Chainfeeds Summary:
Vault and Curator are gaining mindshare, while the "low-profit" nature of lending protocols is being challenged.
Article source:
https://x.com/SilvioBusonero/status/2003190246280958401
Article Author:
Silvio
Opinion:
Silvio: The annualized revenue of the entire lending sector has exceeded $100 million. This value is generated within a complex technology and economic stack: settlement blockchains, asset issuers, borrowers, lending protocols, and distribution Vaults collectively constitute the supply and demand sides of the market. I analyzed the top 50 addresses on Aave and SparkLend. The largest borrowers are some Vaults, such as Fluid, Treehouse, Mellow, Etherfi, and Lido (who are also asset issuers). They control user distribution channels, serving users who want to earn additional returns but do not want to manage the cycle and risk themselves. In addition, there are institutional funds such as Abraxas Capital, which deploy external funds to execute similar strategies, and their economic models are essentially similar to those of Vaults. Of Ether.fi's total TVL, approximately $215 million is net assets deployed on Aave, which generates approximately $1.07 million in platform fee revenue annually for Vaults. However, this strategy requires paying approximately $4.5 million in interest to Aave annually (calculated as: $1.5 billion × 2% borrowing APY × 15% reserve factor). Even in one of the largest and most successful revolving strategies in DeFi, the lending protocol generates revenue several times that of a Vault. This Vault also directly creates demand for weETH: EtherFi Vault fees and issuers' TVL returns on Aave. The economic value created by the lending layer (Aave) exceeds that of the Vault strategy itself and even the asset issuance layer. The lending protocol is the layer that contributes the most value in the entire stack. Is it better to do Aave or Lido? This question is more difficult to calculate precisely. Lido has approximately $4.42 billion in deposits in the Ethereum Core lending market and generates approximately $11 million in performance fees annually. These assets support both ETH and stablecoin lending. Based on the current net interest margin (NIM) of approximately 0.4%, lending protocols earn about $17 million from these deposits, more than 30% higher than Lido (and this is a historically low NIM). If measured solely by deposit profitability, DeFi lending protocols appear low-profit compared to traditional finance. However, this overlooks the true location of their competitive advantage. In the on-chain credit system: lending protocols capture more value than downstream Vault/distribution layers. Overall, they also capture more value than upstream asset issuers. [Original text in English]
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