ON–058: DeFi

This is issue #58 of the on-chain analytics newsletter that reaches nearly 8000 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: Mirror, Aave, Compound, and Instadapp.

• Mirror Protocol was officially launched on December 2nd as a community-owned synthetic assets protocol built on the Terra blockchain. The governance token MIR was bootstrapped with a fair launch model that encompasses a 4-year emission schedule -- heavily weighted to supplying liquidity to UST/mAsset pairs in the first year.

• Within 2 months, the total value of all UST and mAssets in liquidity pools (on the TerraSwap and Ethereum Uniswap pairs total) surpassed $213 million. Daily trading volumes of mAssets have also been steadily increasing, peaking at $44.42 million on 02/07.

• Mirror’s total collateralization ratio for minted mAssets has remained relatively capital efficient. Using a siloed CDP model for users that lock-up UST to mint a specific mAsset (essentially going short that mAsset), the ratio of the total collateral value to the total minted asset value has remained consistently below 200% — currently sitting at 183%. Total value locked (TVL), the total value of collateral, liquidity, and staked MIR currently sits at $419.79 million, which would place Mirror among the top 17 DeFi protocols by TVL. (source: DeFi Pulse).

• Mirror’s community is heavily active in the governance of the protocol via the Mirror Forum, where proposals to change parameters of the protocol, whitelist new assets, and configure incentives are active. Active participation is reflected by more than 70 formal proposals undergoing voting in 2 months, 34.94 % of the total quantity of MIR staked for governance, and a current MIR staking APR of 29.96%.

• Minting mAssets requires collateralizing positions in UST, meaning that the adoption of Mirror has accelerated the demand for the UST stablecoin. As a result, total UST accounts and UST transaction velocity have grown concurrently since the launch of Mirror. Total UST accounts increased by 460% since December 2nd and transaction velocity increased by 297% (source: Flipside Crypto, Terra Community Console).

• Aave V2 launched on Ethereum mainnet on December 3, 2020 and since then V2 has grown to $2B in assets and borrowings (market size) with a total of 125k user transactions to date and 12,035 unique users. This dashboard focuses on Aave V2 user retention rates with 92% of the users proceeding to repeat transactions. It also highlights that more new users are using Aave V2 each week. This dashboard was created at MarketMake hackathon by Abhay Singh (source).

• Also from this dashboard, users can view a funnel that classifies Aave users based on the number of V2 transactions they’ve done, which helps identify power users. Interestingly, 25% of all V2 users have done 8+ transactions.

Last week set a new record for Aave Flash Loans with $1.9B of volume, bringing the total Flash Loan volume to $3.7B. V2 volume now surpasses V1 with $2B of Flash Loans. Most prominently, V2 Flash Loans allow for batch transactions across assets.

Last week’s spike in V2 Flash Loans pushed the ETH weekly depositor APY to 7%. ETH was a top income generator, generating 60% of the $3.4 million weekly income due to this exceptional Flash Loan volume. (Source)

• Aave Protocol started the week with nearly $4.9B in total liquidity, with $AAVE making up almost 30% of that. For more information on weekly data for Aave, subscribe to Aave Weekly on aave.com.

• Finally, Aavenomics continues to crystallize with the execution of AIP 9, Activation of the Aave Balancer Pool Liquidity Staking. Users can deposit an AAVE/ETH combo into the Aave Balancer Pool and receive aBPT (a liquidity provider token). They can then stake their aBPT in the Aave Protocol Safety Module to earn Safety Incentives. The Aave Balancer Pool reached over $57M in liquidity in just 2 days, with $3M of daily volume.

• Outstanding supply volume on Compound surpassed $7B for the first time in the protocol’s history on February 5th, and is currently sitting at $7.8B at the time of writing. The 288% growth over the last 6 months can be attributed to the rising price of collateral assets like ETH and WBTC during the recent bull run, as well as the high demand for stablecoins like USDC and DAI. These four markets each have over a billion dollars of outstanding supply, with the ETH market alone surpassing $2B.

• There is currently $3.5B of outstanding borrow volume on Compound, 86% of which is driven by the three stablecoin markets. 44.1% of the borrowing volume is DAI, 34.8% is USDC, and 7.5% is USDT. Overall, borrowing volume on Compound is up 192% in the past 6 months, with Compound now representing over 51% of the market share for the top 3 borrowing protocols.