Opinion | The Overflow Effect of Ethereum DeFi is Strong, the "Cross-Chain Universe" is Coming, Analyzing the Sector Rotation in This Bull Market

This article is from the vernacular blockchain.

This year, the rhythm of sector rotation is evident. First, NFTs surged unexpectedly, with old leaders like Enj and Mana experiencing astonishing price increases, while newcomers like Flow, AXIE, and Chz also did not fall behind, each seeing dozens of times in price growth. Crypto art and collectibles began to attract more attention, with Opensea's trading volume reaching 100 million in March and user numbers hitting 100,000. Beeple's artwork was sold for nearly 70 million dollars at Christie's.

The high-priced auction in March can also be seen as the climax of the first phase of the NFT sector, after which NFTs as a whole entered a phase of "lowering the flag and stopping the drums."

Many previously stagnant "mainstream projects" began to catch up, and although you know that most of them may not survive the next bull-bear cycle and will ultimately be swept into the dustbin of history, it makes no sense during a bull market. Some Chinese public chains, under the concept of "Ethereum killers," have already fallen behind, yet can still reach market caps of tens of billions or even hundreds of billions of dollars with almost "zero ecology" on-chain. I can only exclaim—this is the taste of a bull market!

In April, you can clearly feel the spillover effect of DeFi projects on ETH becoming increasingly strong. More and more DeFi projects began to appear on BSC, HECO, and Solana, and recently FTM, Avax, and Matic have also joined the "battle for ETH spillover value." It can be anticipated that Near, Okexchain, Cosmos, and Dot will also join the fray in the near future, leading to a prosperous scene (or chaos?) of a "multi-chain universe."

Further reading: Polygon announces the launch of a $150 million DeFi fund! After attracting Aave and Curve, MATIC doubled in three days

With the announcement at the end of April that "Binance will launch an NFT platform for global users in June," the NFT sector clearly began to enter a second rise, with NFT projects like Bake, Dego, Alice, AXIE, and TLM collectively soaring.

In this article, we mainly discuss how this round of cross-chain and NFT trends differ from previous ones.

01 Cross-chain - ETH becomes the center of the multi-chain universe

Interestingly, under the current environment, ETH has "mysteriously" become what Cosmos and Polkadot originally aimed to achieve.

As we all know, under the vision of Cosmos, the entire network has many hubs, with Cosmos undoubtedly being the largest and most important hub among them. Polkadot is even more so, with its relay chain being the hub connecting all parallel chains, positioned at the core of the network.

Last year, when we played DeFi, whether it was lending, trading, or liquidity mining, there was only ETH. This feeling is completely different now. Each high-speed chain is building a relatively complete DeFi ecology, typically including at least the following three:

1. DEX;
2. Lending;
3. Yield aggregators (Yield Farming).

Chains like BSC and Solana, with richer ecosystems, often have projects like synthetic assets, insurance, and IDO, and the aforementioned sectors usually have more than one project competing.

Recently, it is not difficult to find that smart funds are shuttling back and forth between various chains, constantly searching for higher-yielding "farmland." But how does the capital move between chains?

1. BSC - through Binance;
2. Heco - through Huobi;
3. Solana - through FTX;
4. FTM - through Multichain.xyz (essentially via Anyswap bridge);
5. Matic - through Matic's own bridge.

For example, if you want to move your AAVE from BSC to FTM for liquidity mining, how do you do it?

You first need to transfer AAVE from BSC to Binance, then withdraw it to your own ETH wallet, and finally use Multichain.xyz to transfer USDT from your ETH address to your FTM address.

It can be said that most assets need to take a detour through the "overpass" of ETH to cross between any two chains.

Thus, this round of cross-chain has several characteristics:

1. Like DeFi, the earliest batch of "Ethereum killers," such as AE, NXT, NEO, and Quantum, have not played a role in this round of cross-chain.

After all, the essence of asset cross-chain is to seek higher yields on DeFi projects across various chains. Projects without a DeFi ecology have no significance for capital to move there.

The three earliest DPoS chains, Trx, EOS, and IOST, have basically lost their popularity on Twitter and WeChat groups. It seems that only TRX has a significant advantage in transferring dollars, while other aspects have been completely overshadowed by BSC and Solana.

2. Binance once built Binance Chain using Cosmos, but it has since been largely ignored, while the fork of ETH, BSC, is bustling.

This indirectly highlights the importance of EVM compatibility and user habits. A Metamask + a set of private keys and addresses can handle all chains. Downloading a wallet or browser extension for each chain and generating a mnemonic phrase is simply a nightmare in terms of user experience.

Currently, Solana is the only exception, having built its own DeFi empire without being compatible with EVM or using Metamask, achieving a considerable user base and market cap. One can only say that Sam Bankman-Fried (SBF), the founder of the FTX trading platform, is exceptional.

Further reading: Cake completes the "largest burn ever" of $200 million; BNB's market cap surpasses $100 billion, overtaking No. 15 BNP Paribas

Dynamics of the two major leaders in orthodox cross-chain: Cosmos and DOT

• Cosmos: Originally, Rune, built on Cosmos, was highly anticipated, whether for its technical signature exchange technology or for using Rune itself as a token model for liquidity exchange and staking assets. However, the current cross-chain seems to differ from what people initially envisioned; it appears that everyone is "manually cross-chain" using Cex + ETH + other chains, and they are enjoying it…
• Iris: Recently launched its own Coinswap; I tried it out and found it average. Cosmos's own Gravity DEX will begin internal testing in the coming days, and it remains to be seen whether it will bring new changes to the Cosmos ecosystem.
• Dot: Well, the slot auctions have been delayed repeatedly. Founder Gavin is respected as "Dr. Gavin" when there is progress, but when delays occur, he is jokingly referred to as the "Pigeon King." Dr. Gavin has also expressed that it is difficult for him…

According to unverified reports, the date for Polkadot's auction is likely to be in May, as it has been delayed for several months, and progress is almost there. Polkadot already has a relatively complete DeFi ecology; the hundreds of projects previously mentioned were not just talk. Once the parallel chain auctions start, it can officially "go public," adding another major public chain to this multi-chain universe.

