The segment of decentralized finance (DeFi) protocols has matured since the bull run of 2020-2021 ended. Here's what it means for users, VCs, token holders and retail investors.
"Blue-chip DeFi (or anything) was meme last cycle"
During the latest bullish rally in crypto (Q1, 2020 - Q4, 2021), every "blue-chip" altcoin was nothing but a meme. None of them managed to start generating a sustainable cash flow for their investors and token holders. Every successful protocol was surrounded by dozens of VC-fueled forks, Framework Ventures' Vance Spencer recalls.
Important to internalize. Blue chip DeFi (or anything) was a meme last cycle. Nobody was generating sustainable cash flow and tbh the industry was a shitshow. Launch a successful protocol and 15 VC funded forks would come in with tokens and vampire attack you.— Vance Spencer (@pythianism) July 28, 2023
This cycle is…
This imbalance between mediocre value flow and enormous hype around "blue-chip DeFis" made "vampire attacks" possible. As covered by U.Today previously, the first such attack happened in September 2020, when then-new DeFi SushiSwap (SUSHI) siphoned $1.4 billion of Uniswap (UNI) liquidity overnight.
Amid the 2020 DeFi tokens euphoria, the mysterious SushiSwap (SUSHI) creator Chef Nomi announced better conditions for "yield farming," i.e., more generous liquidity provider rewards. As a result, LPs started dropping Uniswap (UNI) en masse.
Such tricks by marketers will not work in the upcoming cryptocurrency cycle, Spencer foresees. Today, the cryptocurrency segment is about real cash flows and large markets.
Who will join FAANG of DeFi in 2023-2024?
As many "queens for a day" are simply not there any longer, VCs will not be interested in funding arrays of "new-gen" blue-chip DeFis. This will result in consolidation: Only the strongest players will be able to attract liquidity and accomplish well-balanced tokenomics.
In some regards, this consolidation can lead to the emergence of the "FAANG of DeFi." Top DeFis will achieve the dominance Facebook, Amazon, Apple, Netflix and Google created in the Web2 digital world.
As covered by U.Today previously, Vance Spencer predicts the approval of Bitcoin ETFs by the end of 2023.
This announcement will also unlock massive opportunities for other major cryptocurrencies, the expert says.