L2s Lead Gas Surge, LendFlare Yields, & Maple's Loan Growth

APR 06, 2022 • 5 Min Read

Joo Kian + 2 others

DISCLOSURE: DELPHI VENTURES HAS INVESTED IN RON, AXS, ETH, OFFCHAIN LABS (ARBITRUM). MEMBERS OF OUR TEAM ALSO HOLD YFI AND AAVE. THESE STATEMENTS ARE INTENDED TO DISCLOSE ANY CONFLICT OF INTEREST AND SHOULD NOT BE MISCONSTRUED AS A RECOMMENDATION TO PURCHASE ANY TOKEN. THIS CONTENT IS FOR INFORMATIONAL PURPOSES ONLY AND YOU SHOULD NOT MAKE DECISIONS BASED SOLELY ON IT. THIS IS NOT INVESTMENT ADVICE.

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Chart of The Day: Gas Spend Surges in March on L2 Activity
  • Layer-2 rollups post all their transactional data to L1s. This allows L2s to inherit the security of the L1 it settles on.
  • In March 2022, L2s settling to Ethereum hit a new monthly high in terms of gas spent, surpassing 35B. (Note: gas expenditures are not to be confused with gwei, or the price of gas in ETH.)
  • The surge in gas spent was propelled by activity from several L2s. The main contributors were:
    • Arbitrum, the largest contributor to L2 gas settlements, saw transactions start to trend upwards, likely due to the attention from TreasureDAO and Stargate. Read our Delphi Pro report to learn more about TreasureDAO.
    • Metis also played a significant part as the launch of Hermes Protocol (a Solidly Fork) attracted yield farmers over to Metis, which was not surprising given that Solidly had a great launch in Fantom.
    • ImmutableX started spending more gas as activity re-ignited. The activity will likely remain high if transactional volumes on IMX continue to soar. IMX now has the 2nd largest daily transactions of NFTs by Chain.
  • As Ethereum remains one of the most secure and decentralized L1s, we can expect continuous development by L2s to utilize its security.
  • For more detail, read our Delphi Pro report about L1s vs L2s.

Airdrops, Boosted Stablecoin Farm, Lending Market & NFT Staking
[Excerpt from our Apr. 6 Yield Insights]

  • LendFlare allows Curve investors to borrow against their LPs for a certain amount of period with a fixed borrow rate and no concerns for assets being liquidated due to price fluctuations. Curve LPs will not be lent out again but reinvested in Convex to ensure the maximum profit and give all back to borrowers. Investors who supplied loan liquidity will gain one of the highest supplied interest rates compared to current lending platforms. Learn more about it here.
  • Yield calculations can be found here. To access Ethereum, you’ll need to configure your MetaMask to run Ethereum’s Mainnet.
  • Bridge: You can use Synapse Protocol to bridge assets over to Ethereum. Ethereum uses ETH for gas.
  • Tokenomics: Out of a total of 3.03 Billion LFT tokens:
    • 62% for liquidity providers
    • 15% for IDO participants which can be claimed instantly
    • 15% to permanently bootstrap Uniswap liquidity
    • 3% for the team, vested over two years
    • 4% for the community, vested over four years
    • 1% for an airdrop which can be claimed instantly
  • Emissions: The initial mining rate is about 0.7 million LFT per day. At the end of each year, the mining rate is lowered. The initial allocation ratio is set by the team and then changed by community proposals. The allocation ratio depends on the pool gauge weight.
  • VeLFT: The longer the user locks LFT tokens, the more VeLFT tokens the user receives. The VeLFT tokens are not transferrable. The locking procedure depends on a number of factors:

  • Holders receive 50% of loan interests on the platform and boost your LFT rewards up to 2.5X
  • Holders can create their own proposals and vote.
  • VeLFT automatically boosts LFT earnings. LFT boosting depends on the total number of VeLFTs and the total current pool liquidity.
  • For more, Delphi members can see our latest Yield Insights here.

The Race to Build a “Sticky” DeFi Debt Market
[Excerpt from Delphi Pro Report]

  • Undercollateralized lending makes up less than 5% of the $50B in total value locked across crypto money markets. In traditional finance, the vast majority of credit is extended in an uncollateralized or under-collateralized fashion, allowing companies and individuals access to efficient debt financing. The lack of infrastructure surrounding these loans has acted as a massive bottleneck within the crypto economy. Maple Finance provides a solution via under-collateralized loans to approved borrowers while taking advantage of the composability and efficiency of public blockchains.
  • Apart from protocol growth, Maple’s token (MPL) has had a fantastic start to 2022, significantly outperforming competitors and the broader lending market.
  • This out-performance from Maple can be attributed to its improving fundamentals versus other lending protocols. One metric we can use to illustrate this is comparing TVL between platforms. In this case, TVL makes sense as it directly relates to the number of loans these platforms can support and thus revenue that can be generated.

  • Maple’s loans outstanding have grown over 70% in 2022 with its utilization hovering above 90%. This high utilization rate versus TrueFi can be attributed to the caps that Maple has on its lending pools alongside the 90-day lock-up period. By doing this, Maple can reduce the amount of capital that is idly collecting yield while providing limited value to the protocol.
  • A potential problem for both Maple and TrueFi is the fact that lending yields are currently greater than borrowing costs, which opens up potential exploitation. This is a result of the cumulative lending yield consisting of organic yield and a token subsidy. Users could effectively borrow from the protocol and then lend to themselves, thus pocketing the token incentivized spread. Maple is in the process of mitigating this by slimming down or removing token incentives for lenders.
  • To learn more about TrueFi’s loan model you can read our previous report here. TrueFi has also recently launched its lending marketplace, which is very similar to Maple Finance’s current design.
  • For more, you can see our latest Delphi Report on Maple Finance here.
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Joo Kian + 2 others