻松地在投资组合中持有SNX。 治理提案可以刺激活动，改变代币经济的好坏，并可以显着改变投资理念。

Summarize

尽管风投公司进行了压倒性且持续不断的基础设施投资，但2023 年确实是协议年，而不是区块链和基础设施年。 随着用户离开和原生代币价格暴跌，每个生态系统和行业的dApp 都被迫进行创新，而所发生的大部分开发工作将为下一个牛市奠定基础。

Perps 在熊市中表现出韧性，继续证明其产品适合市场，竞争激烈，dYdX V4 作为应用链、具有各种链外组件的CLOB 以及各种AMM LP 模型之间存在不同的架构决策。 其他衍生品，例如从坦率地说，灾难性的2022 年建立起来的期权。当我们寻求LVR 的答案时，DEX 格局继续发展，Uniswap 发布了hooks 和UniswapX 作为潜在的解决方案，同时伴随着意图驱动解决方案的兴起。 质押/流动性质押是DeFi 领域最大的赢家之一，因为TVL 几乎翻了一番，并且LST 在DEX 和货币市场中得到广泛采用。 这种增长不仅限于以太坊，还包括Solana 和Cosmos 等其他生态系统。 今年稳定币陷入困境，因为我们看到USDC 的供应持续减少，同时在SVB 失败后努力应对脱钩问题，而其他稳定币创新未能兑现增长承诺。 贷款行业最大的创新在于LLAMMA 及其软清算机制，现有机构进行小幅渐进式改进以提高资本效率。 今年协议不乏创新。

2024 年，dApp 开发者将看到他们的机制和升级是否能按预期发挥作用，以及随着用户和degens 的回归，他们中的哪些人将赢得各自领域的市场份额。 愿最好的协议（“激励措施”）获胜。