Thinking about it is quite exhausting. In the past, when playing DeFi, you could just look at projects and trade on Uniswap, and for lending, it was just AAVE + Compound. Now, every chain has three to five lending platforms and three to five DEXs, which means the multi-chain universe has dozens of DEXs and dozens of lending platforms…

On ETH, the chain with the most complete ecology, there are already seven or eight projects just in the "fixed-rate lending" sub-sector. The blockchain world has entered a state where even full-time involvement cannot keep up with or understand all project statuses, not to mention the daily influx of new projects…

One can only say that embracing the bubble and withdrawing in time before it bursts is the way to go.

02 NFT - new scenarios, new ideas, new gameplay

The recent resurgence of NFTs cannot simply rely on the previous wave of Beeple's crypto art. This wave of NFTs has introduced many new gameplay and scenarios, as well as the expansion of existing scenarios.

1. More Out-of-the-Box: Representatives - Flow, Chz

In the first wave of the NFT craze, NBA Topshot based on Flow can be considered a huge success. If DeFi is a track for insiders to enjoy, then NBA Topshot is the true out-of-the-box champion. At the same time, Chiliz has also established partnerships with several football clubs.

This out-of-the-box NFT, to put it simply, is a competition to see who can secure more IP collaborations, with technology, backing capital, and marketing strategies all being indispensable.

In this round, you will definitely see more IP collaborations with Flow and Chz.

2. More Fun - TLM, Alice, AXIE

The newly released NFT games are much more playable than those from the EOS and TRX era. Games like TLM and Alice, based on BSC, leverage BSC's high performance, providing a much better experience compared to traditional NFT games based on ETH, like the leading MANA.

Recently, the skyrocketing price of SLP has once again declared AXIE's leading position in NFT games. Notably, it is evident that this round of NFT games has seen technological innovations—TLM and Alice are based on BSC, while AXIE, originally based on Ethereum, has developed its own high-speed sidechain, Robin, and is currently migrating to the sidechain. The gameplay is more closely linked to DeFi, with features like land auctions in Alice and a dual-token system in AXIE, as well as an internal trading platform for weapons and equipment, and pet lending…

I strongly recommend readers interested in investing in NFT games to experience a few NFT games as a guide for their investment standards. Only by deeply using Uniswap can you have the confidence to take an asset from $2 to $40. Often, a significant part of belief is based on the user experience.

3. More Popular - Binance, Bake

In the current blockchain world, CEX and DEX complement each other; neither can eliminate the other, and neither can do without the other.

BSC is the best example. Although it cannot escape the shadow of Binance, it is technically a DEX. With the support of Binance's resources, both the locked amount of XVS and the user numbers and trading volume of CAKE have surpassed their ETH counterparts.

This was completely unimaginable before; everyone had long accepted that Uniswap was the number one in the universe, yet Cake managed to catch up and even surpass it. Of course, in terms of market cap and industry status, Uniswap remains the unshakable leader.

Binance's public announcement of the NFT platform aims to provide the best, fastest, and cheapest solutions, creating the world's largest NFT trading platform, along with top-notch minting, purchasing, and trading experiences. This NFT platform will be compatible with the current Binance account system, and it is believed that many artists and creators will connect and collaborate on the Binance NFT platform. After all, in the crypto world, whether in fame or user numbers, Binance is undoubtedly the heavyweight champion. As a creator, do you have a reason to refuse Binance?

After failing to challenge Cake, Bake quickly pivoted to focus on the NFT trading market. As a swap platform invested by Binance, it clearly evokes the relationship between Binance and Cake, and between Binance NFT and Bake, which is why BAKE soared after Binance officially announced the NFT platform. In the community, this is considered positive news for the token.

4. More Innovative - Visor, Mist

Uniswap V3 is about to be released, and many users say that the improvements in V3 are not significant and do not have high expectations. From a user perspective, such evaluations are understandable.

However, the biggest improvement of Uni V3 is actually targeted at LPs (liquidity providers); in other words, the biggest improvement of Uni V3 lies in capital efficiency, rather than user experience.

Uni V3 directly leads to a significant change in LP strategies, transforming homogeneous LPs into non-homogeneous NFT LPs, changing conventional liquidity into irreplaceable liquidity, which also leads to structural changes in liquidity mining designs based on Uniswap LP in various DeFi projects.

Projects like Visor, which are built around V3, fully embrace NFT LPs and have developed NFT smart vaults, providing many new gameplay based on NFT LPs. Due to space limitations, I won't elaborate further; interested friends can search for introductions to this project.

It is said that Visor's idea was actually borrowed from Mist (Alchemist), which is a more mysterious project with no official website, only a GitHub page, and not much information available online. However, the initiator, thegostep, is quite prominent; he is the mastermind behind the well-known Flashbot, which recently reduced GAS fees significantly.

It can be anticipated that with the launch of Uni V3, the practice of integrating NFTs into LPs will further promote the fusion of NFTs and DeFi, giving birth to new gameplay, new projects, and even new tracks, which is truly exciting!