ON–195: DeFi 🫧 ✖ Mega Issue 💥

Coverage on Synthetix, MakerDAO, Curve, Perennial & More.

Dec 8, 2023

ON–195: DeFi 🫧 ✖ Mega Issue 💥

About the Editor: Spencer Noon is an independent angel investor. Looking to get in touch? DM him on Telegram or reply to this email and say hi 👋

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DeFi 🫧

① Synthetix ⚔️

📈 Synthetix Perps Open Interest crosses $200M with $120M in Non-ETH/BTC OI

  • Synthetix Perps' open interest has surpassed the $200 million mark, with a significant portion, nearly $120 million, coming from non-ETH and non-BTC markets. This peak reflects the highest recorded onchain open interest for altcoins, indicating a diversification beyond major cryptocurrencies into Synthetix's extensive 80+ market offerings, including crypto, forex, and commodities. This data point is a testament to the protocol's ability to cater to a broad spectrum of traders and markets.
Source: Synthetix - Internal Analysis
  • Synthetix Perps' trading volume recently exceeded $38 billion, with $10B in the past 3 months. This corresponds to an avg daily trading volume of $110M. The increase in activity aligns with heightened market volatility, emphasizing the protocol's capacity to support significant trading volume.
Source: Synthetix - Internal Analysis
  • Over the past 90 days, Synthetix Perps has accrued over $7.5 million in fees, averaging daily fees of $83k. Fees have fluctuated with volatility but highlight the protocol's ability to generate fees for liquidity providers while safeguarding LPs from directional risk due to built-in risk management.
Source: Token Terminal
  • 💦🔬 Tx-Level Alpha: In a recurring weekly transaction, as seen here, $967,057 in collected fees are distributed to Synthetix liquidity providers by burning fees, which in turn reduces the debt of stakers. This process, crucial to the network's health, reduced the total systemwide debt by half a percent in one week.

② MakerDAO 🏦

📈 MakerDAO crosses $200M of annualized revenues

  • MakerDAO underwent a significant transformation of its balance sheet over the past year by decreasing its stablecoin exposure (PSMs) and allocating it in Real-World Assets (RWA), up to $2.89 billion, mainly off-chain T-Bills. The return of the bull market also increased people's willingness to take crypto-backed loans ($1.3 billion at the end of 2022 to $2 billion), which decreased MakerDAO’s stablecoin holdings. To replenish stablecoin holdings, in November the RWA structure sold $270 million of T-Bills. It marked the first time the T-Bill structure sold holdings.
Source: Dune Analytics - @steakhouse
  • Turning to the liability side of the MakerDAO balance, we can see the impact of the 8% DAI Savings Rate (DSR) in August, which was quickly reduced to 5%. More than $1 billion flowed into the DSR, primarily from new users. Most DAI is still not utilizing the DSR feature (70% of outstanding DAI).
Source: Dune Analytics - @steakhouse
  • Examining annualized revenues: MakerDAO surpassed the $200 million threshold in November. T-bills still account for 55% of revenues, but the bull market made Maker loans relatively less expensive, contributing to 37% of revenues. With decreased stablecoin issuance, the incentives from GUSD and USDP have diminished.
Source: Dune Analytics - @steakhouse
  • 💦🔬 Tx-Level Alpha: This transaction records a transfer of $100 million from Clydesdale (a BVI SPV specifically for T-bill investments). It was initiated from a Sygnum wallet and routed to Maker Protocol. From there, it utilizes the USDC PSM to be converted into DAI and then employed to repay the Maker RWA007 vault. While the MakerDAO community had expressed apprehensions about the potential to "retrieve the funds," this transaction clearly demonstrates its functionality, as it successfully processed the return of capital.

