PvP has come to an end temporarily, and guaranteed arbitrage has become the current priority?

Author: Nianqing, ChainCatcher

Edited by: TB, ChainCatcher

A new consensus is getting stronger: the PvP era has come to an end for the time being.

Pump.fun's revenue in the past 24 hours has fallen more than 90% from its all-time high of $15.38 million on January 25. Celebrity coin issuance trend and becomes the last throttle kick of memecoin before this crazy racing car is out of control. The Libra incident may mark the end of the Memecoin era. The key is that the player's mentality has changed, and the young player finally "P" has stopped moving.

What followed was that Bitcoin returned to the range of 8, and altcoins collectively fell sharply. There is a saying that ambitions have come to an end temporarily, and preservation has become the key task at the moment. This sentence is most appropriate to use in the current investment strategy of the crypto market. If the market is chasing hot money during the bull market, investors prefer more stable annual interest products and stable risk aversion strategies in the downward market.

Although DeFi veteran Andre Cronje believes that the person involved in Meme Coin is a group that does not care about DeFi or even blockchain at all, Meme Coin has not taken any attention away. But after the end of PvP, funds are indeed looking for other high-yield opportunities, and DeFi is beginning to show signs of recovery.

Sonic has been launched at the end of December last year to today, in just two months, its on-chain TVL has achieved a speed-transmission from $0 to about $700 million. Its ecological Dex project, Shadow Exchange, has achieved extremely rapid money-making due to annualized mining, and the price of Token has achieved a leap from a few dollars to a few hundred dollars.

The launch of DeFi arbitrage with high APY has almost become one of the new public chain strategies in recent times. According to Defilama data, in addition to Sonic, emerging high-performance public chains focusing on DeFi, such as Berachain, Sei, Soneium, etc., have achieved TVL's rise in the overall market decline in the past week, and this is inseparable from the high-year interest rate-absorbing strategy. In addition, the live-for-production products of the agreements such as Pendle and Morpho are also being sought after.

Shadow Exchange: The "golden shovel" of Sonic Eco

In addition to Sonic's ecological incentives and subsidies, the most important thing about Shadow's success is the innovative gameplay it launched. In the last round of DeFi Summer, AC proposed the ve(3,3) model. This time, Shadow made improvements based on ve(3,3) and proposed x(3,3).

Simply put, (3,3) is the agreement that everyone works together to make it bigger and stronger:

• You buy tokens and lock them up to help the platform do things, such as providing liquidity and supporting development;
• The longer you lock, the more rewards you get, and the platform is more valuable because of your support;
• In theory, if you lock your position with everyone, the token price will rise and everyone will make a profit.

But ve(3,3) has a problem: the locking time is too rigid, and it takes several years to get high returns, the risks are extremely high and the rules are inflexible. Therefore, Shadow's x(3,3) adds some new tricks to the old mechanism, and the core is "flexibility + motivation":

1. Lock the position and exchange tickets: You use Shadow's token $SHADOW to lock the position on the platform and exchange it for $xSHADOW. $xSHADOW is like a "membership card". With it, you can divide the platform's profits (such as transaction fees) and vote to decide how to play the platform.
2. Leave the market at any time, but there is a price: the old mechanism lock can be unlocked for a few years, x(3,3) is different, you can get back $SHADOW whenever you want. The price is that if you don’t lock for a certain period of time, there will be fines, and these fines will be distributed to those "honest people" who continue to lock their positions.
3. The longer you get, the more you earn: the longer you lock, the higher the "gold content" of $xSHADOW, the more rewards it will be.
4. " Re-base" motivates long-termists : the fines paid by those who run away will make those who stay earn more. This is called "re-baseing", which makes those who stay more motivated.

At present, Shadow has verified the explosive power of the x (3,3) model in the liquidity track. The trading volume on the platform has exceeded US$1.4 billion in the past week and TVL has exceeded US$130 million. The liquidity pools have reached nearly 2,000, and the APR of some early pools is ridiculously high .

So, how to implement high APY of Shadow staking pool?

Shadow's high APY pool mainly relies on issuing reward tokens xSHADOW to attract users. At the beginning, in order to motivate more people to mine, the reward was in the "high emission" stage. The annualized income calculated based on this is naturally high, and it may be hundreds or even thousands of points at any time. In addition, Shadow uses the centralized liquidity mechanism of Uniswap V3. The narrower the range of liquidity provided, the more concentrated the rewards you receive, and the higher the APY looks. But as more people and chips are involved, the rewards are gradually diluted, and APY will naturally drop.

Moreover, there is also a lot of "water" behind high APY. There is actually an unlocking limit for xSHADOW of the pledge reward, and some rewards need to be locked for 6 months before they can be taken out. In addition, you also need to take the risk of impermanent losses. If the price of the pool fluctuates greatly, once the large investors sell, they will also face the risk of losses. In addition, some users also complained that the APY displayed on the front end of Shadow is calculated based on the narrowest price range, and many investors do not understand the real returns and are easily deceived by "inflated heights".

