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Author: PEDRO M. Negron, Medium; Compilation: Songxue, Bit Chain Vision Realm
The decentralized finance (DEFI) agreement has created financial services that directly promote lending on its platform, and users can borrow assets without traditional intermediaries.These protocols mainly adopt smart contracts. Smart contracts are an automated protocol with its terms. These terms are directly embedded in the code, providing enhanced transparency and security.The lender invests their assets into the liquidity pool as compensation to collect interest, and the borrower can obtain loans by providing collateral.Interest rates are usually set through algorithms, reflecting the supply and demand dynamics of assets in the liquidity pool.These agreements include risk management strategies, such as liquidation when the value of mortgage is lower than the specified level to protect the assets of the lender.This article deeply analyzes the current development trend of the borrowing agreement in the DEFI, and discusses the transaction volume of supply and demand, market value and agreement token in the industry.
supply and demand
Although the total lock value (TVL) of almost all agreements in 2022 has declined significantly,By the end of 2023, TVL flowed to the lending.This trend may indicate that users have begun to believe that the bear market has reached the lowest point, which reduces the risk of liquidation of leverage positions.As users are becoming more optimistic about price trends, they may see that funds flow rises, and users will increase their positions through borrowing.
Source: ITB’s loan protocol viewing angle instrument board
The loan protocol category has created its own niche, and it maintains relatively stability compared with the entire market.The TVL ratio of the loan protocol has been stable, accounting for 15-20%of the overall DEFI TVL.This shows that even in the bear market, borrowing assets still have lasting cases and needs.
Source: ITB’s loan protocol viewing angle instrument board
The reduction of TVL in 2022 is partially attributed to user behavior. Due to the expectations of bear markets and price declines, users have reduced their desire to lend assets and leverage transactions.Therefore, with the decrease in borrowing activities, the loan interest rate has also decreased, prompting the deposit to withdraw funds.on the contrary,In the bull market, the interest in borrowing and leverage positions has increased, pushing up the loan interest rate, thereby attracting more capital inflow agreements.This trend is clearly reflected in the unprecedented loan indicators, which began to rise with the recovery of market prices and emotions in 2023.
Market value
As the biggest agreement for TVL, AAVE tokens have maintained a dominant position in terms of market value compared with other lending tokens.Although new agreements appear on the market, such as AAVE’s fork Radiant, AAVE has maintained more than 60%of the market share.At the same time, other protocols, such as Compound (Comp) and Justlend (JST), are more likely to lose market share when the emergence of new entrants.
Source: ITB’s loan protocol viewing angle instrument board
AAVE’s success is attributed to various functions. Recently, users have been using the “E-Mode” function.The function used to improve efficiency allows users to borrow between similar assets (such as ETH and WSTTH).This strategy has attracted great attention to the AAVE and Spark items (Spark and Radiant), which attracted a lot of capital inflow in the second half of last year.
Agreement income is one of the important factors that maintain these agreements and the feasibility of borrowing agreement.AAVE also stood out in this field, constantly creating income of more than $ 100,000 a day.This income helps the security of the agreement. By providing the necessary funds to compensate developers and invest in enhancing the security of the agreement.
Govern token transaction volume
In the past year, the highest trading tokens came from more new protocols such as Radiant (RDNT) and Sonne (Sonne), and many older tokens still perform well, but the transaction volume is relatively new and not mature.The protocol performance is worse.This trend is mainly due to the incentives provided by the native token of these two protocols. These tokens are often traded by liquidity providers to achieve benefits.Therefore, the RDNT token has always occupied nearly 40%of the total trading of tokens in the borrowing agreement in the past year.
Source: ITB’s loan protocol viewing angle instrument board
These newer tokens show greater volatility.Although they have shown a considerable short -term price growth in the past year, this has led to some traders to buy at the highest point and found that their initial investment has depreciated.In contrast to the high volatility of these newer tokens, old -fashioned currencies such as AAVE and COMP have experienced lower levels of volatility.
In general, the DEFI lending agreement has shown toughness and innovation, especially through the leading platform AAVE.Despite market fluctuations, AAVE has maintained a strong market share through advanced functions and continuous agreement revenue through “E-Mode”.New entrants such as Radiant and Sonne have introduced new developments, characterized by high transaction volume and related volatility.This continuous development ecosystem reflects the increasing complexity and diversification of the DEFI lending agreement, providing investors and users with various opportunities and risks.
