Exploring the Unknown. Engineer by day, explorer by night.
Exploring the Unknown. Engineer by day, explorer by night.
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As a curious person, I enjoy researching novel Defi protocols. I think that the most capital-efficient solutions will emerge as winners, and thus I believe Defi will become an integral part of our future financial system. Personally, I find it fascinating to be part of this revolution.
The protocols listed below are somewhat novel, meaning they have not been battle-tested. There could be logical flaws in their smart contracts, or even worse, they could be vulnerable to exploitation or rug pulls. Of course, the latter possibility is something we should try to avoid at all costs. To do this, I follow some standards, such as:
Being skeptical and not rushing into the next best things
Doing my own research (DYOR); checking the docs, and understanding where the yield comes from
Looking for a working product that has invested time in development (not just a fork of an existing protocol)
However, as an outsider, I may miss some red flags.
Needless to say, I am not paid by any of these protocols. In some protocols I put my funds (“put money where your mouth is”), some I have not even used (“my funds are limited”) and for some protocols, I even own their native protocol token (“selling my bags”), but on a very limited scale to my net worth (my investment is mainly in ETH).
I mostly follow ETH and L2s, so I may easily miss out on innovations on other protocols. For now, I will leave out all LSD tokens and L2 protocols, as they will likely be covered in a separate blog post.
The list is in alphabetical order.
So enough talking, let's delve into this rabbit hole!
Buffer on Arbitrum allows you to trade short-term options and reminds me very much of GMX, not only because they have copied the successful esGMX/MultiplierPoints model. With option expiries from 3 minutes up to 4 hours, trading is much attractive to gamblers. We all know, some crypto folks like to gamble, and the house usually wins, which is probably also the case for Buffer.
As an important note: Despite the high APY, the buffer vaults (which are counterparty to the traders, like the GLP of GMX) have recently lost significant value (5%). The exact reason is not known, they have changed a little their min trade size, min. expiry time (up from 1 minute to 3 minutes), etc.
When I first heard about Camelot, it was introduced as Excalibur Exchange. I was always confused with 3xcalibur (another exchange that coincidentally launched on Arbitrum at the same time in late 2022). Due to this confusion, I didn’t look into Camelot much, but in hindsight, oh boy, I was wrong.
Camelot DEX is much more than a DEX; it’s a community. They have innovative xGRAIL ponzinomics, where locked tokens can not only earn DEX fees, increase your LP fees, or last but not least invest into new protocols through their launchpad vehicle.
You can buy or sell a forward contract, and Contango borrows on fixed-rate markets (check also Illuminate.fi below), swaps on spot markets, and lends back on fixed-rate markets. It may sound complicated, but it’s like fascinating money lego. This allows you to go long or short in a capital-efficient manner.
We all like the Llamas. Defillama has not only very insightful dashboards on protocols and blockchains but also two very nice products:
Swap.Defillama: It’s an aggregator of an aggregator. That means that the llama spits out the best price for each swap. Keep in mind that if you trade large amounts on not-so-liquid assets, you could be MEV-sandwiched in some aggregators. Use MEV protection.
DLNews: If you want to stay up-to-date with news around crypto, check it out! The articles are well-written and well-researched.
Defisaver is not just a Defi product but much more. It’s a smart wallet, so you can automate your money lego, leverage up with flashloans, use one of Liquity’s frontends, or use prepared recipes or simulate transactions. A competitor is Instadapp Pro.
If you believe you should not manage your assets yourself (because you’re a gambler, tend to freak out, and thus always lose money), and prefer to have your assets managed by a “professional” asset manager, you can do it on Enzyme. They provide individual vaults, managed by more professional (but unsuccessful) asset managers or just fellow, more luckier degens. You can check their portfolios, trading strategies, gains, average monthly returns, amount of depositors, etc.
Keep in mind that past performance is no guarantee of future results.
Gearbox is another protocol that allows users to have a credit account in which you can open leveraged positions on whitelisted DeFi protocols. You can see a credit account as your automated DeFi wallet where you can not only open positions but also program them.
