December DeFi ecosystem map: which protocols are worth entering a position?

Since the beginning of winter, the heat in the DeFi space has not diminished. From lending to trading, from yield farming to re-staking, both new and old players are searching for the “optimal solution”. Today, let's take a look at the mainstream DeFi protocols on the market and help you clarify your thoughts.

Lending Track: Aave or the Leader

Aave's status is somewhat like the “Galaxy Bank” in the DeFi space – large scale, full functionality, and rapid innovation. The core competitive advantage can be summed up in two words: flash loan. No collateral is needed, you can borrow instantly, as long as you pay it back in the same transaction, it's all good. This is a godly skill for arbitrageurs and heavy players.

Currently, Aave supports a wide range of cryptocurrencies, and the yield rate is considered to be at a balanced level within the industry. However, the old problem still exists — newbies can easily get lost, and sometimes the gas fees on Ethereum can deter small investors.

Quick Review: Stable, secure, and fully functional. The only regret is that the threshold is a bit high.

Trading Market: Uniswap claims that no one dares to say they are first.

When talking about Uniswap, we have to mention the concept of liquidity pools – it was Uniswap that revolutionarily brought it into Decentralized Finance, leading to today's decentralized exchange ecosystem. Its trading volume and the variety of tokens are indeed unmatched in the DEX space.

Recently, Uniswap launched the limit order feature, addressing the issue of excessive slippage in large trades. This was previously a fatal flaw of DEXs — now it's been fixed.

The drawbacks are also obvious: gas fees on the Ethereum chain are still expensive, and the UNI token itself does not have revenue representation, indicating insufficient weight.

Quick Comment: The most mature DEX, but needs to accept Ethereum's “tax”.

Stablecoin Trading: Curve is Invincible in This Area

If you frequently transfer large amounts of USDT/USDC, Curve is unavoidable. This guy's focus is on stablecoin trading—by optimizing algorithm pools, it minimizes slippage and the fees are significantly cheaper than Uniswap.

But the cost is: the interface is not very friendly to beginners, and the choice of currencies is limited (only focusing on stablecoin ecosystem).

Quick Comment: The optimal choice for stablecoin transfers, a dish for professionals.

The Re-Staking Trend: Eigenlayer's Ambition

One of the hottest concepts in 2024 is Restaking. Eigenlayer has turned this into a platform-level product. Simply put: the ETH you have already staked on Ethereum can continue to earn interest—by using Eigenlayer's security module to provide security to other new protocols, earning double income.

TVL has surpassed $12 billion, indicating a relatively high level of market acceptance. Recently, the EIGEN token was launched, also due to the positive market sentiment.

Risk cannot be ignored either - if the connected protocol has issues, your stake may be slashed.

Quick Comment: Innovative mechanism, but not a zero-risk game.

Yield Derivatives: The Strategy of Pendle

What Pendle does is a bit of magic - turning future income into cash in advance.

Assuming you stake a certain asset to earn 10% annualized, Pendle will split this investment into two tokens:

• Principal Token (PT): It's your principal at maturity.
• Yield Token (YT): That is the 10% yield, which can be sold immediately for cash.

This way you can immediately obtain liquidity while betting on whether the future returns from trading YT will be higher. It's somewhat similar to options in traditional finance, but applied to crypto assets.

Quick Review: The concept is innovative, the approach is flexible, but the learning curve is steep.

Derivatives Trading: dYdX vs GMX

dYdX = A perpetual contract platform on the Ethereum chain, with leverage up to 20x. With the Layer 2 solution (StarkWare), gas fees are kept very low, and the trading fees can even beat CEXs like Binance. It is very attractive for those who want to trade derivatives without going to centralized exchanges.

GMX = Another path in the Solana ecosystem. It is also a perpetual contract, with leverage up to 100 times (very high risk). If you buy GLP (an index token that packages multiple assets), you can also receive trading fee dividends. However, the performance of the GMX token is average.

Quick Comment: Both paths have markets, it depends on which chain you choose.

The memecoin hub of the Solana chain: Raydium

Raydium's positioning on Solana is somewhat similar to Uniswap's role on Ethereum. This chain is fast, with low fees, and has a strong memecoin culture. Raydium has become the main trading venue for this wave.

You can trade, earn fees by being a liquidity provider, and also participate in yield farming and staking. The multi-layered returns are quite attractive.

But the ceiling is also there - the Solana ecosystem is still smaller than Ethereum, and the liquidity depth is limited.

Quick Comment: A must-visit place in the Solana ecosystem, but don’t expect its token liquidity to compete with Uniswap.

New Force Supplementary Observation

Ethena (ENA): An algorithmic stablecoin that maintains its peg through a perpetual contract mechanism rather than relying on fiat reserves. It has a higher degree of decentralization, making it suitable for those who are not very confident in USDC/USDT.

Toncoin (TON): The infrastructure coin of the Telegram ecosystem. The potential of Telegram's 1.4 billion monthly active users is here, and the imagination space for TON's Decentralized Finance is enormous.

Synthetix (SNX): A synthetic asset trading platform that allows trading of tokenized versions of traditional assets (stocks, commodities, currency pairs, etc.). It builds a bridge between crypto and traditional finance.

Radiant (RDNT): A cross-chain lending protocol. The benefit is that liquidity can traverse multiple chains, providing a smoother user experience.

A Reality Check on DeFi Investments

1. Start Familiarizing with CEX

Don't start with complicated operations on DEXs right away. CEXs like Coinbase, although simple in functionality, are very helpful for learning the basic concepts.

2. The Truth Behind High Returns

The yield of DeFi is indeed amazing, but don't be dazzled. Most of the time you earn protocol tokens, not stablecoins. These tokens may plummet during your withdrawal period. A seemingly 30% annualized yield, if the token drops by 80%, you end up losing a lot.

3. Beware of Rug Pull

Before entering any new project, be sure to verify the official identity. Check the Twitter account, audit report, and smart contract code. Trust is the most expensive thing in Decentralized Finance.

4. Think twice before trading

A decimal point error or an incorrect address, and the money is lost forever. 20-25% of Bitcoin is lost this way - it all goes to the wrong address.

Several Signals Worth Noting in December

• Ethereum (ETH): The backbone network of DeFi, with a TVL of $45.8 billion, solid position.
• ENA Influx: A new alternative to USDC, with a TVL of 2.3 billion and impressive growth.
• Opportunities of TON: The Telegram ecosystem has immense potential for growth.
• Revival of SNX: The track of traditional assets on the blockchain is still in its early stages.
• The Multi-Chain Story of RDNT: Cross-Chain Liquidity is the Next Stage of Opportunity

Final Words: The DeFi ecosystem is rapidly iterating, with opportunities and risks coexisting. No matter what new concept you pursue, safety and understanding should always come first. Do your homework before diving in, and don't let FOMO ruin your wallet.