About the editor: Spencer Noon is Co-founder & General Partner at Variant.

Network Coverage
Coverage on Lido, Aave, MakerDAO, Instadapp, and Frax.

• Total ETH staked in ETH2 exceeded 10m this past month. Though the overall rate of additional ETH being staked started to slow down at the end of last year, the share of ETH2 staking activity attributed to Lido grew in the same time frame (crossing the 25% mark). Lido’s share of the total amount of ETH staked spiked significantly in March 2022, partly due to anticipation of the coming merge but also new usage of stETH by individuals and smart contracts (eg. AAVE listing).

• stETH supply grew consistently since launch. Until summer 2021, this was mostly in the Curve pool. Since fall of 2021, it started to differentiate into other sources, such as Gnosis, Yearn, Nexus, and most notably, Aave. March 2022 saw a massive uptick of stETH in Aave (almost 50% of Feb supply).

• Unique addresses depositing in Lido was low until Aug 2021, then spiked ~5x and leveled off around ~3-5k/mo, indicating more are individuals staking through Lido. Then, in August, avg deposit size dipped as depositors increased, and jumped in March 2022 (Aave bump).

• Aave price rose 88% this past month, coinciding with the v3 launch. Price fell from ~$300 in May 2021 (post L2 launch) to ~$120 in March 2022. Also, the number of new daily users fell from ~400 in May 2021 to ~60 in Feb 2022. After the v3 launch, new users and price both rose significantly. The spike in new users led ahead of the price movement. The increase in number of new daily users (to 370/day) implies that users saw meaningful value in the new features (though not yet live on ETH mainnet).

• Aave v3 has been live for Avalanche, Optimism, Fantom, Harmony, Polygon, and Arbitrum for ~2 weeks now. The borrow volume (per Defi Llama) grew linearly (up to ~$57M so far). The bulk of v3 activity has been on Polygon. This is distinct from v2 markets, where Polygon was ~8% of borrow volume.

• Over the past two weeks, borrow volumes on Aave v2 have outpaced repayments. As such, about $8b is borrowed of ~$22b in liquidity, with utilization being weighted toward stablecoins. This implies leverage-seeking behavior and market bullishness. v2 volumes still eclipse v3, largely due to Ethereum.

• MakerDAO has seen its DAI supply increase by 350m (4%) YTD. DAI supply peaked at 10.3b on February 15, 2022 and has been in a supply contraction since, falling 6% from its all-time-high. As a result, DAI's stablecoin market cap share has fallen from 6.3% to 5.6% YTD. Since February, DAI's market share has been crowded out by algorithmic USD-pegged stablecoins like FRAX and UST.

• MakerDAO grew its reliance on stablecoins until mid-March. Total DAI supply backed by stablecoins has fallen 8% since its ATH (6.572b DAI) while non-stablecoins are backing 12% more DAI. This is positive for MakerDAO with a higher ratio of DAI’s supply backed by more decentralized collateral assets.

• MKR is burned once MakerDAO's system surplus reaches 250m DAI from protocol profits (27% is filled). Annualized profits have fallen to $69m (37%) YTD, although higher stability fees have paused this downtrend for now. However, at current rates, fees will start burning MKR after 1,660 days (4.5 years).

• Instadapp is a DeFi Middleware app that helps users with complex DeFi transactions such as refinancing, cross chain swaps and more. Instadapp utilizes flashloans for many of its operations. In December of last year, the project launched and transitioned to its Flashloan Aggregator, completing over $1b in flashloan volumes across multiple networks.