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🟣 Bitcoin DeFi expands on BOB
Plus, DeGods shakes up NFTs with fungibility
Macauley Peterson & Donovan Choy
September 16, 2024
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Welcome back to 0xResearch. Here's what we’ve got for you today:
BOB Stake for BTC yield
DeGods and hybrid NFTs
Chart: Solana Tx fail rate
Degen: Stablecoin Maxi vault
You have $1.1 trillion worth of bitcoin in existence, and less than $10 billion of that is locked by BitGo in the form of WBTC. Surely there are some subset of hodlrs who would welcome the chance to earn a bit of yield on their corn, right?
A new crop of Bitcoin-focused DeFi protocols are betting on just that. One group has coalesced around Babylon staking infrastructure and the BOB “hybrid layer-2” platform.
BOB is called a "hybrid" because it leverages features from both Bitcoin (for its security and decentralization) and Ethereum (for its programmability and smart contract capabilities). By integrating both systems, BOB aims to provide the security of Bitcoin while offering the DeFi functionality commonly associated with Ethereum.
Launched today, the new BOB Stake product is a portal for one-click BTC liquid staking. It aims to simplify the process of staking BTC by offering direct access to a variety of Bitcoin Liquid Staking Tokens (LSTs), which can be used in DeFi applications like borrowing and lending platforms.
BOB Stake connects users with several major BTC liquid staking providers including Babylon, Solv, Bedrock, Chakra and PumpBTC. It plans to add more over time. The protocol also partners with infrastructure players such as Cobo, Dynamic, fBTC and wBTC, as well as DeFi platforms like Sovryn and Layerbank, thus giving BOB Stake the prospect of solid distribution out of the gate.
Source: BOB
The concept of liquid staking has proven successful on Ethereum, where staked ETH can be used as collateral while earning staking rewards, with tens of billions of dollars deployed in this way.
BOB’s co-founder, Alexei Zamyatin, believes the platform's one-click staking feature simplifies the more complicated analogous process for BTC, thus positioning BOB as a central hub for bitcoin liquid staking and broader BTC-based DeFi activities.
Zamyatin knows his Bitcoin bridge history, and BOB Gateway, the underlying technology powering BOB Stake, consolidates Bitcoin staking into a single transaction. It uses cross-chain intents and light-client verification for a trust-minimized, user-friendly experience.
“The whole LST market is about rehypothecation, and there are two types: There's Babylon and the staking one and then there is CeDeFi [short for “centralized DeFi”], ones where you basically have some strategies that use the bitcoin for trading, but at the same time, it's tokenized in DeFi,” Zamyatin told Blockworks.
BOB Stake is in the former camp and while Zamyatin is confident in the security model, he’s cognizant of the fierce competition for capital.
“People should be able to choose, but I do believe that if you want to compete with centralized bridges, it's not about security only — it's about the product itself.”
DeGods experiments with fungibility
Part of the core value thesis of a “non-fungible token” was always non-fungibility — you would own a unique 1-of-1 copy with a distinctive combination of traits. But NFT markets are down bad, so projects are now embracing fungibility in a bid to create excitement around price action.
The DeGods NFT project on Solana is the latest project to try its hand at this pivot. The team is offering the option for holders to fractionalize their DeGods or y00ts NFTs with the “ERC-404” standard, an unofficial standard introduced by Pandora back in February 2024.
404 tokens are an attempt to get the best out of both the fungible and non-fungible worlds. The idea is that NFTs can be broken down into lower-denomination tokens, making the market more liquid and accessible to a larger market.
It’s not a new idea. There have been similar attempts in Solana, most prominently the “SPL20” standard from the Libreplex community, then subsequently the “Bozo Hybrid” project in March. In Ethereum land, the NFT marketplace Zora also experimented last month with a “ERC-20z” standard that leveraged Uniswap liquidity pools to allow fungible token trading of NFTs after a mint window closed.
The only problem is that NFTs are priced in a range. Rarer traits are typically priced higher than those with common traits. So, unilaterally introducing a fixed rate of exchange in effect dilutes those investors who have spent more on DeGods NFTs with uncommon traits. This criticism is all over Twitter right now, with even the likes of Polygon CEO Marc Boiron saying the same (DeGods was previously on Polygon).