The credit accounts are currently gatekept, but you can deposit tokens and earn yield. Keep in mind, such vaults are a “honey pot”, so inherently risky. Sentiment.xyz, which provides a similar credit account model on Arbitrum, was just recently exploited. That’s why the Defi protocols need to be whitelisted for those “credit account models”. This, and also separate borrower/leveragers, makes them not so capital efficient.
GMD is another protocol that reminds me very much of GMX, not only because they share the first letters, but also because of their similar spirit and close connection. GMD’s first and most successful product is a split up of GLP into its single parts, providing pseudo-delta-neutral vaults. They also have a product for Buffer.
Fluxfinance is the “partner in crime” of Ondo.Finance. It is the only place where you can deposit Ondo’s short-term U.S. government bond token, $OSUG, as collateral and borrow on-chain stable coins (USDC, DAI, USDC). Depositors of $OSUG, which gain yield from government bonds, are likely to deposit it into Fluxfinance because they can earn the difference in borrowing-lending rates. This can be as high as government bonds, which is not always the case in usual Defi lending protocols (Aave, Compound).
There are many fixed-rate lending protocols for stablecoins (such as element.fi, notional, pendle, sense, swivel, yield, etc.) that are notorious for low (fragmented) liquidity. And every protocol has their own maturity dates, leading to chaos.
Illuminate (closely related to swivel, though) has identified this, and have launched an aggregator for those lending protocols, providing you with the best rates.
However, there might be some more coordination required between all those protocols.
IPOR is an Inter-protocol Offered Rate for Decentralized Finance, inspired by the LIBOR (that defines reference rates for banks) and adapted for stablecoins USDC, USDT, DAI. The IPOR benchmark index is designed to produce the average rate that represents the cost of borrowing or lending money in the universe of decentralized finance in a capital-efficient way. It can be used as a hedge, for arbitrage or just for speculation/trading. A good example is provided here that shows how to use IPOR to fix rates when you borrow from Morpho.
https://docs.ipor.io/automated-market-maker/ipor-swaps/hedging-example-with-morpho-protocol
Although this protocol may seem complicated, they have very insightful documentation, blog posts, and papers covering many topics. It's worth checking them out!
JonesDAO is an original Arbitrum protocol, deploying some asset management style vaults. Recently they have launched one killer product: the leveraged GLP and the gamma neutral USDC. Whenever I check their vaults status, their GLP vault is full.
And I check them often.
Maverick is a novel AMM (swap exchange) with high capital efficiency. It works with “bins” (which we know from traderjoe), but those bins are programmed to move with the price (they can also be chosen static) and thus reduce the so-called impermanent loss in an automatic way when you have a price bias. For swap users, it provides swaps with very low fees. It has already been implemented in 1inch, which helps with adoption.
Mellow.Finance provides strategies, mostly active liquidity management. Think of a leveraged curve wstETH/ETH position, and a Mellow-bot observes the borrowing rate. When the borrowing rate is skyrocketing, they just deleverage and save you the hassle. The Ethereum gas fees, which can skyrocket during such events (high borrowing rate is a sign of market turbulence or depeg scenarios), are shared among protocol users. Some other products from Mellow control Uniswap vaults.
The comfort you pay with additional smart contract risk. Mellow is currently in beta.
“Crypto kills the middle-man,” they told me.
It's not true.
Morpho is a middle-man between Aave Lender and Borrower, reducing the spread. The lender gets higher returns, and the borrower pays less. Both parties are happy. And you even get Morpho’s token. Enough said. We like this middle-man.
Myso lets you access liquidation-free, fixed-interest, and oracle-free loans. They are currently in gated launch, so liquidity is low. They have many articles providing more insights on their Medium blog.
I talk much about fixed-lending / fixed-terms, and notional is the Ethereum leader in this segment TVL-wise. They have also released a leveraged vault, which leads to high ETH lending rates. They announced a v3, in which idle money interacts with variable pools like Aave or Compound (so-called prime lenders), making the protocol more capital efficient.
An AMM on Arbitrum allows you to access leverage with no liquidation penalty, and it's fully oracleless. It's done as a power perpetual token, for example ETH^2, in which you have constant 2x leverage. But there is a catch - you pay relatively high funding rates, so it's rather good for short-term trades. Now, let me ask you: What happens when you make an (LSD/ETH)^2? LSDs like rETH or wstETH gain value natively against their underlying ETH, and thus, in a power perpetual token, you would gain power staking yield. Numoen allows exactly this. Currently, there is very low liquidity on these power-staked boosted LSD tokens, so they are not very useful, but it's interesting to watch.
