Delphi Digital's 2024 DeFi Outlook: LSD Sector Is Saturated, Interest Rate Derivatives More Attractive
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Delphi Digital's 2024 DeFi Outlook: LSD Sector Is Saturated, Interest Rate Derivatives More Attractive
The derivatives market is emerging as a critical area with untapped potential for decentralized stablecoins.
Navigating Web3 tides with focused insightsAuthor: Stacy Muur
Translation: TechFlow
Recently, Delphi Digital released its 2024 outlook on DeFi. Author Stacy Muur has selected the key highlights, which are compiled here for readers' reference.
Liquid Staking
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The ETH staking rate currently stands at 23.7%, relative to a total supply of 120.2 million ETH. The amount of staked ETH is approaching the target of 33.5 million ETH (27% of total ETH supply), considered optimal for network security.
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Adoption of LSDs has also seen significant growth, with approximately 44% of all staked ETH now held within these protocols. Compared to other LSDs, Lido’s stETH offers superior utility, giving it a strong competitive advantage.
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In the LST space, Frax has shown steady growth, increasing its ETH staking from 38K to 233K in 2023. Frax stands out due to its innovative sfrxETH design and deep integration across its ecosystem, especially within Fraxlend.
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Mantle has leveraged its protocol-owned ETH to launch its mETH product. mETH aims to generate yield for Mantle and enhance DEX liquidity.
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ether.fi and Renzo have achieved liquid restaking on EigenLayer.
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The LSD sector on Ethereum has matured, becoming highly competitive and saturated.
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Many LSDfi projects have lost appeal as incentive-driven high yields diminish.
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Restaking (Eigenlayer) will be the fastest-growing area among staking protocols in 2024.
DEX
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Uniswap v4, Uniswap X, and other intent-based DEXs are set to dominate the narrative in 2024.
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Perp DEXs have evolved over the past year but failed to gain market share:
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dYdX v4 transitioned into a Cosmos app-chain
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Aevoxyz pioneered the OP stack
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Vertex significantly improved DEX UX
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RabbitX became a booster for Starkware
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App-specific rollups: Aevo paved the way for rollapps (forked Optimism and deployed its DEX on top to expand supported usage)
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Most DEXs, especially derivatives platforms, will benefit from having their own execution environments.
RWA
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RWA was one of the most successful sectors in crypto during 2023.
Interest Rate Derivatives
Atm, Pendle, Notional (fixed-rate lending), and IPOR are sustainable interest rate derivatives protocols. Interest rate derivatives may become one of the more compelling narratives in crypto over the coming years.
Decentralized Stablecoins
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Decentralized stablecoins represent only a small fraction of the overall stablecoin market cap.
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The derivatives market is emerging as a critical area with untapped potential for decentralized stablecoins, particularly Synthetix.
Wallets
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User experience and in-wallet functionality are top priorities for most wallet developers. Delphi_Digital lists some notable wallet features:
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MetaMask leads the wallet space
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Phantom excels in transaction simulation within the wallet
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Rabby is the best EVM wallet
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Brahma is an institution-focused wallet
On-Chain Gambling
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For users and bettors, DEX sports betting still has work to do before being ready for prime time.
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Nonetheless, DEX sports betting has performed fairly well, capturing around 20% market share led by Rollbit.
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Telegram bots such as Unibot, BookieBet, and Boxbet offer temporary mobile experiences for on-chain gambling, peaking at 35% of Azuro’s daily volume and stabilizing around 15% since.
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Thales holds a first-mover advantage, deploying on Optimism, Arbitrum, and Base.
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Azuro, deployed on Polygon and Gnosis Chain, started slowly but recently surpassed Thales to become the highest-volume DEX sports betting platform.
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Stacy Muur
