Ethereum returns with DeFi again, with Aave/Pendle/Ethena turning circular lending into a leverage amplifier. Compared to the on-chain stack based on ETH during DeFi Summer, the leverage rise curve supported by stablecoins like USDe is more gradual.
We may be entering a warm long cycle, and the examination of on-chain protocols will be divided into two parts: first, involving more asset types, with external fund liquidity being more abundant under the Federal Reserve's rate cut expectations; second, exploring the limit of leverage multiples, corresponding to the process of safe deleveraging, i.e., how individuals can safely exit and how the bull market will end.
Six Crypto Protocols: Interaction of Ecosystem and Tokens
On-chain protocols and assets are numerous, but under the 80/20 rule, we only need to focus on parameters like TVL/trading volume/token price. To be more focused, we'll concentrate on the least number of individuals indispensable to the on-chain ecosystem, and then examine their relationships in the ecosystem network, taking into account individual importance, ecosystem connectivity, and the highest growth potential of new protocols.
In the DeFi TVL composition, Ethereum's DeFi TVL share exceeded 60% in July, and Aave's share of the Ethereum ecosystem TVL is also over 60%. This is the 20% in the 80/20 rule, and the remaining protocols must have a strong connection with these two to be included in the list of main passive beneficiaries.
With the flywheel of the three circular lending musketeers starting up, the correlation between Ethereum, Aave, Pendle, and Ethena goes without saying. Adding Bitcoin, WBTC, ETH, and USDT/USDC are de facto DeFi base assets. However, USDT/USDC, similar to Lido, only possess asset attributes and basically lack ecosystem value, with Plasma, Stablechain just beginning to compete.
To make a slight distinction, a protocol can have multiple values. For example, Bitcoin basically only has asset value, meaning everyone needs BTC, but no one knows how to utilize the Bitcoin ecosystem. This is not to say BTCFi is a scam (dog head for survival).
ETH/Ethereum, however, has dual value. People need both ETH and the Ethereum network, including EVM and its extensive DeFi stack and development facilities.
Further divided by asset and ecosystem value, examining the "being needed" degree of top protocols, gaining one point for asset attribute needed and one point for ecosystem value needed, the following table can be summarized:
Pendle/Aave/Ethena/Ethereum/HyperEVM/Bitcoin are the most connected six protocols, with any two able to be mutually coupled, requiring at most an additional protocol or asset to link.
[The translation continues in the same manner for the rest of the text]· Aave has become the de facto lending infrastructure, closely tied to Ethereum
· Bitcoin and Ethereum represent the limits of the blockchain economic system, and their expansion is the basis for DeFi growth, which is how much of BTC's scale can be migrated to DeFi and how much room for growth DeFi still has
· Hyperliquid/HyperEVM is already closely integrated with existing DeFi giants. Although its TVL is far behind Solana, its growth prospects are larger. Solana's story is about defeating the EVM system from a public chain perspective
Conclusion
The crypto six protocols examine the degree of interconnection between them. This doesn't mean other protocols lack value, but that high collaborative proximity can exponentially improve fund freedom and utilization, thereby benefiting all parties.
Of course, a loss would also be shared, which requires examining the subsequent development of DeFi anchor switching - from ETH to YBS. As a high-value asset, ETH is more aggressive in leverage, while YBS like USDe is naturally more price-stable (not value-stable). DeFi Lego based on it is more solid. Except in extreme de-anchoring situations, it can theoretically make leveraging and deleveraging curves more moderate.
Seats in the crypto pantheon are limited. New chosen ones can only forge ahead, make connections with existing deities, and build the strongest protocol network to earn their place.
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