Delphi Digital 2024 DeFi Outlook: The LSD Track is Saturated, Interest Rate Derivatives are More Attractive

Original Author: Stacy Muur

Original Compilation: Shenchao TechFlow

Recently, Delphi_Digital released its outlook on DeFi for 2024, with key points selected by author Stacy Muur. This article compiles those points for readers' reference.

Liquid Staking

• Compared to a total supply of 120.2 million ETH, the staking rate of ETH is currently 23.7%. The amount of staked ETH is approaching the target of 33.5 million ETH (27% of the total ETH supply). This staking amount is considered the optimal level for ensuring network security.

• The adoption of LSD has also seen significant growth, with approximately 44% of all staked ETH currently residing in the following protocols. Lido's stETH offers exceptional utility compared to other LSDs, providing it with a significant competitive advantage.

• In the LST space, Frax has shown steady growth, with ETH staking volume increasing from 38K to 233K in 2023. Frax stands out due to its innovative sfrxETH design and its integration within its ecosystem, particularly in Fraxlend.

• Mantle has launched its mETH product utilizing the ETH it holds in its protocol. The purpose of mETH is to generate yield for Mantle and enhance DEX liquidity.

• ether.fi and Renzo have implemented liquidity-native re-staking on EigenLayer.

• The LSD industry on Ethereum has matured, becoming competitive and saturated.

• Many LSDfi projects have lost their appeal due to the reduction of incentive-driven high yields.

• Re-staking (Eigenlayer) will be the fastest-growing area in staking protocols in 2024.

DEX

• Uniswap v4, Uniswap X, and other intent-based DEXs are becoming a theme for 2024.

• Perp DEX has undergone a year of development, but its market share has not increased:

• dYdX v4 leaps into the Cosmos application chain

• Aevoxyz pioneers the OP stack

• Vertex boosts DEX UX

• Rabbitx becomes a booster for Starkware.

• Application-specific Rollup: Aevo paves the way for rollapp (forked from Optimism and deployed DEX on it to expand its supported usage)

• Most DEXs, especially derivatives, will benefit from having their own execution environment.

RWA

• RWA is one of the most successful areas in cryptocurrency in 2023.

Interest Rate Derivatives

Atm, Pendle, Notional (fixed-rate loans), and IPOR are sustainable interest rate derivative protocols. Interest rate derivatives may become one of the more attractive narratives in cryptocurrency over the next few years.

Decentralized Stablecoins

• Decentralized stablecoins account for only a small portion of the total stablecoin market cap.

• The derivatives market is becoming a key area with untapped potential for decentralized stablecoins, namely Synthetix.

Wallets

• User experience and in-wallet experience are top priorities for most wallet developers. Delphi_Digital lists some features of wallets:

• MetaMask is the leader in the wallet space

• Phantom has excellent transaction simulation features within the wallet

• Rabby is the best EVM wallet

• Brahma is a wallet focused on institutions

On-chain Betting

• For users and bettors, DEX sports betting still has some work to do before it's ready for prime time.

• Nevertheless, DEX sports betting is performing quite well, with a market share of about 20% of Rollbit.

• Telegram bots like Unibot, BookieBet, and Boxbet provide a temporary mobile experience for on-chain betting, peaking at 35% of Azuro's daily trading volume. It has since stabilized around 15%.

• Thales has deployed on Optimism, Arbitrum, and Base, gaining a first-mover advantage.

• Azuro, deployed on Polygon and Gnosis chains, has recently surpassed Thales to become the highest trading volume DEX sports betting, despite a slow start.