Crypto Research Day 2024 Insights

Crypto Research Day 2024: The State of DeFi; Intents & Crypto UX; The Bitcoin Ecosystem

On 19th September 2024 ​ Superscrypt ,  Ethereal Ventures , and  ANAGRAM hosted the Crypto Research Day in Singapore, where some of the most prominent thought leaders in the Web3 spoke about the latest trends in the space. As part of the program we host three panels on The State of DeFi, Intents & Crypto UX and The Bitcoin Ecosystem. Takeaways & Insights below!

The State of DeFi

Key takeaways from a panel featuring David from Drift, Tian from Pendle, Guy from Ethena and Siong from Jupiter

• Current Market Conditions and Challenges in DeFi

  • DeFi has seen a significant drop in Total Value Locked (TVL), from a peak of $150 billion to $80 billion, indicating a more challenging environment.

  • A major hurdle remains the user experience, such as connecting wallets and so forth, which many find intimidating.

  • DeFi didnt make much sense through 2023 cause treasury and other risk free yields were decent enough to not warrant the risk with DeFi. Things changing now, especaially with the latest rate cut.

• Sustainability and Token Incentives

  • DeFi protocols face difficulties in maintaining user interest post-token incentives like airdrops.

  • While airdrops are still important to hit that critical mass, sustainable growth strategies are important to wane off this. One way could be to stretch out the airdrop over time and effectively make it vest, like what Jupiter did. They found it helps users to get more engaged and they tend to come back more often and stick around.

  • Additionally, Token inflation often leads to unsustainable outcomes, where protocols compete aggressively for liquidity but struggle with long-term user retention.

• DeFi vs. Centralization and TradFi Convergence

  • Many DeFi protocols are becoming more centralized, offering faster transactions and better user experience at the cost of decentralization.

  • Users increasingly prioritize convenience and efficiency, blurring the lines between DeFi and centralized solutions.

  • As DeFi solutions adopt more centralized elements, there is a growing convergence between DeFi and traditional finance (TradFi).

• Lack of Radical Innovation in DeFi

  • The space is currently experiencing a lack of groundbreaking innovations, with most developments being incremental rather than revolutionary.

  • Many protocols are focused on improving capital efficiency and refining existing products, but there are no radically new primitives or technologies emerging.

  • While there is some exploration in areas like account abstraction and interest rate products, the overall sentiment is that DeFi is in a phase of iterative improvements rather than disruptive breakthroughs.

Intents and Crypto UX

During this panel with Hart Lambur (Across Protocol), Adrian Brink (Anoma), Dominik Hell ( LI.FI ), and Joshua Baker (Aori), we explore the future of intents and how it will impact how individuals interact with blockchain in the future.

• History and Current Landscape

  • In the beginning, blockchains optimized for decentralization but suffered with throughput. They needed scaling solutions which was solved by creating more blockchains, hence, the creation of new L1s and L2s on top of Ethereum. This inevitably led to fragmentation and complexity on how to make blockchains interoperable.

  • There’s a broad spectrum of intent protocols: on one side we have generalized intents (Anoma) enabling any type of transaction to be codified, in the middle we have Across building intent infrastructure for crosschain asset transfers, and at the other end we have hyper-specific use cases like Aori building an intents-based orderbook. Finally, we have LI.FI aggregating all approaches of intents to enable clients to route their desires in the most effective way possible.

• The Future of Blockchains

  • There was general consensus amongst the panelists that the future of blockchains was modular.

  • Bear Case for crypto is creating an entirely new financial rails for all of finance to run on. The greatest unlock of DeFi is equalizing the playing field for trading assets — anyone can be a market maker and intents makes this process even better. In TradFi, there’s a high barrier of entry for HFT — you need to have agreements with exchanges, capital, and a lot of talent.

    • As of now, execution and order matching is infinitely better in TradFi; however, custody and settlement is way much better on blockchain rails.

  • Bull Case for crypto is placing the entire internet onchain and creating a generalized economy native to the internet, which is what Anoma is building towards.

• Thesis for Intents

  • 95% of what users do today between blockchains is move assets and this is likely going to continue to be the case.

  • If you control orderflow and volume, then you will make money which is why Li.Fi built out the aggregator API and frontend.

  • A healthy solver economy is naturally sustainable: on Across, solvers have never been incentivized, they only generate revenue from user’s fees and spread.

The State of the Bitcoin Ecosystem

Bitcoin has often been referred to as “digital gold” where its main utility is being a store-of-value. However, with a $1.3T market cap. (which represents ~54% of the entire web3 market), there is a massive opportunity to extend these assets (and liquidity) to various use cases ( participating in DeFi for additional yield , scaling security to other networks , etc). This prompted a deeper look at the Bitcoin ecosystem with our panel featuring Chris Spadafora of Corn, Kai-Tai (KT) of Yala Labs, Matt Donovan of Lombard and Clayton Menzel of Babylon Labs.

• Unlocking additional yields with idle BTC: The panelists (across Corn, Yala Labs, Lombard and Babylon Labs) shared similar observations around increased demand across institutions and users to generate yields from their BTC, suggesting BTC’s evolution beyond a store-of-value.

  • KT shared that part of this is driven by the outperformance of select stocks in the traditional market, where Nvidia has outperformed BTC , hence there’s increased appetite to earn higher returns with BTC.

  • Matt also commented that yield-bearing assets are the foundations of TradFi, and that is what Lombard’s LBTC hopes to unlock by enabling users to participate in various DeFi strategies with their BTC (Lombard’s platform has more than ~$300M worth of Bitcoin deposited on its platform at the time of the panel, and has grown up to $368M since).

• BTC will continue to live (and be secured) natively on Bitcoin network, and will only be deployed to secure, battle-tested ecosystems & products: Although the market is seeing a rise in yield generation opportunities for BTC (across various ecosystem, such asBitcoin L2s, Ethereum, Solana), the consensus is that Bitcoin holders are still largely conservative and security of their BTC will be top of mind (whether it’s held with trusted custodians, self-custodial on the native BTC network, etc).

  • More than 90% of wrapped BTC (wBTC) are deployed on Ethereum, where 70% is going into blue-chip DeFi protocols like Aave and Compound.

• Increased expressivity with recent network developments (OP_CAT, BitVM, etc) unlocks new use cases beyond just “hodl-ing” BTC: Historically, BTC is often held and used as collateral for loans (e.g. miners not wanting to sell their BTC, take loans for operating expenses, etc); with increased programmability on BTC (native or not), more uses are imminent.

  • Clayton shared how Babylon Labs is building a horizontal shared security layer, which leverages BTC to bootstrap and enhance security of PoS networks.

A bit about the hosts…

• Superscrypt is an early-stage web3 fund based in Singapore & New York and founded by Temasek. We focus on infrastructure and emerging applications in web3 and provide comprehensive support to founders building the next wave of disruptive decentralized networks. Learn more here .

• Ethereal funds and supports the growth of early web3 companies and innovators. We invest directly in permissionless networks and partner with the global teams building them at the earliest stages of their journey. Learn more here .

• ​ANAGRAM is a modern institution for a novel technology. We leverage human and financial capital to help bring the ownership economy to the masses. Learn more here. Learn more here .