If you’re looking for a larger power protocol, check out opyn’s squeeth.
Ondo.Finance allows you to connect to the "real world." Their main product is $OSUG, which represents Short-Term US Government Bonds. They have just announced $OMMF, which will invest in liquid short-term U.S. Government debt. Its prey? $USDC! Why should you hold USDC when you can get an almost risk-free yield on your dollar?
They also have other products, such as a fund for the US money market and high-yield income. Currently, access is gatekept with KYC rules and a $100k minimum deposit. This reminds me that the term "Defi" does not stand for permissionless.
They are strongly connected with Fluxfinance.
https://blog.ondo.finance/tokenizing-money-market-funds/
We know that US citizens are protected from investing in risky businesses by the SEC or Gary himself, but there is - SBF knows - always a solution: move offshore!
OpenEden is a direct competitor to Ondo.Finance and is launching their US treasury from Singapore. KYC is still required and their alpha is gatekept. The minimum investment is $100k, same as Ondo.
Parallax.Finance is currently in Alpha and they will launch some novelish strategies on Arbitrum and zksync (probably similar to gearbox and mellow).
When rage.trade launched, there was much hype. Hunter smelled a fresh airdrop. Their Delta Neutral Vault was full in minutes, but underpermoed. There has been some flaws, some GLP trading gains were not “neutralized” and thus some bad beef on twitter was between the bull from rage.trade and the cowboys from Jones. I’m not sure if it’s just marketing.
Rage is interesting to follow as they will thrive in competition, and they have announced GLP v2 and their token (soon^Tm).
Redachted Cartel is more of development studio than a protocol. They have launched at the peak of crypto mania end of 2021 and has since then delivered with protocols which are used in the Defi space. Their prime product I see as Hidden Hand, which is similar to votium for curve, and protocols can incentive LP’s.
Their main bribe activity happens Aura, which is built on top of Balancer System. The bribes of Aurua give Redacted Cartel a continuous income stream (see image below), even during the 2022 bear market. Another income stream is Pirex, which is a liquid wraper. They have just announced Dinero, a new stable coin based on staked ETH. Last but not least Redacted Cartel has built a treasury of > $25M (mainly consisting of curve aligned tokens cvc).
Sturdy.finance is a normal lending-borrowing market with one trick: borrowers pay no borrow fee until 80% utilization. This means (for most of the time) free leverage.
Sturdy takes advantage of it by allowing you to get into some pools with looping and leverage up, for example ETH staking yields. You can easily achieve double-digit ETH yield (when utilization <80%), which is “not bad”, even for a pure degen. Or let's call it insane. When utilization jumps above 80%, game theory jumps in: borrower fees increase, but lenders also get their share, attracting likely more liquidity, or some deleverage, bringing the overall utilization down. The highest risk I see in this model is a larger depeg event of an LSD (which I treat as a black swan event currently). It would be devastating for this protocol.
Syncswap is the first protocol I'm listing from the zk.Era. I've been following them for some time now; they are legitimate, their product is nice, and they align well with the zk.sync spirit. Syncswap incentivize trading by giving out ySYNC tokens as a reward, plus it’s airdrop hunter season for zk.sync, so the APY on their pools is currently quite good. It's a win-win, and buying shovels in a gold rush is a good strategy, isn't it?
Syncswap itself provides different pool models (classic xy=k, stable x+y=k, or concentrated ax+(1-a)*y=k), dynamic fees, and a smart router.
If you're interested in zk.sync and its ecosystem, try it out.
Some might now Joe from Avalanche, as an ETH Maxi, I don’t - not until their launch on Arbitrum. I take the liberty of listing Traderjoe here, although it actually already belongs to “older protocols”. They are continuously innovating, recently launched automated liquidity (e.g. concentrate liquidity around the active bin when volatility is low and widen as volatility increases with inputs from twap, volatility and puts as position and shape size) and much more.
