🟣 LSTFi Summer

LSTs are growing rapidly alongside the use cases associated with them.

Last week, I released a report on LSTFi and the many opportunities to earn yield by putting your capital to work. Within this report was a mention of Lybra, a new stablecoin created with strictly LST collateral, where the yield is given natively to the stablecoin itself. This creates a new stablecoin, eUSD, that is constantly accruing yield.   The LBR token has increased over 100% in just the week since the report launched, and has seen an explosion in TVL growth from $60M to $180M.   While this is extremely impressive and likely has room to grow in the short term, it's tough to know how long this will last as there will inevitably be a mismatch between the demand for the stablecoin and the demand to borrow. If I am a user looking to borrow against my LST, why would I forgo my staking yield in Lybra if I can go elsewhere and use that to my advantage? However, short-term hype gives them the ability to create a brand moat and time to create a better long-term model as they continue to scale up.   Prisma should be launching something similar that plugs into the Curve/Convex flywheel that maybe finds ways to continuously incentivize borrowing while the stablecoin earns a portion of the staking yield. Cat-in-a-box also offers a unique product where you borrow an ETH derivative rather than a stablecoin, allowing for greater capital efficiency. So, while LSTFi will continue to get its hype, I would look for models that have a better long term design in terms of capital efficiency and yield generation.   Another point of conversation around the last few days has been about rollups. What exactly about them? Well, that everything we know about them has been a lie.   Jon Charbenneu of DBA wrote a piece called "Rollups Are L1s (& L2s) a.k.a. How Rollups *Actually Actually Actually* Work." The post focuses on the enshrined smart contract on the L1 associated with the L2.   Conventional wisdom says that this smart contract defines the canonical chain of the rollup, and is where "settlement" happens. Jon breaks down why this is a false construct, as the L2 can always fall back on social consensus, and what that means for those interacting with the chain via the bridge. A great read that may mess with your head a few times. Have a good day, y'all! - Westie   Blend, Blur's NFT lending platform, has dominated the NFT lending market since its inception earlier in May. A top-notch Dune Dashboard by Beetle breaks down the platform's usage relative to its peers.   Blur's dominance hit a new all time high last week, finishing the 7 day period with 90% market dominance. Loans now makeup over 50% of Blur's total volume. Blend borrowers are some of crypto's most degen, with more than half of Blend loans taken out at a LTV above 70%.   Currently, Blend users are rewarded with points to receive a portion of the next BLUR airdrop. It will be interesting to watch this usage as Season 2 of Blur's incentive campaign winds down later this year. Fiddy, the lead developer of Curve's new 3-coin concentrated liquidity pools, had an active morning onchain, as he looks to be testing a new deployment on Ethereum mainnet. Unfortunately, it seems Etherescan still isn't automatically decoding the factory contract, even after the new vyper release. This is a major roadblock to officially deploy the new pools, but at least the test swaps are proving to be highly efficient.   Some test swaps are using around 160k gas, which is comparable to Uniswap V3 transactions! This marks around a 50% reduction in the amount of gas required to execute a swap through a Curve concentrated liquidity pool, and will increase the amount of volume that DEX Aggregators route through the protocol. We will continue monitoring the progress of the test deployments as the Curve team continues to test in prod. Curve's Stablecoin and Lending Market AMMs are at the root of everything elegant and useful in DeFi.That's why Curve put LLAMMA at the center of its lending protocol. Read More → Circle's Cross-Chain Transfer Protocol: Bridges Will Evolve, They May Not Survive CCTP is a cross-chain infrastructure protocol, created by Circle, that allows anyone to burn and mint native USDC across supported chains. It unlocks a huge variety of use cases and may change the bridging landscape. Read More → Kellogg's Could Jump Into the Metaverse: 12 Trademark Filings Reveal NFT Interest Consumers could be seeing Cheez-It or Frosted Flakes NFTs in the future Read More → Can Any Blockchain Compete on Security With Bitcoin? Morgan Creek Capital's Mark Yusko argues that when it comes to security, no other blockchain comes close to Bitcoin Read More → The insights, views and outlooks presented in the report are not to be taken as financial advice. Blockworks Research analysts are not registered broker/dealers or financial advisors. Blockworks Research analysts may hold assets mentioned in this report, further outlined in the Firm's Financial Disclosures. 133 W 19th St, New York, NY, 10011 Manage your email subscription preferences here.