Competitive positioning in LSD market and
Plus Odds & Ends and Thoughts & Prognostications from the last week
Ahoy, and happy 2023! In case you missed it, check out DoD’s Top 5 Memes of 2022 recap post. Two quick announcements:
DoD Scheduling - In 2023, Dose of DeFi will be published twice a month aka every other week. One a “short version” of charts, tweets & links and one “long version” that’s a deep dive into stablecoins, MEV, DeFi infrastructure or whatever our hearts fancy.
DXdao is looking for a new Treasury Manager! DXdao manages a $30m treasury on-chain and has trailblazed the use of decentralized and sovereign treasury tools. For a leg up, say “Dose of DeFi reader” in your application.
Tweet of the week: DeFi’s growth driver
With market stagnation in DEXs and lending protocols, DeFi’s most competitive and interesting battle is for ETH’s LSD or liquid staking derivatives. Staking ETH earns you a nice 4.3% yield but that means you have to lock up your ETH. ETH LSDs are liquid tokens that represent a claim on staked ETH. The most popular one is Lido’s stETH, which has a 70% market share, but Coinbase’s cbETH has chipped into Lido’s lead in recent months. Lido has the first mover advantage, which is why it is so ingrained into DeFi protocols as Dragonfly’s Tom Schmidt points out in the tweet above.
Given the amount of ETH stored on Coinbase’s exchange, it’s an easy market for it to enter (better than NFTs), so it shouldn’t be a surprise that they were able to grab so 15% market share so quickly. We’ve long wondered why they haven’t launched a tokenized BTC to compete with WBTC. Coinbase should take note of Tom’s critique because this is an incredibly important market for them. In the future, Coinbase will make little from exchange fees. Instead, it will be a trusted gateway to DeFi for the mass market. Coinbase already owns 50% of USDC and has a easy-to-use wallet and browser extension. cbETH fits well in this product suite, but Coinbase will need to do more to reorient their business around the inevitable rise of DeFi and on-chain activity.
Tweet of the week: Value stored on Ethereum
DeFi had just over $500m in TvL at the beginning of 2020, and while a lot has happened in the intervening three years, but not much change in the makeup of the assets on Ethereum. Ethereum continues to be around half of all value the network is securing. Stablecoins have consistently grown over this time period, approaching all-time-high’s over the last few months as crypto prices declined and investors fled to stablecoins. DeFi tokens are a sliver of overall value just as they were at the beginning of 2020. CoinMetrics goes into further detail on this in their latest post, The State of DeFi Tokens in 2023.
Odds & Ends
ConsenSys opens private beta for its zkEVM Link
Ondo launches tokenized treasuries and corporate bonds Link
Bloomberg: Mike Novagratz wants to punch SBF & Barry in the face Link
Guide to Web3 data tools Link
Uniswap metrics compared to Robinhood’s Link
Bitcoin blockchain now available to query on Dune Link
Thoughts & Prognostications
MEV: The next five years [James Prestwich/Nomad]
The Web3 growth stack [Shayon Sengupta & John Robert Reed/Multicoin]
Onchain markets in 2022 [Parsec Finance]
Generating secure randomness on Ethereum using SNARKs [Paradigm]
MEV impact on Curve [EigenPhi]
Follow-up analyses of LP Profitability in Uniswap V3 [0xfbifemboy/CrocSwap]
What Uniswap v4 might look like ]Michael Cohen/xToken Terminal]
Why the steepest borrowing rate may be the best rate [JP Koning/Moneyness]
That’s it! Feedback appreciated. Just hit reply. Written in Nashville, where it’s cold, but getting excited for Mexico next week.
Dose of DeFi is written by Chris Powers, with help from Denis Suslov and Financial Content Lab. Caney Fork, which owns Dose of DeFi, is a contributor to DXdao and benefits financially from it and its products’ success. All content is for informational purposes and is not intended as investment advice.