If you’re a fan of Trader Joe check also out stakehut.finance
As a curious person, I enjoy researching novel Defi protocols. I think that the most capital-efficient solutions will emerge as winners, and thus I believe Defi will become an integral part of our future financial system. Personally, I find it fascinating to be part of this revolution.
The protocols listed below are somewhat novel, meaning they have not been battle-tested. There could be logical flaws in their smart contracts, or even worse, they could be vulnerable to exploitation or rug pulls. Of course, the latter possibility is something we should try to avoid at all costs. To do this, I follow some standards, such as:
Being skeptical and not rushing into the next best things
Doing my own research (DYOR); checking the docs, and understanding where the yield comes from
Looking for a working product that has invested time in development (not just a fork of an existing protocol)
However, as an outsider, I may miss some red flags.
Needless to say, I am not paid by any of these protocols. In some protocols I put my funds (“put money where your mouth is”), some I have not even used (“my funds are limited”) and for some protocols, I even own their native protocol token (“selling my bags”), but on a very limited scale to my net worth (my investment is mainly in ETH).
I mostly follow ETH and L2s, so I may easily miss out on innovations on other protocols. For now, I will leave out all LSD tokens and L2 protocols, as they will likely be covered in a separate blog post.
The list is in alphabetical order.
So enough talking, let's delve into this rabbit hole!
Buffer on Arbitrum allows you to trade short-term options and reminds me very much of GMX, not only because they have copied the successful esGMX/MultiplierPoints model. With option expiries from 3 minutes up to 4 hours, trading is much attractive to gamblers. We all know, some crypto folks like to gamble, and the house usually wins, which is probably also the case for Buffer.
As an important note: Despite the high APY, the buffer vaults (which are counterparty to the traders, like the GLP of GMX) have recently lost significant value (5%). The exact reason is not known, they have changed a little their min trade size, min. expiry time (up from 1 minute to 3 minutes), etc.
When I first heard about Camelot, it was introduced as Excalibur Exchange. I was always confused with 3xcalibur (another exchange that coincidentally launched on Arbitrum at the same time in late 2022). Due to this confusion, I didn’t look into Camelot much, but in hindsight, oh boy, I was wrong.
Camelot DEX is much more than a DEX; it’s a community. They have innovative xGRAIL ponzinomics, where locked tokens can not only earn DEX fees, increase your LP fees, or last but not least invest into new protocols through their launchpad vehicle.
You can buy or sell a forward contract, and Contango borrows on fixed-rate markets (check also Illuminate.fi below), swaps on spot markets, and lends back on fixed-rate markets. It may sound complicated, but it’s like fascinating money lego. This allows you to go long or short in a capital-efficient manner.
We all like the Llamas. Defillama has not only very insightful dashboards on protocols and blockchains but also two very nice products:
Swap.Defillama: It’s an aggregator of an aggregator. That means that the llama spits out the best price for each swap. Keep in mind that if you trade large amounts on not-so-liquid assets, you could be MEV-sandwiched in some aggregators. Use MEV protection.
DLNews: If you want to stay up-to-date with news around crypto, check it out! The articles are well-written and well-researched.
Defisaver is not just a Defi product but much more. It’s a smart wallet, so you can automate your money lego, leverage up with flashloans, use one of Liquity’s frontends, or use prepared recipes or simulate transactions. A competitor is Instadapp Pro.
If you believe you should not manage your assets yourself (because you’re a gambler, tend to freak out, and thus always lose money), and prefer to have your assets managed by a “professional” asset manager, you can do it on Enzyme. They provide individual vaults, managed by more professional (but unsuccessful) asset managers or just fellow, more luckier degens. You can check their portfolios, trading strategies, gains, average monthly returns, amount of depositors, etc.
Keep in mind that past performance is no guarantee of future results.
Gearbox is another protocol that allows users to have a credit account in which you can open leveraged positions on whitelisted DeFi protocols. You can see a credit account as your automated DeFi wallet where you can not only open positions but also program them.
The credit accounts are currently gatekept, but you can deposit tokens and earn yield. Keep in mind, such vaults are a “honey pot”, so inherently risky. Sentiment.xyz, which provides a similar credit account model on Arbitrum, was just recently exploited. That’s why the Defi protocols need to be whitelisted for those “credit account models”. This, and also separate borrower/leveragers, makes them not so capital efficient.
