While other chains have been distracted by various emergencies in the MeMe market, Sonic Labs, formerly Fantom, has focused on the development of DeFi. Sonic has announced several new measures to incentivize DeFi projects in its ecosystem, which has led to a 500% increase in TVL on the Sonic chain in the past month. What has Sonic done, and how can retail investors participate in the Sonic ecosystem?
Old Chain, New Layout, What Has AC Brother Done Since Returning to Sonic?
Fantom achieved great success in 2021, with its TVL reaching a peak of $8 billion. However, after the departure of the lead developer, Andre Cronje, and the end of the DeFi Summer, Fantom gradually faded into obscurity. At the end of last year, AC returned and upgraded the Fantom brand to Sonic, and the former star team used new technology to build a new chain, which indeed achieved good results in the two months after its launch.
In just two months, Sonic has grown from 0 to over $500 million in TVL, with a net inflow of $110 million in external funds to the chain, with Solana accounting for the majority, followed by Base and ETH. The DEX trading volume on Sonic has also exceeded $1 billion.
How did Sonic achieve this in such a short time? First, for a DeFi chain, a stable coin funding channel is essential. After integrating USDT into Sonic, the total market value of stable coins has increased by 59% in the past week, with DeFiLlma showing that the current total market value of USDT, USDC, scUSD, stkscUSD, and USDC.e has exceeded $100 million.
In addition to Euler, Sonic also has its native lending platform Silo and staking platform Beets, which provide ample liquidity for assets such as ETH. Sonic has also nested three DeFi protocols, Lombard Finance, Ether.fi, and Rings Protocol, using a stacking model to provide users with leveraged returns and bonus points. In a mutually beneficial scenario, this has brought BTC liquidity into Sonic, like a triangular attack on a basketball court.
The starting point of the attack is Lombard Finance, a DeFi project focused on Bitcoin, whose most famous product is the launch of LBTC, a liquid staking version of Bitcoin. Users can pledge BTC on Ethereum, Base, or BNB through Lombard and receive 1:1 "LBTC".
The intermediary is then Ether.fi, which has collaborated with Lombard to launch the first Bitcoin liquid re-staking token "eBTC". eBTC uses LBTC as collateral, allowing eBTC holders to potentially earn multiple layers of returns, as they benefit from the staking rewards of LBTC "supported by actual Bitcoin", as well as Ether.fi's re-staking strategy on Ethereum. eBTC can also be deposited into Rings on Ethereum to mint scBTC.
The endpoint of the attack is Rings, which allows users to deposit various tokens, from stable coins to Ethereum and the aforementioned Bitcoin derivatives LBTC and eBTC, to mint yield-bearing "sc" versions of these assets, such as scUSD and scETH. According to Sonic's current reward mechanism, holding, using, or staking these assets can all earn weekly rewards. Rings utilizes Veda Labs' farming strategy to generate returns from protocols on Ethereum and Sonic and pass them on to users.
To attract early developers and new users, Sonic has also launched a DeFAI Hackathon and a Sonic Meme Mania contest to expand into AI and meme applications.
The hackathon has a prize pool of $295,000 worth of $S to support the development of AI agents that can perform social and on-chain operations on Sonic. It has already attracted 18 AI projects and 485 technicians, with the registration deadline on February 25th.
The Meme contest has a prize pool of $1 million $OS, with the highest market value of a participant currently approaching $7 million. The Meme coin infrastructure on Sonic is still relatively underdeveloped, and it is unclear whether Sonic will follow Solana's strategy to capture the Meme market while developing DeFi.
The main new user acquisition is from airdrop hunters and DeFi players. Sonic plans to airdrop a total of 200 million $S tokens as incentives, with a 1-year unlocking period and the first 6-month phase accounting for 40-60% of the total airdrop. 25% of the airdrop will be immediately liquid tokens, and 75% will be tradable locked NFT certificates. Users can trade the NFTs or burn a portion of them to unlock $S tokens early, an flexible airdrop unlocking model that has attracted many users.
Rumored High Yields, What Opportunities Are There in the Sonic Ecosystem?
How to Obtain the Airdrop?
The current airdrop certificates are points, of which there are three types: Passive Points (PP) only require holding whitelisted assets in a Web3 wallet, Activity Points (AP) require providing whitelisted assets as liquidity in participating projects, and DApps Points ("Gems") are allocated to ecosystem developers based on their contributions.
According to the chain analyst @phtevenstrong's estimated APRs and provided strategies, users have many ways to participate and earn good returns.
The $S token is currently in full circulation, and since there is no VC allocation, there is no dilution risk. Nearly half of the liquidity is currently locked (31% of the total supply is staked, and 5-10% of $S is locked in DeFi protocols). Assuming 50% of the airdrop is distributed in 6 months, the estimated average points TVL during that period would be 20% APR at $300M TVL and 12.5% APR at $500M TVL.
Basic Points Mining Strategies
Rings Protocol's scETH Cycling Strategy: Stake Ethereum (ETH) on Rings Protocol to mint yield-bearing scETH. Then collateralize the scETH on the Euler platform, borrow Wrapped Ether (WETH) at a 91.5% Loan-to-Value (LTV) ratio. Reinvest the borrowed WETH, theoretically achieving 10x leverage. This strategy can achieve a theoretical APR of 87.49% without considering Rings points and rEUL rewards.
Silo Finance's stS/S Hedging Cycle Strategy
Borrow stS tokens on Silo Finance at a 95% LTV, achieving 20x leverage. Then stake the borrowed stS tokens to earn 2.4% lending and 5.3% staking rewards. This entire process can also earn an additional 10% points rewards, further boosting the total returns. The base return is 7.7%, plus the 10% points rewards, totaling 17.7%. The complete strategy can achieve an APR of 74%.
Reverse Hedging Arbitrage Strategy
Borrow stS tokens on Silo Finance to get an 8x bonus on points. Then lend out the stS tokens to earn a 4.1% lending yield. You can also earn a daily bonus of 0.5 Silo points. The basic returns of this strategy are 4.1% and a daily reward of 0.5 Silo points, which, although not high, have relatively lower risk.
After the MEME market cooled down, DeFi returned to the public's view. Sonic, an expert in DeFi, has achieved outstanding growth in the first three months. After integrating the DeFai concept, how can Sonic, with its high-performance chain and AI, establish a new DeFi paradigm and stand firm amid the squeeze between the previous hype and the upcoming Monad? It is hoped that more interesting innovations will emerge from the fierce competition among the many projects, bringing new vitality to the market.
