GM you filthy degenerates, which ass blaster 1000 Obama sonic inu shitcoin have you been punting this week? When the dust in your wallet is more embarrassing than your search history you know you have a problem.
Anyway, I want to talk to you briefly today about protocols that build moats. More specifically, they get others to do it for them.
What are you talking about you complete idiot?
Projects that succeed are those that have their own ecosystem built around them and don’t isolate themselves from the compostable world of DeFi. That is the most beautiful thing about this ridiculous space.
Think about some of the best that have their own cult-like followings. Here are a few examples:
GMX - How many GMX forks are there? I can think of about 6 off the top of my head that despite changing the UI colours have launched and then proceeded to flop. They may have a short-lived uptick in TVL and users if they are being promised airdrops or have extremely inflationary liquidity mining campaigns running. That being said, as soon as these ill-informed surface-level ponzi marketing effects disappear, people revert to OG.
There must be 30+ protocols that all have a GLP-based product and with that comes inherent value in the GMX token with ever-increasing revenue shares distributed to GMX stakers. Simply put, the more projects that build on top of, or adjacent to GMX, the greater the moat a protocol can build.
GMX could (but they won’t) stall the V2 launch and focus on increasing their ecosystem integrations and partner protocols to increase demand, and utility to become an even bigger fortress. When you have a protocol set up that can generate and create its own flywheels, big things can happen.
Naturally, the more composable a project can be the greater the value proposition for the underlying revenue share token is too.
Uniswap - This one is still emerging and very much ongoing but Uni V3 is already light years ahead of other concentrated liquidity DEXs, partly because of the business license which I’ll admit. The other thing is protocols instead of having to bootstrap their own liquidity more and more will look to leverage the pre-existing depth of liquidity already residing on Uniswap.
There are many products being built on top of Uniswap that leverage V3’s capabilities such as:
- On-chain liquidity management/market maker: Arrakis, Gamma Strategies, Orange Finance
- Options Protocols: Panoptic.
- Impermanent Loss Hedging and Options: GammaSwap, Smilee
- Leverage Protocols: Infinity Pools
The only drawback to this is that the UNI token fee switch is still being hotly contested and we will never know if it will actually be turned on. As such, its value proposition for its holder base doesn’t increase with its increasing ecosystem projects.
Now, if you look at Uniswap V4, you see they have shifted focus to become more of an infrastructure provider to prevent additional liqudiity fragmentation and poor attempts at fixing minor issues. Instead, they provide the necessary out-of-the-box infrastructure to allow builders to get creative with their ideas and tap into the preexisting userbase, moat and depth of liquidity that Uniswap continues to attract…
This is a perfect segway that brings me to the topic of the day, Hxro Network. A project close to my heart which feels like it is at the beginning of that hockey stick growth with regard to onboarding new and existing protocols that will build on top of its infrastructure products. Dexterity and Spandex are two core primitives from Hxro that allow products such as perps, expiring futures, options, and bonds, to allow aspiring builders to take this underlying architecture and use it to their own advantage. They also have a parimutuel protocol for builders who are focused on betting verticals. For more info on this see our previous article.
The beauty in this is that as more projects and protocols leverage the Hxro Network infrastructure the quicker the Hxro flywheel begins to spin. Network revenue share, fee capture, HXRO buyback and max-locks, all increase with the more products that are built using their tech. This is naturally great for holders as they are getting positive feedback loops happening from all corners of the Hxro ecosystem which will perpetually get larger and larger.
When you start getting to 10-20+ protocols and dapps across different disciplines all fuelling the HXRO fire, then this begins to get very interesting indeed. It gets even more interesting as protocols begin to want to own and earn the lion's share of rewards from staking their treasuries HXRO bags as their stake-weight gives them a cash-flowing asset from sharing in the network's revenue.
The most notable example of this is CRV and how projects literally battle it out to own the largest portion of the CRV votes and emissions as physically possible as the game theory aspect of it is too profitable to not participate.
The current Hxro ecosystem is rapidly expanding, it feels like every week there is a new product being built on top of the Hxro Network. Some recent live projects include PepperDex, Flowmatic, Iconic Markets, Bonk or Bust, and the latest social trading bot YoloNolo.
