Remember the DeFi summer of 2020?
In that summer, Compound was the first to initiate liquidity mining, which led to a liquidity mining boom. Many projects imitate Compound by offering token rewards to liquidity providers to attract liquidity. APYs over five, six or even seven figures were everywhere back then. But we all know that those APYs are unsustainable and false, because these gains come from the inflationary release of tokens, not the income of the DeFi protocol itself.
As DeFi evolves into 2022, one trend is the rise of Real Yield DeFi.
What is the real gain? Which protocols have adopted or are about to adopt it? Will it become the new DeFi narrative? Take a look.
What is “Real Earnings”
As the name suggests, the true benefit is that the DeFi protocol product itself generates revenue and distributes that revenue to its token holders.
And unlike previous liquidity mining, these distributions are paid not in their own native tokens, but in ETH or USDC. This makes the gain “real” as it is not inflated by the over-release of the native token.
Going into 2022, sharing in the profits created by itself, rather than token releases, has proven to be extremely attractive to liquidity providers and governance token holders. The most representative DeFi protocol is GMX. The chart below shows the contrarian growth of its token GMX price in the last 3 months.
In the current DeFi market, some protocols have already started to provide real benefits, and many more are ready to join.
Which protocols are already delivering real benefits
GMX is a decentralized perpetual contract exchange built on Arbitrum and Avalanche, with two main tokens, GMX and GLP. GLP is a liquidity token index and GMX is a governance token.
The GLP index consists of assets used for swap and leveraged trading. Currently, there are mainly 6 assets: ETH, WBTC, LINK, UNI, USDC, USDT, DAI, FRAX. GLP can be minted using any index asset, and GLP can be burned to redeem any index asset. Minting and redemption prices are calculated based on (total index asset value, including profit and loss on open positions)/(GLP supply).
For Arbitrum, GLP token holders receive custodial GMX rewards and a 70% platform fee allocated in ETH . For Avalanche, GLP token holders receive escrow GMX rewards and a 70% platform fee allocated in AVAX . Another 30% of platform fees are distributed to GMX stakers in the form of ETH and AVAX, respectively .
Gains Network, like GMX, is a decentralized perpetual contract exchange, the difference is that Gains Network is based on Polygon.
The gTrade developed by Gains Network uses a custom Chainlink oracle to provide leveraged trading on 82 trading pairs (48 cryptocurrencies, 10 foreign exchange and 24 stocks) , where the foreign exchange trading pair and the stock trading pair are traded the same and their respective real-time trading hours are the same. gTrade is also the first DEX to allow forex and stock trading. Among them, 5-100 times leverage is optional, and the maximum collateral size is 100,000 US dollars.
Gains are traded using DAI collateral regardless of the trading pair. Leverage is synthetic and backed by DAI, GNS/DAI liquidity, and GNS tokens. Gains uses the DAI vault to pay out rewards to traders who make money, while collecting DAI when traders lose money.
According to the official Gains document, a total of 40% of market order fees and 15% of limit order fees are allocated to GNS stakers. Since 70% of Gains transactions are market orders, GNS stakers will receive an average of 32.5% of transaction fees distributed in DAI.
Synthetix is a decentralized protocol for trading synthetic assets and derivatives, and one of the most classical DeFi protocols.
The current income from staking SNX comes from two parts, one part comes from the staking reward of SNX inflation, and the other part comes from the transaction fee in the form of the sUSD stablecoin. Because the former part comes from the token inflation emissions brought about by liquidity mining, Synthetix is not a complete real income protocol .
However, on August 25, 2022, Synthetix founder Kain Warwick submitted a proposal, SIP276, that would end SNX inflation and limit the total SNX supply to 300 million.
Warwick said that SNX reward inflation was originally intended to “bootstrap the network,” which is no longer necessary because he can generate sustainable income from atomic swaps. If the proposal goes into effect, Synthetix will only have transaction fee income and distribute them to SNX holders.
According to Token Terminal data, Synthetix currently generates approximately $82 million in annual revenue, all owned by SNX stakers. SNX rewards and sUSD fees give stakers an annual yield of around 67%, but this could drop to around 15%-20% if based solely on the “true yield” of sUSD fees.
Umami was one of the first protocols to launch the Real Yield narrative, an OHM fork that initially provided huge unsustainable gains for staking UMAMI. A series of initiatives by the Umami community in early 2022 have catalyzed the Real Yield movement in DeFi. For example, the UMAMI token is absolutely zero-emission, and its maximum supply is capped at 1,000,000; stakers will only receive ETH rewards from protocol revenue.
