on Sector

Vertical Expansion of DeFi: decentralized interest market rises

1. Lending is horizontal expansion for DeFi

   • more asset included : ETH, Wbtc, synthetic asset, LP/leveraged positions & RWA ( Real World Asset)
   • debt creating is more effective way through useful leveraging tools

   

2. Interest rate ( yield more general) is the vertical expansion; "Time" become a tokenized position

   • Pendle achieved two things:
     • OT & YT design: separating the yield-generating token into two separate tokens: the Ownership Token (OT) and the Yield Token (YT).

       • separate the principal position and future cash flow

         • supporting Compound & AAVE
         • Sell your principal position and only betting on yield
           • bullrun: buy YT to bet the basis point increase
           • bearish: lock up high lending rate by selling YT

       • extension: LP tokens beyond lending protocols, enable future swap fees of LP tokens to be traded and hedged

         

         • separate the principal and the swap fees
         • sell OT at day 0 and buy back all the principal token could be one way to hedge the impairment loss on LP position
         • hold YT to enjoy the yield as LP without impairment loss
     • AMM for time-decayed assets

3. Good mining & holding opportunity with:

   • attractive APYs

   

   • easy to evaluate downside risk downside risks
     • YT price is more affected by "macro" environment / capital flows
   • good growth potential: sector & project

4. Downside:

   1. Low liquidity: both mining pool & token trading pool is small
   2. Interest rate (YT) mkt is heavily affected by mining rewards and mining capitals
   3. Gas is expensive: smart contract too complex...