GMD is another protocol that reminds me very much of GMX, not only because they share the first letters, but also because of their similar spirit and close connection. GMD’s first and most successful product is a split up of GLP into its single parts, providing pseudo-delta-neutral vaults. They also have a product for Buffer.
Fluxfinance is the “partner in crime” of Ondo.Finance. It is the only place where you can deposit Ondo’s short-term U.S. government bond token, $OSUG, as collateral and borrow on-chain stable coins (USDC, DAI, USDC). Depositors of $OSUG, which gain yield from government bonds, are likely to deposit it into Fluxfinance because they can earn the difference in borrowing-lending rates. This can be as high as government bonds, which is not always the case in usual Defi lending protocols (Aave, Compound).
There are many fixed-rate lending protocols for stablecoins (such as element.fi, notional, pendle, sense, swivel, yield, etc.) that are notorious for low (fragmented) liquidity. And every protocol has their own maturity dates, leading to chaos.
Illuminate (closely related to swivel, though) has identified this, and have launched an aggregator for those lending protocols, providing you with the best rates.
However, there might be some more coordination required between all those protocols.
IPOR is an Inter-protocol Offered Rate for Decentralized Finance, inspired by the LIBOR (that defines reference rates for banks) and adapted for stablecoins USDC, USDT, DAI. The IPOR benchmark index is designed to produce the average rate that represents the cost of borrowing or lending money in the universe of decentralized finance in a capital-efficient way. It can be used as a hedge, for arbitrage or just for speculation/trading. A good example is provided here that shows how to use IPOR to fix rates when you borrow from Morpho.
https://docs.ipor.io/automated-market-maker/ipor-swaps/hedging-example-with-morpho-protocol
Although this protocol may seem complicated, they have very insightful documentation, blog posts, and papers covering many topics. It's worth checking them out!
JonesDAO is an original Arbitrum protocol, deploying some asset management style vaults. Recently they have launched one killer product: the leveraged GLP and the gamma neutral USDC. Whenever I check their vaults status, their GLP vault is full.
And I check them often.
Maverick is a novel AMM (swap exchange) with high capital efficiency. It works with “bins” (which we know from traderjoe), but those bins are programmed to move with the price (they can also be chosen static) and thus reduce the so-called impermanent loss in an automatic way when you have a price bias. For swap users, it provides swaps with very low fees. It has already been implemented in 1inch, which helps with adoption.
Mellow.Finance provides strategies, mostly active liquidity management. Think of a leveraged curve wstETH/ETH position, and a Mellow-bot observes the borrowing rate. When the borrowing rate is skyrocketing, they just deleverage and save you the hassle. The Ethereum gas fees, which can skyrocket during such events (high borrowing rate is a sign of market turbulence or depeg scenarios), are shared among protocol users. Some other products from Mellow control Uniswap vaults.
The comfort you pay with additional smart contract risk. Mellow is currently in beta.
“Crypto kills the middle-man,” they told me.
It's not true.
Morpho is a middle-man between Aave Lender and Borrower, reducing the spread. The lender gets higher returns, and the borrower pays less. Both parties are happy. And you even get Morpho’s token. Enough said. We like this middle-man.
Myso lets you access liquidation-free, fixed-interest, and oracle-free loans. They are currently in gated launch, so liquidity is low. They have many articles providing more insights on their Medium blog.
I talk much about fixed-lending / fixed-terms, and notional is the Ethereum leader in this segment TVL-wise. They have also released a leveraged vault, which leads to high ETH lending rates. They announced a v3, in which idle money interacts with variable pools like Aave or Compound (so-called prime lenders), making the protocol more capital efficient.
An AMM on Arbitrum allows you to access leverage with no liquidation penalty, and it's fully oracleless. It's done as a power perpetual token, for example ETH^2, in which you have constant 2x leverage. But there is a catch - you pay relatively high funding rates, so it's rather good for short-term trades. Now, let me ask you: What happens when you make an (LSD/ETH)^2? LSDs like rETH or wstETH gain value natively against their underlying ETH, and thus, in a power perpetual token, you would gain power staking yield. Numoen allows exactly this. Currently, there is very low liquidity on these power-staked boosted LSD tokens, so they are not very useful, but it's interesting to watch.
