Everywhere you look theres a new chain.  Some chains the sole purpose is to launch more chains on that chain. Layer 1s, 2s, 3s, sidechains, drivechains, any and every configuration under the sun.  It may seem overkill but we dont make it anywhere without experimentation and, as long as these new chains are contributing to well intentioned experimentation in crypto, its net positive in my book.

While it seems like DeFi and especially DeFi 1.0 are dead or at least less exciting than these new shiny chains, theres a natural law of finance that cant be broken.

Liquidity is king

No matter what a chain is purporting to do, there is some value transfer happening, and therefore it is financial in nature.  To support these financial transactions you need liquidity. There are two Factors that will drive a shift in the relationship between new chains and Defi infrastructure

1. Less meat on the bone for new chains - Layers of infrastructure will make things easier to launch a chain but less profitable as well

2. Minimum viable necessary DeFi primitives are a solved problem - The baseline for what a chain really needs in order to start innovating is known

In the years since DeFi summer largely new chains would court existing protocols (uniswap, curve, aave, sushiswap launching on Fantom, Polygon, etc) or new groups would fork mainnet protocols to launch on the chain (quickswap on polygon, beethoven on op, trader joe on avalanche).  That model was sufficient when there were only a few new chains, what do you do when theres dozens or hundreds of chains?  Do existing protocols want to add reputational risk and technical overhead to launch on all of these new chains?  Are there dozens or hundreds of teams willing and qualified to launch and support these DeFi primitives as forks on all of the chains?  My answer to both those questions is NO

When launching a new chain is as easy as launching a token, will there be funding available to bootstrap grant programs to incentivize teams to build the necessary financial infrastructure?  When sequencers are decentralized and validators productized with miniscule transaction fees will there be enough potential revenue to bootstrap a robust ecosystem?  My answer to both of these is also NO

The best descriptor for DeFi has always been Money Legos.  Build a thing, it catches on, gets use, and over time as its successful and proves to be secure you start building on top of it.  Some of the earliest Legos are still some of the most popular; Uniswap, Aave, Compound, Maker, Curve have all been around for 5+ years and continue to dominate TVL.  Experimentation on top of and inspired by these protocols should be greatly encouraged but the core protocols have proven very useful and very safe.  Forking them to run on a new chain adds little value, but the fees they generate do still offer a lot of long term value if the new chain is successful.

The rise of chain-native DeFi

Berachain is the most popular example of what will be a new trend with chains, absorbing core DeFi primitives into the chain itself.  The protocol deploys an AMM and a lending protocol and receives the fees from those deployments.  I believe this is only an early example and that the end game will be new chains launching with core DeFi primitives built in at their core. With complexity stripped away, chains can launch with the necessary financial infrastructure with little added overhead and have a clear path to positive revenue via transaction and lending fees if they can attract users.  The goal should not be for chains to absorb all protocols, but to only own whats necessary so that true experimentation can occur without running into financial infrastructure bottlenecks.

The Core DeFi Stack

Required

• Swapping - AMM - UNI v3/Solidly

• Lending - Pool Based - Aave/Compound

• Bridging - Layer Zero, Across, Native

• Incentivization - Governance and Gauges - Curve style vs Solidly style

Nice to Have

• Token + NFT Factory

• NFT Marketplace

• CDP Stablecoin

• Regulated Stablecoin (Fiat On/Off-Ramp)

Hurdles

• Oracles! Chainlink is the gold standard but has its own requirements for supporting a chain.  Ideally could be provided through infra layer new chain is launched on.

• Bridges - Generally have their own requirements for support but ideally would be supported by infra layer a new chain is launched on.

• CDP + Regulated stable - Build or partner?  There is an issue with liquidity fragmentation when introducing a new coin that is used in the same way as existing liquid options.  Partner could be better than own in some cases for these types of protocols

The hurdles seem eminently solvable and the rest comes down to a matter of complexity that can likely be iterated away based on some real world deployments. 

Functionally there would need to be some sort of consulting service as well.  Strip down the requirements, help the team deploying the chain get everything up and running and usher them into self-sustainability.  There is a big gap that infrastructure projects looking to support new chains and ecosystems will start to realize exists and could create a major opportunity for a service-oriented organization than can get the tech stripped down to extremely low maintenance. If you have demand for this servic or would like to contribute to building something like this out please reach out.

tg: @jontom | email: jonto2121@gmail.com | twitter: @jonto21

Everywhere you look theres a new chain.  Some chains the sole purpose is to launch more chains on that chain. Layer 1s, 2s, 3s, sidechains, drivechains, any and every configuration under the sun.  It may seem overkill but we dont make it anywhere without experimentation and, as long as these new chains are contributing to well intentioned experimentation in crypto, its net positive in my book.

