Are you ready for crypto in 2023?
Messari published a 168-page report based on their crypto theses. It provides an insane amount of valuable information for free.
Here are the takeaways from the top 10 trends in DeFi for 2023.
Revenge of the dApps
Three Ethereum-based apps are now generating more monthly fees on a combined basis than the Ethereum L1:
Meanwhile, Ethereum's flagship dApps are quickly conquering competing chains. We have seen AAVE and Uniswap launching on other chains and coming to the top in their segments. Yet the DeFi market cap relative to ETH is nearly at ATL. The fear of new regulations may explain this. But given that TradFi is valued at $23 trillion, DeFi's potential remains massive.
Uniswap, the Final DeFi Unicorn
Uniswap's concentrated liquidity proved to be a massive improvement in liquidity efficiency. Now, there's not much left to improve the current AMM designs significantly.
However, AMMs can still compete around offering dynamic fees and their reference pricing oracles. But in 2022, it became clear that forks cannot dethrone Uniswap with marginal improvements. The only question remains: What will happen with Uniswap's Fee Switch?
Real-World Collateralized DeFi
The collapse of CeDeFi companies proved once again that decentralization and transparency matter. While centralized lenders got wrecked, DeFi lenders showing interest in real-world assets (RWA) have done exceptionally well.
MakerDAO added $500M in exposure to U.S. Treasuries. Now RWA accounts for 57% of its revenue. Besides that, AAVE will also launch a stablecoin soon. The interest paid by the borrowers will generate new income for the DAO. Overall, DeFi lenders seem to manage risk better.
Undercollateralized DeFi Lending
This sector took a big hit this year. Maple, an on-chain credit market, was heavily affected by the FTX collapse. Yet crypto can't compete with banks without undercollateralized lending.
Smart contracts, soulbound NFTs, and decentralized social identities could probably be used to make this sector more viable and decentralized. But it is too early to predict how undercollateralized DeFi lenders will work in their final form.
Superfluid Collateral and Synthetic Stakes
Liquid staking protocols played a significant role in convincing ETH holders to stake their ETH. Earning 5% APR on a liquid asset almost deflationary is extremely attractive.
At the moment, Lido and Rocket Pool seems to be the most promising liquid staking providers. However, stETH and rETH can lose their peg at some point until ETH can finally be unstacked. But as we advance, this sector is expected to grow significantly.
The Perp Walk: dYdX as an Appchain
Despite botching its decentralization, dYdX has a strong product market fit. The dYdX V4 upcoming launch on its own Cosmos chain will address the centralization concerns.
dYdX took a risk when deciding to move to Cosmos from an Ethereum L2. However, the migration to its own chain will offer numerous benefits, including increased customizability and scalability. Overall, 2023 is expected to be a challenging year for dYdX.
On-Chain Asset Managers
On-chain asset managers are almost invisible. Despite ETFs being very popular in TradFi, the customized indices for crypto didn't gain any traction yet. But dApps that allow fast creation of on-chain funds are expected to have a great year.
New Novel Markets: Two Truths and a Lie
Protocols like Nori and Tuoucan started getting more popular- They revamped the broken carbon trading markets to reduce carbon footprints. By tokenizing carbon offsets, they bring transparency and liquidity to green markets.
Given the size of the real estate market, physical real; estate plays that leverage crypto have potential, but these will not take off anytime soon.
DeFi Censorship
2023 is going to be a decisive year for DeFi. With more regulatory clarity being expected soon, some protocols have already started implementing restrictions on their sites. Uniswap Labs delisted a few tokens and AAVE geofence U.S. users last year.
2023 is going to be a decisive year for DeFi. With more regulatory clarity being expected soon, some protocols have already started implementing restrictions on their sites. Uniswap Labs delisted a few tokens and AAVE geofence U.S. users last year.
Bullish Unlocks are Down Bad
On-chain hacks resulted in $3b losses in 2022. Security and sustainable token design need to be taken more seriously. Speaking about bullish unlocks, this is a bull market meme. During bear markets, watch out for tokens with huge unlocks.
Bottomline
This is just a summary of the report. Reading the report will offer a clear insight into the journey of DeFi for the year coming in. With so much happening in the industry this past year, decentralized finance is coming into the limelight.
As such, there is much to expect from different players.
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