If you’re looking for a larger power protocol, check out opyn’s squeeth.
Ondo.Finance allows you to connect to the "real world." Their main product is $OSUG, which represents Short-Term US Government Bonds. They have just announced $OMMF, which will invest in liquid short-term U.S. Government debt. Its prey? $USDC! Why should you hold USDC when you can get an almost risk-free yield on your dollar?
They also have other products, such as a fund for the US money market and high-yield income. Currently, access is gatekept with KYC rules and a $100k minimum deposit. This reminds me that the term "Defi" does not stand for permissionless.
They are strongly connected with Fluxfinance.
https://blog.ondo.finance/tokenizing-money-market-funds/
We know that US citizens are protected from investing in risky businesses by the SEC or Gary himself, but there is - SBF knows - always a solution: move offshore!
OpenEden is a direct competitor to Ondo.Finance and is launching their US treasury from Singapore. KYC is still required and their alpha is gatekept. The minimum investment is $100k, same as Ondo.
Parallax.Finance is currently in Alpha and they will launch some novelish strategies on Arbitrum and zksync (probably similar to gearbox and mellow).
When rage.trade launched, there was much hype. Hunter smelled a fresh airdrop. Their Delta Neutral Vault was full in minutes, but underpermoed. There has been some flaws, some GLP trading gains were not “neutralized” and thus some bad beef on twitter was between the bull from rage.trade and the cowboys from Jones. I’m not sure if it’s just marketing.
Rage is interesting to follow as they will thrive in competition, and they have announced GLP v2 and their token (soon^Tm).
Redachted Cartel is more of development studio than a protocol. They have launched at the peak of crypto mania end of 2021 and has since then delivered with protocols which are used in the Defi space. Their prime product I see as Hidden Hand, which is similar to votium for curve, and protocols can incentive LP’s.
Their main bribe activity happens Aura, which is built on top of Balancer System. The bribes of Aurua give Redacted Cartel a continuous income stream (see image below), even during the 2022 bear market. Another income stream is Pirex, which is a liquid wraper. They have just announced Dinero, a new stable coin based on staked ETH. Last but not least Redacted Cartel has built a treasury of > $25M (mainly consisting of curve aligned tokens cvc).
Sturdy.finance is a normal lending-borrowing market with one trick: borrowers pay no borrow fee until 80% utilization. This means (for most of the time) free leverage.
Sturdy takes advantage of it by allowing you to get into some pools with looping and leverage up, for example ETH staking yields. You can easily achieve double-digit ETH yield (when utilization <80%), which is “not bad”, even for a pure degen. Or let's call it insane. When utilization jumps above 80%, game theory jumps in: borrower fees increase, but lenders also get their share, attracting likely more liquidity, or some deleverage, bringing the overall utilization down. The highest risk I see in this model is a larger depeg event of an LSD (which I treat as a black swan event currently). It would be devastating for this protocol.
Syncswap is the first protocol I'm listing from the zk.Era. I've been following them for some time now; they are legitimate, their product is nice, and they align well with the zk.sync spirit. Syncswap incentivize trading by giving out ySYNC tokens as a reward, plus it’s airdrop hunter season for zk.sync, so the APY on their pools is currently quite good. It's a win-win, and buying shovels in a gold rush is a good strategy, isn't it?
Syncswap itself provides different pool models (classic xy=k, stable x+y=k, or concentrated ax+(1-a)*y=k), dynamic fees, and a smart router.
If you're interested in zk.sync and its ecosystem, try it out.
Some might now Joe from Avalanche, as an ETH Maxi, I don’t - not until their launch on Arbitrum. I take the liberty of listing Traderjoe here, although it actually already belongs to “older protocols”. They are continuously innovating, recently launched automated liquidity (e.g. concentrate liquidity around the active bin when volatility is low and widen as volatility increases with inputs from twap, volatility and puts as position and shape size) and much more.
If you’re a fan of Trader Joe check also out stakehut.finance
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