③ Curve Finance 🌈

📈 crvUSD Grows to 50% of Curve.fi Revenue

  • Curve's weekly revenue has grown ~350% (total revenue, including LPs) to 460% (DAO revenue, excluding LPs) from August lows, with a growing contribution from crvUSD borrowing fees. Borrowers pay a variable interest rate to borrow crvUSD against crypto collateral, and these fees are paid to veCRV lockers (the DAO). Since its inception in May, crvUSD has grown to generate 70% of Curve DAO's weekly revenue, or 53% of total revenue (including LP profits).
Source: curvemonitor.com
  • crvUSD supply grew through 2023, peaking at ~155M in November. To stabilize prices (now: ~$.995), interest rate multipliers were increased Nov 28, increasing rate sensitivity to price deviations and pegkeeper supply. Despite rates >20% during re-calibration, crvUSD supply has thus far remained >140M.
Source: curvemonitor.com
  • Curve pools also continue to provide steady income to DAO. In terms of total volume and liquidity usage (volume/TVL), stablecoins, ETH, and wrapped BTC continue to dominate, with growing activity in LSDs. The stETH-ng (ETH/stETH) pool has consistently topped charts, with $132k in earnings last week.
Source: curvemonitor.com

④ Perennial 🌸

📈 Perennial V2 on display — $19M liquidity, $200M+ volume

  • Perennial is an on-chain derivatives primitive that recently launched a new protocol. Perennial V2 is designed to be hyper capital efficient, oracle agnostic, and feature-rich through extensions built on top (as opposed to within). Perennial’s capital efficiency is on display in the chart below — V2 natively nets traders’ longs & shorts, allowing ~$5.5M in TVL to service nearly $20M in total liquidity, a ~4x boost.
Source: Perennial - Internal Analysis
  • In the past month, Perennial has averaged $6.2M in daily volume, and hit a new 24hr all-time high of $23.3M in early December. Open interest went as high as $12.2M on November 12. This indicates less active traders have been replaced by more active traders, keeping overall demand consistent.
Source: Perennial - Internal Analysis
  • In V2, proper risk management drives capital efficiency. Early on, maker exposure saw significant swings (40% to -40%). As arbitrageurs entered the game & V2 matured, longs & shorts became more balanced, decreasing the volatility of delta exposure, now floating in a narrow range on an EWMA basis.
Source: Gauntlet
  • 💦🔬 Tx-Level Alpha: This transaction is a user opening a Pro Maker position in Perennial’s BTC market with high leverage — currently providing $775k of liquidity using only ~$100k in collateral. At over 7x leverage, this user is earning over 204% APR (before ARB rewards). This user is taking advantage of Perennial’s capital efficiency to the max.

⑤ Kwenta 🔲

📈 Kwenta commands 90% Synthetix V2’s volume, 92% of fees

  • Kwenta is a decentralized derivatives trading platform offering perpetual futures and options trading on Optimism. Within the Synthetix V2 perps market alone, Kwenta takes the lion's share of perp volume (>92%) and has dominated since mid-September. Kwenta has taken an even larger share of perp fees at 98% and currently generates $300k/day in revenue.
Source: Dune Analytics - @blockworks_research
  • Kwenta's volume has been outpacing the CLOB-based perpetual market leader, dYdX, since September, climbing from 10% to 15% on a Kwenta/dYdX ratio persepctive. What's interesting from a timing perspective is that this relative volume growth comes before Synthetix V3 goes live - where new collateral assets/pools may be added to build new derivative markets.
Source: Token Terminal, Re7 Capital
  • Kwenta's recent volume growth is also organic with token incentives stopping in September with Kwenta's daily volume (7d MA) breaking new ATHs of $250M+ in the weeks afterwards. This is impressive when you compare to competitors like Vertex which has set aside 44% of the token supply for Trade & Earn programs.
Source: Token Terminal, Re7 Capital
  • 💦🔬 Tx-Level Alpha: As a front-end for Synthetix, Kwenta receives rebates relative to how much fees it has generated for the Synthetix protocol by driving Synthetix perpetual volume. The transaction refers to a 47,028 SNX rebate received in November when Kwenta facilitated $4.7B in volume and generated $2.14M in fees.

