Web3.0 Marketing Playbook #3 | How DeFi Integration Empower Protocol Growth

Keywords: Airdrop, Integration strategies, Point program trends, User loyalty

Tl,dr:

• Points programs unify DeFi integration across various dApps, enhancing asset utilization and effectively driving protocol growth while tackling the cold-start problem.

• Pendle, Curve, and Morpho emerge as the go-to platforms for initial liquidity scaling

• As the institutional DeFi and Trafi/RWA matures, permissionless risk manager curated vault is the future

  
  

The rise of Eigenlayer, the pioneer of restaking infrastructure, has amassed a peak TVL of $20 billion as a top3 protocol by size, representing a large portion of all staked ETH, with Symbiotic and Karak following suit; the assets built top on it like Etherfi, Renzo and Puffer also experienced exponentially growth in 2024. As blockchains continue to grow and become more scalable, on-chain consumer apps and the wide range of possibilities they entail are now poised to have a greater influence on the broader crypto experience than ever before. In this dynamic environment, DeFi integrations have become a critical solution for bootstrapping liquidity and addressing the cold-start problem. Airdrops and points programs, which have become standard in crypto in 2024, have played a pivotal role in this process.

The industry's relentless pursuit of user liquidity and attention through innovation and token incentives has created a highly competitive landscape. Points, which are not a new form of user loyalty, have conquered DeFi in 2024 by introducing an element of unpredictability and excitement to asset restaking. Unlike fixed liquidity mining, points introduce variability in rewards, which keeps users engaged and motivated. According to the Hook Model, proposed by Nir Eyal, the variability of the reward is crucial to the hook model. Novelty activates the dopamine system, which causes us to feel pleasure when we experience something new. The unpredictability of rewards keeps users engaged, similar to how a slot machine operates. kinda assemble the craze of airdrop in DeFi. Players feel extremely motivated to participate since rewards are unpredictable and random.

Integration Stack We explore the ways in which decentralized finance (DeFi) protocols began to tokenize ever-more complex forms of value in a composable manner, enabling an entire sector of decentralized financial services on chain, including lending, borrowing, trading, yield generation, and more. In many respects, DeFi protocols represent some of the first on-chain consumer apps to achieve product-market fit, fundamentally altering the way users interact with blockchains and continuing to serve as a driving force for on-chain activity today.

The combination of speculation and utility can be quite powerful. Speculation can serve as an effective tool for early user acquisition. The internet itself thrives on attention, and in a world where competition for attention is growing exponentially, every dApp needs a certain level of attention to remain relevant. These DeFi integration enables the asset’s use cases and facilitate its netflows growth in various sectors.

One of the most significant trends in DeFi integration is the rise of Proof of Stake + Restaking. This concept has changed the landscape for on-chain dapps, particularly for lending protocols, which occupy a significant portion of DeFi usage seen above. When creating a lending pair where users could borrow ETH using an LRT/ a LRT DEX LP token as collateral or enabling them farm the points/yields with leverage (and multiplying LRT liquidity). The most important thing for the collateral assets is that users are willing to pay relatively high interest rates to borrow LRT against them, since this will increase lending rates for LRT and grow demand then drive TVL.

Source: https://dune.com/Henrystats/lrt-utilization-specific

Current Trends in DeFi Integration

1. From Uniswap to Curve

   During the recent restaking war, Curve has emerged as a leading platform for DEX liquidity, surpassing Uniswap. Curve's advanced trading mechanics and ecosystem support, including CRV bribes, access to DeFi power users, and co-mkt, have made it a preferred choice for projects seeking liquidity. Unlike Uniswap, Curve's ecosystem offers comprehensive support for early-stage projects, driving its dominance in this niche.

   
   

2. Pendle's Dominance in Yield Trading

   Pendle has established itself as a go-to platform for yield trading and a key component of on-chain liquidity. By aligning with the crypto Twitter narrative around liquid staking tokens (LSTs), Bitcoin staking, and real-world assets (RWAs), Pendle has positioned itself at the forefront of yield provision. Its ability to cater to emerging trends has solidified its role in the DeFi landscape, achieving a peak TVL $6.7Billion during the point season.

   

   
   

3. Risk’s First Vault Popularity

   As restaking gains momentum, projects are integrating with additional infrastructures like Karak and Etherfi to enhance yield and user retention. Etherfi’s liquid vaults simplify staking and have attracted significant liquidity, leveraging the expertise of risk management firms like Gauntlet and Chaos Labs to optimize financial strategies.

The liquid vaults on etherfi, including Usual’s USDe and Elixir’s deUSD, not only enhance yield across various protocols but also simplify the staking process. By reducing manual effort and lowering entry barriers, these vaults have attracted significant liquidity, with Etherfi leading the charge due to its first-mover advantage, no.1 TVL in restaking sector and efforts on security.

There has been increasing popularity to launch a vault managed by risk managers, like Gauntlet, Chaos Labs and MEV capital. For context, risk management companies are economic security institutions, they provide professional cryptoeconomic security service including but not least risk parameter optimization, financial risk monitoring system, token incentive design, and treasury management, etc. for crypto native projects. Because of their proficiency in financial engineering and risk-sensitive approach, they had some success on gaining trust and liquidity when operating a liquid yield strategy, best exampled by Morpho V2 launch and their LRT onboarding strategy. I personally fully recognize their role as risk manager in DeFi and bullish on the strong potential with growing institutional adoption and RWA.

Looking Ahead

While some may argue that DeFi integrations with points systems are not innovative, their combination has brought more attention, traffic, and TVL to newer assets on-chain. These have become an indispensable part of the new assets on-chain scaling solution. As the industry continues to evolve, we expect to see even more innovative solutions emerging to meet the growing demands of on-chain consumers. The future of DeFi is bright, and with the integration stack, we are poised to witness even greater advancements in decentralized financial services.