ON–055: DeFi

This is issue #55 of the on-chain analytics newsletter that reaches more than 7000 crypto investors every week 📈

1inch, whose v2 offers the best rates by discovering the most efficient swapping routes across all DEXes—swap on the customizable new UI. And also Aave, where you can experience DeFi: Deposit, Earn, & Borrow on Aave.

This week our contributor analysts cover DeFi: Opyn, KeeperDAO, Uniswap, and Yearn.

• Opyn is a capital efficient DeFi options protocol that allows users to buy, sell, and create options on ERC20s. DeFi users and products rely on Opyn’s smart contracts and interface to hedge themselves against DeFi risks or take speculative positions on different cryptocurrencies. On December 29th, 2020, Opyn released v2 of its protocol. Since launch, v2 has recorded notional trading volumes of $10.9mm, TVL of $6.3mm, and 1,732 transactions from 619 unique addresses (Source).

• One way to gauge short-term investor sentiment in the market is the put/call ratio (P/C ratio). The ratio measures the amount of put activity relative to call activity. For v2 to date, there is a P/C ratio of 0.74, implying bullish sentiment among v2 users. There were 3,016 puts traded compared to 4,045 calls. Despite more traded calls, the top options by volume included two puts and one call:

  • WETH JAN 29 800 Put: $851k

  • WETH JAN 15 1280 Call: $778k

  • WETH FEB 26 640 Put: $770k

• Total cumulative volume for Opyn surpassed $128mm since launch (March 2020), $117mm of which came from v1, and $10.9mm from v2. Total cumulative transactions for Opyn reached 21,464 — 19,732 of which came from v1, and 1,732 from v2. (Source & Source)

• Accompanying BTC’s rise in January, Opyn launched two WBTC puts that each surpassed $2.6mm in notional volume. The 01/15/21 WBTC $20,000 Put reached $2.85mm in notional volume from 96 total transactions, and the 01/29/21 WBTC $22,000 Put reached $2.6mm in volume from 96 transactions. This is more than 4x the volume than the previous 12/25/20 WBTC $18,000 Put. DeFi users use protective puts to protect themselves against sharp declines in market prices. (Source)

KeeperDAO is a DAO that aims to flip the keeper and arbitrageur landscape in DeFi from a competitive to a co-operative dynamic. The system centers around a (i) pool where LPs deposit assets for keepers to take flashloans out from, and (ii) a Treasury where keepers deposit part of their profits for the DAO to utilize, via ROOK enabled governance.

So far, approximately 19 keepers on average have been active per month with 2,598 unique addresses contributing to the pool. Flash loan volumes — a proxy for keeper activity — have been growing at a rapid pace year-to-date (~85% week-on-week). This sharp acceleration in 2021 happened parallel to both price (2x) and volatility (+35%) climbing up in DeFi, and benchmarked off of an equally weighted basket of DeFi blue chips. The total lifetime volume of flash loans from the KeeperDAO pool stands at a whopping 900M+ USD (in v2). (Source)

• As flash loan activity picked up, so did the gas cost of interacting with the KeeperDAO suite of contracts. It’s worth noting that while the gas/ETH trend since the beginning of the month has been down, the gas cost involved in calling the [borrow] and [keeper_claim] functions remains persistently high, indicating a healthy engagement level on the “demand” side of the pool. (Source)

• KeeperDAO’s TVL has grown significantly (~6x in November and ~0.8x from December), but in reality contributions in nominal terms have remained mostly flat since the end of November 2020. The monthly average of daily utilization (flash_volume/TVL) of the pool’s funds stands at 17%, with WETH leading being utilized at almost 50%! (Source)

• KeeperDAO is in the process of wrapping up its liquidity mining program to distribute ROOK tokens to LPs and keepers (on a ratio of 1:3) and is expected to end in early February. ROOK claims have totaled ~160k ROOK (~$50M at current ROOK/USD and 50% of liquid mcap), with the Top-20 claimants ranging from 2k to 17k ROOK. (Source 1 & 2)

• The role of ROOK in KeeperDAO is that of a governance token. Governance will primarily be centered around managing the Treasury, which is built over time from keeper proceeds. So far the Treasury has grown to $11.2M+ within 2.5 months — which maps to approx. $300k contributed per monthly active keeper. (Source)

• Uniswap continues to see record volume growth, with January on track to support a monthly all-time-high of $25bn: to date, the protocol has generated over $75bn volume. Uniswap is the fourth largest cryptocurrency spot trading venue in the world and consistently commands 50% decentralized trading protocol market share. While long-tail assets play a significant role in the protocol’s success, ETH and WBTC markets together regularly account for 40%+ of total weekly volume.

• Uniswap surpassed 300,000 monthly unique active addresses in December. Median trade size has crept up since the start of 2021 to ~$1,200, although it remains the lowest among Uniswap’s prominent competitors. Despite record-high network congestion in recent weeks, the protocol continues to serve as the destination for over 20% of all Ethereum transactions.