Yolo Nolo allows any Discord server to add their trading bot and allows in-channel trading of Bitcoin, HXRO and the YOLO token. Users can bet on a Bitcoin dual-outcome market i.e. will the price of BTC increase or decrease in the next 5 minutes? This is done by typing a simple / command (/yolo [enter Dollar amount]) and pressing enter. The underlying parimutuels protocol is powered by Hxro Network and as such generates fees and revenue for HXRO stakers. On top of that a portion of the fees and revenue are used to buy and max lock HXRO to add to the Yolo Nolo POL. YoloNolo is also launching a new bot, NoloPerps, that will allow bot users to trade perps right in their favourite Discord server - basically Unibot for perps.
This revenue capture by the Hxro Network is apparent across all DApps building on top of it. So, as you can see, the more products that get built using this infrastructure the more value the HXRO token stakers receive.
Why would they want to do this?
Well, Hxro has a unified liquidity layer across its DApps and those looking to bootstrap liquidity don’t need to go out and search for new LPs and or bootstrap using unnecessary liquidity mining rewards (we all know how that ends).
So, instead, they will build on top of Hxro, utilise the depth of Network shared liquidity, take advantage of the risk engines and infrastructure and earn protocol fees. In most cases, the project's treasury will use a portion of this fee to purchase and max lock HXRO to earn HXRO staking and protocol revenue in the form of SOL, USDC and other base tokens that are used to settle trades.
TLDR: The more projects that build on the Hxro network, the more fees, and the more HXRO purchased and locked to accrue rewards from the rest of the network/flywheel ecosystem. It’s quite simple.
- HXRO accrues value from all protocols built on top of it…. Brrrr
- Protocol revenue share is used to purchase HXRO off the market and max stake it taking additional supply off the market… brrr
- Fees will be paid from all corners of the network to HXRO Stakers… brrr
We are going to cover two of the most recent protocols building on top of Hxro which are Flowmatic and PepperDEX, in our next series of articles which will (in our opinion) potentially spark the next DeFi wave on Solana. Yes, that is a big statement if you live in a Twitter echo chamber. Trust me when I say this, other than the HXRO token, there haven’t been more than a handful of projects on Solana that actually thought about their tokenomics. Period.
A lot of projects came onto the scene in the early days and yes, we were flipping them like crazy and making some good returns. TULIP, SRM, SBR, RAY all those kinda projects that had the Alameda stamp of low float high FDV… look where that got us.
Now, the rebirth of Solana DeFi is around the corner… “But, Grant… CT said Solana is DEAD”.
The majority of research done on CT is complete LARPs telling you what some whale wallet is doing, only to figure out it's an MEV bot or Binance moving some funds around. It's all so tiresome. Go to the source, check it out and see for yourself.
Anyway, I know first-hand from my own experience I want something to get my teeth stuck into on Solana. I have had my HXRO bag locked for eternity (3 years) but now it finally feels like we may get some sticky products and protocols on Solana and in particularly built using Hxro.
From what I can see from Flowmatic, YoloNolo, Pepper DEX etc. These have elements of REAL DeFi. Something that hasn’t really been translated as of yet from Ethereum, Arbitrum or Optimism to Solana - until now.
In that I mean, sustainable staking rewards, no-hyper inflation, no stupid infinite supply or ridiculously low float. Well, thought-out emissions using options tokens, and great LP staking mechanics that print for the holders. When you combine it all together it will be a great earner for a lot of users. It all comes down to how do you maximise the most from each protocol. If you are lazy max locking HXRO would be the play IMO (JOIN ME PLZ).
To finish this ramble, I’d reccomend just keeping up with the next series of articles that we release on Hxro, Pepper DEX and Flowmatic. We will try to break it down as plain and simple as possible and also throw out some of the strategies of what we are doing to maximise returns… Not financial advice or anything, I am literally redacted.
So, huge TLDR: Projects are building on Hxro Network, Solana DeFi looks to be picking up, Revenue capture and fee distribution to HXRO stakers from all angles, and money printers are coming, stay tuned…