Delphi 2024 DeFi Outlook: The LSD track is saturated, and interest rate derivatives are more attractive

Derivatives markets are emerging as a key area with untapped potential for decentralized stablecoins.

Written by Stacy Muur

Compiled by: Shenchao TechFlow

Recently, Delphi_Digital released its outlook for DeFi in 2024. The author Stacy Muur selected the main content and compiled it in this article for readers’ reference.

Liquid pledge

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

LSD adoption has also seen significant growth, with approximately 44% of all staked ETH currently existing in these protocols. The superior utility offered by Lido’s stETH gives it a huge competitive advantage compared to other LSDs.

In the LST field, Frax has shown steady growth, with the amount of ETH pledged increasing from 38K to 233K in 2023. Frax stands out for its innovative sfrxETH design and integration within its ecosystem, especially within Fraxlend.

Mantle has launched its mETH product using ETH owned by its protocol. The purpose of mETH is to generate revenue for Mantle and enhance the liquidity of DEX.

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

The LSD industry on Ethereum is mature, competitive, and saturated.

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

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

DEX

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

Perp DEX has experienced a year of development but no increase in market share:

• dYdX v4 leaps into the Cosmos application chain
• Aevoxyz pioneered the OP stack
• Vertex makes DEX UX soar
• Rabbitx becomes a Starkware booster.

Application-specific Rollup: Aevo paved the way for rollapp (forked Optimism and deployed a DEX on top of it to expand the usage it supports)

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

RWA

RWA is one of the most successful areas for cryptocurrencies in 2023

Interest rate derivatives

ATM, Pendle, Notional (fixed rate loans) and IPOR are sustainable interest rate derivatives protocols. Interest rate derivatives may become one of the more compelling narratives in cryptocurrencies in the coming years.

Decentralized Stablecoin

Decentralized stablecoins only account for a small portion of the overall stablecoin market capitalization.

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

wallet

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

• MetaMask is the leader in wallet space
• The trading simulation function in Phantom wallet is excellent
• Rabby is the best EVM wallet
• Brahma is an institution-centric wallet

On-chain gambling

For users and bettors alike, DEX sportsbooks have some work to do before they’re ready for prime time.

Despite this, DEX sports betting is performing quite well, with a market share of approximately 20% of Rollbit’s.

Telegram bots such as Unibot, BookieBet and Boxbet provide a temporary mobile experience for on-chain gambling, reaching 35% of Azure’s daily transaction volume at its peak. It has since stabilized at around 15%.

Deployed on Optimism, Arbitrum and Base, Thales has first-mover advantage.

Despite a slow start, azuro, deployed on the Polygon and Gnosis chains, recently surpassed Thales to become the top DEX sportsbook by trading volume.