Title: Exploring the Two Branches of the Crypto Market: Financial and Web2 Integration
Introduction:
The recent approval of ETH ETF resulted in a significant market downturn, mirroring the trend seen after the approval of BTC ETF. The impact of ETFs on the market can be summarized as follows: an expectation surge and subsequent rally before the launch, followed by a decline in optimism and a gradual, slow rise due to the positive effects of ETF approval. However, unlike previous cycles that saw explosive trends led by Uniswap’s Defi summer or NFT mania, the current cycle has left many investors and builders perplexed. How will this bull market unfold?
Different Choices in the Bull Market:
In this cycle, individuals have made diverse choices based on their beliefs, whether it’s building within the BTC ecosystem, focusing on DePIN/AI, or fully embracing meme coins. Overall, the exploration of projects can be broadly categorized into two branches. The first is the financial branch, which believes that the development of Web3 is closely tied to finance. Whether it’s Defi, NFTs, or the BTC ecosystem, the essence lies in financial gameplay and asset attributes. The second branch is the Web2 integration branch, which aims to combine Web2’s tracks, such as social media, gaming, infrastructure (DePIN), and AI, with blockchain and cryptocurrencies to explore new scenarios.
The Rise of Defi and Its Pioneers:
Defi has been a well-discussed track that plays a crucial role in both a public chain and the entire Web3 industry, whether it’s the iconic Uniswap in the Dex sector or dYdX in the derivatives sector. Before the emergence of Dex, cryptocurrency trading was conducted through centralized exchanges, which shared similarities with Web2 in terms of speed and simplicity. However, these exchanges lacked transparency and security. The collapse of a prominent CEX giant shattered the confidence of Web3 users, emphasizing the importance of asset ownership, security, and transparency.
In 2018, Uniswap V1 introduced an automated market maker model (AMM) to create a decentralized exchange, allowing users to directly trade with smart contracts instead of the traditional buyer-seller market order book model. This innovation led to the emergence of a new track. Subsequent versions, such as V2 and V3, added features like built-in price oracles, support for centralized liquidity, and multi-tier fees, continuously improving the user experience of Dex. As a result, Uniswap has firmly established itself as the leader in the Dex sector.
On the other hand, dYdX, as a pioneer in Defi derivatives, adopted the order book model to provide leverage and contract trading services, aligning itself more closely with traditional financial models. With high liquidity and a wide range of trading pairs, dYdX once held a significant market share in the derivatives sector alongside Uniswap, leading the Defi summer frenzy.
Challengers and the Future of Defi:
In the subsequent development of Defi, Dex and derivatives took different paths:
1) Dex Binding Chain Model: Looking at the Total Value Locked (TVL) of Dex, their development is closely tied to a particular chain. Whether it’s Uniswap’s takeoff with Ethereum, Pancake’s association with BSC, Raydium’s integration with Solana, or Optimism’s Velodrome and Base chain’s Aerodrome, Dex is essentially a necessity for public chains. The performance of TVL is often correlated with the position of the chain.
2) Derivatives Innovation Model: On the other hand, the evolution of derivatives focuses more on gameplay innovation. For example, GMX, which was launched in 2021, surpassed the previous market leader, dYdX.
GMX’s success can be attributed to two core innovations:
1. The use of LP-provided liquidity pools: GMX combined LP-provided liquidity pools with price oracles, allowing users to trade quickly while maintaining low slippage. This benefits the users.
2. Innovative profit-sharing mechanism: 70% of the profits are distributed to liquidity providers (GLP holders), while 30% is allocated to GMX’s operational token holders. This benefits liquidity providers.
These two innovations precisely cater to both ends of trading: users and liquidity providers, enabling GMX to emerge as a new leader in the derivatives sector.
Following GMX’s success, several interesting derivative projects have emerged. For example, SynFutures on the Blast chain has recently achieved record on-chain trading volume. This project stands out due to several noteworthy factors:
1. The wealth effect of the Blast chain: The Blast chain has carried a wealth effect since its inception, and choosing to deploy SynFutures on this chain is a smart move to attract users.
2. oAMM centralized liquidity: Similar to Uniswap’s centralized liquidity strategy, SynFutures’ oAMM allows LPs to add liquidity within specified price ranges, improving liquidity depth and capital utilization. This benefits liquidity providers.
3. Permissionless listing with oAMM: Additionally, oAMM, like other spot AMMs, supports permissionless listings, allowing anyone to create perpetual contracts for trading pairs, expanding the range of tradable assets. This benefits liquidity providers.
Moreover, SynFutures’ most interesting aspect is its combination of AMM and order book, which will be further analyzed.
As mentioned in point 2, oAMM allows LPs to concentrate liquidity within a specific price range, which can be further divided into multiple price orders. This liquidity provision model, similar to an order book, makes it easier for centralized exchange market makers to participate. Fundamentally, it is not much different from centralized exchanges’ limit order model, further enhancing pool liquidity. With improved liquidity, more users are attracted to the platform, creating a positive feedback loop.
Currently, SynFutures’ daily trading volume exceeds $1.3 billion, surpassing the established projects dYdX ($1.2 billion) and GMX ($180 million, not in the top ten). Its strong performance in terms of trading volume has injected new vitality into the derivatives sector.
Conclusion:
Whether it’s the financial branch or the Web2 integration branch, both eagerly anticipate the emergence of more native and intriguing projects that involve more people and capital. In the short term, this will provide the catalyst needed for the bull market to explode. In the long run, it will facilitate further integration into the traditional world and drive mass adoption.