⑥ Aave GHO 👻

📈 GHO Struggles to maintain Peg at $0.98

  • GHO, Aave's stablecoin, struggled to maintain its $1 peg since launching without a $1 redemption mechanism. Efforts led by TokenBrice, using liquidity incentives on platforms like Maverick and Uniswap, initially boosted its value. However, a sustainable peg required more than liquidity strategies. Aave DAO raised GHO's borrowing rate to help stabilize it. A redemption mechanism allowing GHO exchange for $1, regardless of market price, is expected soon, potentially aiding in maintaining its peg.
Source: CoinMarketCap
  • Despite initial challenges in maintaining its peg, GHO's supply steadily increased, hitting its cap in November. Since reaching this maximum, the stablecoin has consistently touched its 35 million cap, indicating a stabilized circulation at this upper limit.
Source: Flipside Crypto - @jackguy
  • While GHO maintains its 35M cap, swap data reveals 10-40 wallets actively trading daily on decentralized exchanges, exchanging 200k to 1M tokens. This points to a concentrated group of high-volume traders. In total, only 1.4k wallets have swapped GHO, indicating a narrow, active trading base.
Source: Flipside Crypto - @jackguy
  • 💦🔬 Tx-Level Alpha: A key transaction in GHO's largest liquidity pool highlighted its struggle to maintain peg. The swap involved GHO being exchanged for Tether, with more GHO than Tether traded, clearly indicating GHO's value below $1. This largest pool's activity underscores the token's consistent difficulty in trading at its intended peg, reflecting ongoing challenges in stabilizing its market value amidst fluctuating trading volumes and concentrated swapper activity.

⑦ Tether 🍐

📈 USDT is the biggest-volume ERC20 token in Ethereum with a $27B 24H volume

  • USDT is the largest-volume ERC20 token in Ethereum. With a 24H volume of $27B, USDT’s volume is greater than the rest of the top 20 ERC tokens combined.
Source: Etherscan
  • USDT on Tron has continued its multi-year uptrend in terms of Number of transactions, Total Volume, Unique Senders, and Unique Receivers. In particular, for 2023, USDT on Tron has averaged 12 million transactions and $60 billion of volume daily.
Source: Dune Analytics - @steakhouse
  • The volume differential (9x) of USDT ($12.5B) vs USDC ($1.4B) is even bigger than the monetary value outstanding differential (3.75x with USDT’s $90B and USDC’s $24B).
Source: Kaiko + Rob Hadick @ Dragonfly

⑧ Redacted 🦋

📈 rlBTRFLY Nearing $16M in Cumulative Rewards

  • Redacted provides infrastructure for improving a variety of onchain activities regarding liquidity and cash flows for various DeFi applications. Since launching a tokenomics revamp, nearly $16M in rewards have been paid out to rlBTRFLY lockers. Currently, 73% of BTRFLY is locked with a current APR of approximately 30%. Worth noting that the next large unlock is coming up on December 27 with 27k BTRFLY unlocking.
Source: Dune Analytics - @mcasto_
  • Despite the unlock coming up in a few weeks, there has been consistent inflow into locking supply, which has increased 3.5% over the past 90 days. While historically old locking addresses have vastly exceeded the market share of total locks versus new addresses, there is an uptick in new addresses locking over the past months.
Source: Parsec; Dune Analytics - @mcasto_
  • After the Redacted multisig transferred liquidity from Curve to Uniswap. the trade size in the Uniswap pool started visibly processing far larger trades in the pool than previous to the liquidity migration. This can be seen in the wider variance in token balance changes between buys and sells within the pool.
Source: Parsec; Dune Analytics - @mcasto_
  • 💦🔬 Tx-Level Alpha: Pursuant to the third data point, this is the transaction showing the team removing liquidity from the Curve pool. The significance here is that historically Curve has been the dominant venue for swapping BTRFLY, and going forward this is no longer the case. More specifically, the liquidity was moved to an Arrakis vault as a majority of Redacted's onchain liquidity is POL. According to the team, Arrakis allows them to better optimize their POL while improving depth and volume.