While it seems like DeFi and especially DeFi 1.0 are dead or at least less exciting than these new shiny chains, theres a natural law of finance that cant be broken.

Liquidity is king

No matter what a chain is purporting to do, there is some value transfer happening, and therefore it is financial in nature.  To support these financial transactions you need liquidity. There are two Factors that will drive a shift in the relationship between new chains and Defi infrastructure

1. Less meat on the bone for new chains - Layers of infrastructure will make things easier to launch a chain but less profitable as well

2. Minimum viable necessary DeFi primitives are a solved problem - The baseline for what a chain really needs in order to start innovating is known

In the years since DeFi summer largely new chains would court existing protocols (uniswap, curve, aave, sushiswap launching on Fantom, Polygon, etc) or new groups would fork mainnet protocols to launch on the chain (quickswap on polygon, beethoven on op, trader joe on avalanche).  That model was sufficient when there were only a few new chains, what do you do when theres dozens or hundreds of chains?  Do existing protocols want to add reputational risk and technical overhead to launch on all of these new chains?  Are there dozens or hundreds of teams willing and qualified to launch and support these DeFi primitives as forks on all of the chains?  My answer to both those questions is NO

When launching a new chain is as easy as launching a token, will there be funding available to bootstrap grant programs to incentivize teams to build the necessary financial infrastructure?  When sequencers are decentralized and validators productized with miniscule transaction fees will there be enough potential revenue to bootstrap a robust ecosystem?  My answer to both of these is also NO

The best descriptor for DeFi has always been Money Legos.  Build a thing, it catches on, gets use, and over time as its successful and proves to be secure you start building on top of it.  Some of the earliest Legos are still some of the most popular; Uniswap, Aave, Compound, Maker, Curve have all been around for 5+ years and continue to dominate TVL.  Experimentation on top of and inspired by these protocols should be greatly encouraged but the core protocols have proven very useful and very safe.  Forking them to run on a new chain adds little value, but the fees they generate do still offer a lot of long term value if the new chain is successful.

The rise of chain-native DeFi

Berachain is the most popular example of what will be a new trend with chains, absorbing core DeFi primitives into the chain itself.  The protocol deploys an AMM and a lending protocol and receives the fees from those deployments.  I believe this is only an early example and that the end game will be new chains launching with core DeFi primitives built in at their core. With complexity stripped away, chains can launch with the necessary financial infrastructure with little added overhead and have a clear path to positive revenue via transaction and lending fees if they can attract users.  The goal should not be for chains to absorb all protocols, but to only own whats necessary so that true experimentation can occur without running into financial infrastructure bottlenecks.

The Core DeFi Stack

Required

• Swapping - AMM - UNI v3/Solidly

• Lending - Pool Based - Aave/Compound

• Bridging - Layer Zero, Across, Native

• Incentivization - Governance and Gauges - Curve style vs Solidly style

Nice to Have

• Token + NFT Factory

• NFT Marketplace

• CDP Stablecoin

• Regulated Stablecoin (Fiat On/Off-Ramp)

Hurdles

• Oracles! Chainlink is the gold standard but has its own requirements for supporting a chain.  Ideally could be provided through infra layer new chain is launched on.

• Bridges - Generally have their own requirements for support but ideally would be supported by infra layer a new chain is launched on.

• CDP + Regulated stable - Build or partner?  There is an issue with liquidity fragmentation when introducing a new coin that is used in the same way as existing liquid options.  Partner could be better than own in some cases for these types of protocols

The hurdles seem eminently solvable and the rest comes down to a matter of complexity that can likely be iterated away based on some real world deployments. 

Functionally there would need to be some sort of consulting service as well.  Strip down the requirements, help the team deploying the chain get everything up and running and usher them into self-sustainability.  There is a big gap that infrastructure projects looking to support new chains and ecosystems will start to realize exists and could create a major opportunity for a service-oriented organization than can get the tech stripped down to extremely low maintenance. If you have demand for this servic or would like to contribute to building something like this out please reach out.

tg: @jontom | email: jonto2121@gmail.com | twitter: @jonto21