To boost Meme PVP, this round of DeFi has a new choice for business transformation
Where attention goes, liquidity flows.Author: Deep Tide TechFlow
From a lack of innovation to rampant speculation, the market has gradually fallen into an awkward situation.
Memes are rampant on Solana, Pump.fun's revenue is soaring, and issuing tokens has never been so direct and simple…
As a result, the crypto market has gradually evolved into a brutal "player versus player" (PvP) game. In this zero-sum game, participants aim not to create value but to extract benefits from other participants. Behind every winner lies a loser.
Everyone is a recipient and participant of the current crypto situation rather than a changer; while more astute individuals have taken on the role of "promoters":
For instance, yesterday, a platform called The Arena emerged in the Solana ecosystem, its business is very "aligned" with the current market --- allowing players to go long, short, or hedge on any newly emerged Solana tokens on-chain.
The name of the platform (Arena) starkly reveals the essence of the business, further amplifying the degree of PvP beyond spot trading, a brutal gladiatorial contest on leverage.
Behind Arena is another well-known DeFi protocol, Marginfi, providing lending liquidity pools to support the long and short logic of Arena's operations.
PvP Arena, Marginfi Provides Lending Pools
How does The Arena operate?
In simple terms, The Arena is a trading platform based on independent lending pools, allowing users to perform leveraged long and short operations on new tokens on Solana.
Users can create audited open-source lending pools without impermanent loss.
The Arena particularly emphasizes its focus on new tokens on Solana. As they state, Solana generates a large number of new tokens daily, but traditionally, traders have very limited operations on these new tokens.
How to understand independent lending pools?
In layman's terms, this means each token has its own dedicated pool, rather than an AMM pair pool like Uniswap. At the same time, the funds in the pool are over-collateralized, meaning that the deposited funds are more than the borrowed funds to ensure security.
This lending pool originates from the decentralized lending protocol Marginfi, providing the necessary DeFi infrastructure.
Let’s use a more relatable example to understand this operational model:
Imagine The Arena as a special "game field," with many different "game rooms," each representing a token.
Suppose there is a new coin called DOGEE, in the "game room" for DOGEE:
You can become the "room owner," putting your DOGEE or other accepted tokens (like USDC) into this room.
Your earnings: Others using this room will pay you some fees (interest).
Your risk: If someone borrows DOGEE and does not return it, you might lose a portion of your deposited tokens.
Why become a room owner? The answer is to earn interest, just like putting money in a bank, but the returns might be higher.
Others can come to "play games" (trade), going long/short on DOGEE.
How does the lending actually happen?
Imagine The Arena has a "magic box" that can quickly lend out and return tokens.
The process of going long on DOGEE is as follows:
Players put some collateral (like USDC) into the game room. They borrow USDC from the "magic box."
They immediately use this USDC to buy more DOGEE.
If the price of DOGEE goes up, they make a profit.
Finally, they need to sell some DOGEE, return the borrowed USDC, and pay some fees.
The principle of shorting DOGEE is similar and will not be elaborated further.
When users trade on The Arena, the actual lending operations are completed through Marginfi, and they can also use Marginfi's flash loan feature, allowing borrowing and returning to happen in the same transaction.
If The Arena is a leveraged game that intensifies PvP, Marginfi acts as the game engine behind it. You only need to focus on the game interface (The Arena) without needing to understand how the engine (Marginfi) works.
DeFi Fuels the Fire, Trading Never Stops
In ancient Rome, the arena was a place for gladiators to fight to the death, while the audience cheered around them.
In the crypto market, projects like The Arena make Meme PvP even more intense, but the projects themselves can profit by collecting fees, while the underlying DeFi protocol Marginfi can also activate its lending business and gain profits.
Collecting "platform fees" is undoubtedly a surefire business, and the life and death of degens in the arena are probably not the primary concern.
Similar to the health warnings on cigarette packs, the entrance to the arena reads "Leverage is risky," but do you think it can deter the degens eager to enter?
Coincidentally, we previously mentioned in “Interpreting dumpy.fun: A New Product After Solend's Rebranding, Allowing Shorting of Meme Coins” that the name dumpy.fun, which corresponds to Pump.fun, also allows shorting of Meme coins, and is similarly backed by another DeFi protocol, Solend.
It is easy to see that one of the directions for the business transformation of DeFi is to fuel PvP.
The more frequent the trading, the more substantial their income. But are DeFi OGs empowering such PvP platforms exacerbating market speculation?
This question likely has no correct answer.
But "where attention goes, liquidity flows; where liquidity is, opportunities arise; where opportunities are, attention follows." In this closed-loop logic of the crypto market, encouraging speculation accelerates volatility, becoming an almost instinctive and profitable optimal solution that protocols and developers find hard to refuse.
Trading never stops, and the battles become fiercer.
Manage risks well, and watch the market fluctuations.