Shadow has been online for less than two months and is still in its early stages. Coupled with Sonic's ecological subsidies and airdrop expectations, it is difficult to last for a long time. As the lock-up volume (TVL) increases and the number of participants increases, the rewards will be diluted. In addition, investors should also consider risks such as unlocking discounts, impermanent losses and price fluctuations. Therefore, stablecoin trading pairs on Shadow are more popular because of low impermanence losses, but APY is also relatively low.

It is worth mentioning that Solidly, the DeFi protocol that initially applied the ve(3,3) model, failed to sustain due to release mechanism and liquidity management issues. Although its model was improved by protocols such as Velodrome, shortcomings in the sustainability of the (3,3) economic model still exist.

Infrared: Bear Chain 's "liquidity engine"

Before introducing Stride, it is necessary to mention the overall situation of the current BeraChain DeFi ecosystem. Bear Chain was launched on the main network on February 6, and it has only been 20 days since its launch. Its DeFi ecosystem has risen rapidly. Currently, the ecological TVL has exceeded US$3 billion, ranking above the public chains such as Base, Arbitrum, and Sui. Several DeFi protocols on Bear Chain, such as Infrared, Stride, BEX (Berachain Exchange), Bend, Berps, Honeypot, etc., have launched high APY liquid staking pools.

In addition, Berachain designed a reward BGT incentive system around its core consensus mechanism PoL, aiming to incentivize users, validators and project parties to participate through BGT (Bera Governance Token). When the main network was first launched, only a few pools of the official DEX BeraHub could get BGT, such as WBERA/HONEY, USDC.e/HONEY. These are the "default vaults" to lay the foundation for the ecosystem. It is still in the first stage of governance, that is, PoL is fully opened, and any project can apply to get $BGT for your pool. Voting rights are in the hands of BGT holders. At present, it is still in the early stage of participation, and the income and subsidies will be relatively higher. As more pools are added, the distribution of BGT will gradually dilute.

Currently, Bear Chain's leading liquidity staking agreement is Infrared, its on-chain TVL exceeds US$1.4 billion, and the APY of the highest liquidity pool is 120%.

Infrared's explosive growth and high APY are inseparable from the "money-absorbing effect" of the main network bonus period of Bear Chain. Berachain's governance token BGT is "soul-bound" and cannot be bought and sold, and can only be earned by providing liquidity. Infrared is equivalent to the ticket office of Bear Chain. By depositing liquidity (such as BEX's LP tokens) into the vault, you can exchange it for iBGT and get $BGT rewards. In addition, Infrared cooperates with multiple DeFi protocols within the ecosystem to ensure the liquidity and benefits of iBGT in the entire ecosystem.

In addition, Infrared is a Build-a-Bera incubation project supported by the Berachain Foundation and received an investment from YZi Labs (Binance Labs) last June.

At present, Infrared's official currency distribution, validator dividends and leverage gameplay are still growing. However, all high APY projects are risky, and like Shadow, Infrared users also face high risks such as dilution of interests, impermanence losses and price fluctuations.

Yei Finance: Sei Ecology’s “stablecoin mining artifact”

Although Yei Finance's APY is not particularly high compared to the previous agreements, its stable investment has attracted many conservative investors to come and mine.

Yei is the leading lending agreement of Sei ecosystem, focusing on USDC mining, and can also receive WSEI (packaged SEI) rewards. Its positioning is Sei's "revenue aggregator". Recently, Yei also launched the SolvBTC pool to provide Bitcoin earnings opportunities, which is relatively rare in DeFi.

The APY of the USDC pool on Yei is over 20% (of which about 5.7% is stablecoin income and 14.9% is WSEI), and is currently the largest pool on the platform. "Stable + High Return" has attracted a large number of conservative investors.

In December last year, Yei Finance completed a $2 million seed round, led by Manifold, and participated by DWF Ventures, Kronos Research, Outlier Ventures, Side Door Ventures and WOO.

Sonex: DeFi hub on Sony chain

Sony Chain Soneium is an Ethereum Layer-2 blockchain jointly developed by Sony Block Solutions Labs and Startale, a subsidiary of Sony, and is built on Optimism's OP Stack. Soneium officially launched the main network on January 14, 2025. According to L2Beat data, Soneium's TVS (total guaranteed value) has exceeded US$70 million (there are repeated calculations for SolvBTC assets).

Similar to the situation of Bear Chain, as an early online ecosystem, Soneium has rich incentives and subsidies for its ecosystem. For example, Soneium launched Soneium OG Badge in early February, and the event ended at 12:00 noon Beijing time on February 27, and completed 45 transactions on Soneium (why 45? Because Soneium launched on January 14, and the participation event will end on February 27, which is exactly 45 days between) and the soul binding badge can be obtained, and this early participant badge will receive many benefits, such as ecological airdrops.