For example, if you’re the proud owner of a DeGod NFT, the team is letting you swap that for 550,000 DEGOD tokens right now. At the current DEGOD market cap of $81.5 million, a total token supply of 10 billion and 10,000 DeGod NFTs, that prices each NFT at something like $4,483. (Note that this is a very charitable back-of-the-envelope calculation, since it doesn’t take into account the other y00ts and DUST conversions.)
The floor price of the average DeGods NFT on Solana is right now at 38.25 SOL ($5,010). That’s a $528 price discrepancy. It’s a small dilution, but not by an outrageous amount.
But wait, the floor price is exactly just that: a floor price. DeGods NFTs with really rare traits are not going for 38.25 SOL. For instance, DeGods with a rare “mythic wings” trait are selling for at least hundreds of SOL.
It’s not the first time existing NFT projects have tried to pivot to fungibility. The Bored Ape and Mutant Ape Yacht Clubs projects have in the past airdropped fixed allocations of APEcoins to its holders, thereby treating all its NFT holders as equivalent market value.
The difference there, however, was that it was an entirely separate price market, so owners of the rarer traits were at least reasonably happy with receiving a free airdrop. The fundamental economics underlying APEcoin and the BAYC/MAYC NFTs were not interlinked, even if they were culturally so.
With DeGods, the 404 token standard effectively ties both the non-fungible and fungible market together, even if there’s no obligation to burn your DeGods for the tokens.
Of course, one could rationalize this in an entirely different direction to produce bullish conclusions. DeGod’s pivot to fungibility could theoretically open the door to millions more in liquidity. All the crypto degenerates who were previously priced out of the five thousand dollar price point could now be aping into $DEGOD, paving the way to a moonshot. That is the official DeGods marketing talking point, and in that event, everyone would be happy.
Given the fates of 99% of memecoin projects, I’m not holding my breath.
— Donovan Choy (X: @donovanchoy | Farcaster: @donovan)
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Solana user experience improves:
Based on Blockworks Research data, the reversion rate (i.e. rejection) for users sending 1-5 transactions per day on Solana fell below 1% for the first time this year, suggesting that the user experience on Solana has been improving for the average user. Wallet addresses posting 5000 transactions per day (bots) are still responsible for over 90% of reverted transactions.
Transactions on Solana have historically experienced a higher than average reversion rate due to transaction spam from arbitrage bots. Spam is prevalent because Solana is cheap to use. Solana also has a static base fee of 5000 lamports per transaction signature, unlike Ethereum’s EIP-1559, which prices transactions based on a dynamic base fee that adjusts according to market demand. For context, the median transaction fee on Solana in the whole of August 2024 was a mere $0.001158.
— Donovan Choy
Hot on the heels of the Euler relaunch with its v2, a trio of risk managers have squared up to offer stablecoin connoisseurs — armed with Circle USDC, Angle stUSD and more — an attractive destination.
Veteran risk curators K3, MEV Capital and Re7 Labs are jointly launching Stablecoin Maxi, a stablecoin lending vault aimed at creating an efficient cross-collateral money market for blue-chip stablecoins and yield-bearing assets. At launch, the platform will support six stablecoins, including USDC, USDY, USD0 and Angle’s stUSD, with plans to add Maker's USDS (nee DAI) and Liquity's BOLD — the soon-to-launch follow-up to LUSD.
Stablecoin Maxi enables users to deposit productive assets and borrow lower-yielding assets, offering opportunities for delta-neutral strategies. Since stablecoins are highly correlated — barring some catastrophe, they should stay near a dollar — the risk of liquidations is low, enabling the Euler value to support high loan-to-value (LTV) ratios.
The idea is to attract both active and passive DeFi participants. Active users can maximize returns through recursive borrowing and rate arbitrage, while passive holders benefit from access to higher yields in one place. It’s unusual to find such a diverse set of stablecoins in a single vault, and this pits Euler against competing markets from Aave, Curve and Morpho.
— Macauley Peterson
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The insights, views and outlooks presented in the report are not to be taken as financial advice. Blockworks Research analysts are not registered broker/dealers or financial advisors. Blockworks Research analysts may hold assets mentioned in this report, further outlined in the Firm’s Financial Disclosures.