DeFi, Analysis

DeFi Narratives that Matter

Let's cut through the noise of DeFi hype
563 563 Nov 2, 20237 min read
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DeFi Narratives that Matter

While TradFi markets are “forward looking,” crypto-asset speculators can come across as overzealous golden retrievers, eager to chase down whatever flavor-of-the-week token comes across their timeline.

One week it’s the AI narrative, next it’s SocialFi, until we inevitably devolve, grasping at whatever memecoin most recently made us chuckle!

For a change of pace (and who knows, you actually might enjoy this exercise), let’s take a look at narratives that may actually have staying power over a decent timescale.

We’re talking sustainable business models, new primitives, and much-needed infrastructure upgrades. There’s a lot of noise in the crypto industry, and we’re here to help you filter through it all to isolate the signal.


💵 Yield-Bearing Dollars & LSTs

Token ponzinomics of a post-DeFi Summer saw inflationary rewards inflating APYs across crypto. Times were good until they weren’t.

It looks as though the market has (mostly) wised up to these unsustainable models and instead is beginning to build from stable ground. Namely, building off the back of “risk-free” rates – either from the Fed or Ethereum consensus.

Real Work Assets (RWAs), and more specifically, Yield-Bearing Dollars (YBDs), attempt to capture the current risk-free rate set by the Fed and deliver it conveniently to DeFi users. Users can deposit into these applications and tap into stable rates that are otherwise difficult to access for non-US citizens.

Liquid Staking Tokens (LSTs) are the other side of the coin. Since Ethereum’s transition to Proof of Stake, stakers securing the network have been rewarded with a steady stream of ETH for their troubles. The advent of LSTs means that DeFi users don’t have to run their own nodes to participate in the security of the network (and also earn some juicy rewards).

These sources of yield are similar in that they are backed by the very foundations of monetary policy in their respective venues.

  • Want to play around in TradFi? You can always fall back to the safety of the Fed rate.
  • Is DeFi more up your alley? The ETH staking rate is now your benchmark.

▪️ MakerDAO

Maker ($MKR) is perhaps the most well-known advocate for the YBD strategy, with the popularity of their staked DAI ($sDAI) launching them to #2 in Total Value Locked (TVL).

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Bankless Contributing Analyst. Exploring the extremities of DeFi from a fundamentals-driven lens.

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