Sonex is the leading DeFi project of the Soneium ecosystem, supported by Sony Block Solutions Labs and Startale. It is positioned as an AI-powered DEX and all-round DeFi platform. It is one of the first projects incubated on the Soneium main network. It was only launched on the main network on January 28, and it is less than a month. Last month, Sonex also announced it had successfully raised a $1 million seed round in less than 60 days, led by Outliers Fund, with participation from Baboon VC, Taisu Ventures, Nonagon Capital, Flow Traders, Gate Ventures and Lootex.

Sonex's staking pool currently has many high APY liquidity pools, currently mainly based on stablecoins and ETH. Recently, Sonex launched the Astar Contribution Score (ACS) campaign, from February 20 to May 30, you can get dual incentives for ASTR staking on Sonex.

The Soneium mainnet has only been online for a month and is still in the bonus period, so the APY and points return is the highest. Choose popular pledge pools and avoid pools with low depth. Currently, Sonex currently has a point reward program, and its points may be directly related to airdrops.

Morpho: Multi-chain DeFi “Smart Fund”

On February 27, Coinbase announced the launch of MORPHO. Morpho was originally a lending protocol for the Ethereum network, with the core of "optimizing lending pools", which added a layer of "smart matching" to traditional protocols such as Aave and Compound. Simply put, it is to try to match the two parties who borrow and save money as much as possible to reduce idle funds and increase the rate of return. But as a relatively old DeFi protocol, it is recommended that based on other protocols, its popularity is far less than that of Aave, Compound, etc.

At the beginning of 2024, Morpho started a new high-rise building and launched a new decentralized lending foundation Morpho Blue, moving from a simple DeFi protocol to a DeFi infrastructure. Morpho Blue's lending market is independent. Unlike multi-asset pools, the liquidation parameters for each market can be set without taking into account the riskiest assets in the basket. Therefore, suppliers can lend at higher LLTVs while bearing the same market risk as when supplying to lower multi-asset pools of LLTVs. The mortgaged assets will not be lent to the borrower. This alleviates the liquidity requirements required for liquidation to function properly in the current lending platform and enables Morpho Blue to provide higher capital utilization.

In addition, Morpho Blue is completely autonomous, so there is no need to introduce fees to cover the fees for platform maintenance, risk managers, or code security experts. It is worth noting that Morpho Blue has the ability to list assets without permission, and anyone can create custom lending markets, such as assets, interest rates, clearing rules, etc., which makes its ecosystem financial efficiency simple and efficient. Blue also supports the licensing market, enabling a wider range of use cases, including RWA and institutional markets.

Morpho Stack has been deployed on multiple new chains, including Polygon POS, Arbitrum, Optimism, Scroll, Ink, World Chain, Fraxtal, Unichain, Mode, Hemi, Corn, Sonic and other new chains (it should be noted that deployment under the multi-chain framework is limited to infrastructure, and these new chains have not yet been launched on the Morpho App and will not receive MORPHO rewards).

Currently, Morpho’s total deposits exceed US$5.3 billion. According to DefiLlama data, Morpho Blue’s total TVL has risen rapidly in recent months and is currently close to US$3 billion. Currently, there are multiple asset pools on Morpho Blue, and the popular pools are still dominated by stablecoins.

Pendle: DeFi 's bond market

Pendle is a DeFi protocol that allows users to tokenize and trade future earnings of earnings assets. By separating the principal and income portions of the assets, Pendle adopts a more advanced income management strategy, including fixed income, speculation on future earnings changes, and unlocking liquidity from pledged assets, introducing traditional financial concepts such as interest rate derivatives into the DeFi field.

In layman's terms, compared to other exchanges that mainly trade currency prices, the object of Pendle trading is more like "APY", that is, "using future returns to play now." It allows users to split the earnings-generated assets into "principal tokens" (PT) and "yield tokens" (Yield tokens, YT) and then trade them separately. For example, if you have stETH (Lido's pledged ETH), you can use Pendle to divide it into PT (get back the principal when it expires) and YT (earn future income), and then buy and sell it casually. This flexibility allows users to lock in fixed income and speculate on profit expectations.

Pendle established a fixed income market last year, and its TVL achieved 20 times growth last year and is now close to $5 billion.

There are currently many arbitrage opportunities on Pendle, such as discounted arbitrage through PT. In the market, PTs are usually trading at lower prices than their expiration value (discounted transaction). You can buy PT at a low price, hold it to maturity, and earn the intermediate price difference; YT is a profit token, and earn the future income of the underlying assets. If the market expects returns to rise, you can buy YT at a low price and make high returns with a bet; in addition, there are arbitrage space such as PT-YT spreads. What is relatively safe is staking mining. You can also participate in U-based PT pool arbitrage, and APY usually exceeds 10%. However, all arbitrage needs to take into account risks such as impermanent losses, long lock-up period, and price fluctuations.

(Investment is risky, please take it carefully and rationally. This article does not provide any investment advice.)