The RealYield philosophy has since become the core of Umami’s token economics and strategy. UMAMI tokens become a mandatory requirement for Umami governance and protocol revenue and will never be diluted by inflation releases or capital raises.
At present, Umami will transfer about 50% of the treasury revenue to pledgers every month . In the future, the treasury will be self-sustaining and the payment ratio will be increased from 50% to 100%.
Umami has two main products, Marinator and Compound.
Marinator can deposit UMAMI at any time of the month in exchange for mUMAMI, but can only withdraw UMAMI on the 1st of each month. Marinators can claim their wETH rewards immediately, but they must hold mUMAMI tokens to be eligible when a given reward is issued. wETH rewards are pushed to Marineate on a daily or almost daily basis. Rewards are mainly paid in wETH, but Umami may also distribute other tokens in the future.
Compound users can further boost their returns by depositing Umami in Compound. The mUMAMI autocompounder automatically uses ETH rewards paid to mUMAMI holders to buy more UMAMI in the market and deposit it into Umami’s Marinaate contract to increase passive ETH income potential.
Redacted Cartel is a meta-governance protocol and one of the main contenders in the Curve war. The goal is to control the governance rights of a series of stablecoin DeFi protocols, including Curve, Convex, Tokemak, Frax Finance, OlympusDAO, etc., which in turn affects the release of protocol tokens Or provide liquidity to extract value.
In a way, BTRFLY is an index of all voting escrow tokens, and BTRFLY can be thought of as a liquidity wrapper for all voting escrow tokens.
It currently generates revenue from three sources: the Treasury, which consists of different yield-generating governance tokens; Pirex, a product that creates a liquidity wrapper that allows automatic compounding and tokenization of future voting events; and Hidden Hand, A market for governance incentives or “bribes”.
In order to earn Redacted Cartel revenue, users need to “revenue-lock” BTRLFLY tokens for 16 weeks to receive rlBTRFLY. rlBTRFLY will then receive 50% of Hidden Hand’s revenue, 40% of Pirex’s revenue and 15% to 42.5% of Treasury revenue.
The current real earnings of Redacted Cartel come from ETH paid out every two weeks . The protocol paid $6.60 worth of ETH for each rlBTRFLY in the last distribution.
Dopex is a decentralized options exchange on Arbitrum that allows users to buy and sell options contracts and passively earn real returns.
Dopex’s flagship product is its Single Staking Option Vaults (SSOVs), which provide deep liquidity for option buyers and automated passive income for option sellers. In addition to SSOV, Dopex also allows users to bet on the direction of interest rates in DeFi through interest rate options and the volatility of certain assets through so-called Atlantic Straddles.
While all Dopex products allow users to earn real gains by taking some directed risk, the protocol also generates real revenue through fees, which are redirected to stakers. 70% of the fees are returned to liquidity providers, 5% to delegates, 5% to buy and destroy the protocol’s rebate token rDPX, and 15% to DPX’s unilateral governance stakers.
Like Synthetix, some of DPX’s staking proceeds come from inflationary token releases. Dopex currently provides about 22% APY to staking veDPX.
Manifold Finance is the developer of OpenMEV and provides ETH2.0 validator MEV service, this protocol also provides full or partial payment in ETH or USDC.
A protocol for real earnings coming soon
There are also some protocols that will soon add Real Yield.
One is the decentralized exchange trader joe on Avalanche, which will reduce token JOE emissions after the launch of their brand new DEX.
Another is Kujira, a Cosmos L1 platform under construction. KUJI stakers will receive the following benefits: transaction fees for FIN, the largest exchange on Kujira L1; transaction fees for liquidation collateral market Orca; minting fees for the new over-collateralized stablecoin USK.
New narrative for DeFi?
With the evolution of DeFi, its competition also tends to rely on the competitiveness of the product itself, and Real Yield is the embodiment of competitiveness.
After the education of liquidity mining and the baptism of the bear market, investors are gradually paying more attention to real income. For example, under the social media of the aggregation exchange ParaSwap on September 2, community users are directly asking ParaSwap to share income with PSP pledgers like GMX.
It is foreseeable that more DeFi will actively or passively choose real returns.
Therefore, it is very likely that real gains will become the new DeFi narrative.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/real-yield-defi-rise-these-defi-protocols-have-adopted-it/
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