July 21, 2022: The Sidechain Slump ππ
As Curve mainnet yields moon, sidechains fall back to Earth
Alfa Alert!?! Curveβs chad founder spoke at a conference and teased $crvUSD.
SideChain Struggles
Lest you worry Iβm a repetitive perma-bull who canβt see beyond my rose-tinted glasses, letβs look at the sorry state of sidechains. Cause it ainβt pertty.
Before the market decided to have one of its moods, the future was bright for life on chains adjacent to Ethereum. It looked like things were on track for sidechains to flippen ETH.
Admittedly, much of the sidechain growth came from Terra. Ever since that dark purple section erased itself, along with our bags and dreams, TVL on all other chains has been stagnant or shrinking. Perhaps itβs the suddenly affordable gas fees on Ethereum, but thereβs been precious little reason for anybody to bridge funds off-chain.
The sole chain that had a pretty good last month has been Tron, which has been gaining ground thanks to protocol JustLend doubling over the past month.
Within Curve, the trends almost perfectly mirror the global state. Curve total deposits and volume is in direct proportion with the broader TVLs reported on DeFi Llama.
The βCrypto %β column refers to the percent of Curve volume on each chain flowing through v2 crypto pools (where applicable). This narrative is at least somewhat bullish in that adoption of v2 pools is particularly important for Curveβs growth. On most chains v2 pools are driving the vast majority of the volume.
Itβs good evidence to counter to the Curve haters who like to deride Curve as merely a site for stablecoin trading (although this strain of FUD is extremely peculiar, given that stablecoins are the hottest investment of 2022).
Polygon featured the first sidechain v2 factory launch. Despite being shipped in the bear market, weβve already seen 30 factory v2 pools launched, hinting that sidechains will indeed become a useful playground for testing these complex pools is a lower cost environment. However, to date, very few of these pools been seeded with significant value.
At peak, when Curveβs TVL on Ethereum was north of $20B, the yields on mainnet got so diluted the best option for farmers was to head to sidechains and hunt for under-utilized yield. Back then, there were lots of hidden gems offering double digit yields, in an era when mainnet yields had all dropped to single digits. Today this phenomenon is reversed, all the double digit yields are on mainnet, with sidechains almost entirely under 10%.
The advent of cross-chain boosties hints at a world where volume would naturally flow off-chain as ETH grew over-crowded. This phenomenon may still play out in the future, but weβll have to wait until the bears are fully slain to find out.
If you are seeking yields today where should you look? Youβre best off sticking around on Ethereum. At the moment, Curve tAPRs on mainnet are strong. You have several options earning you north of 20% on Curve, to say nothing of compounding on Convex or Concentrator.
Of course, these all have their own risk/reward profile, several of which we covered last month when the composition of the leaderboard looked quite similar. Some particular highlights here:
CRV/ETH and CVX/ETH are giving competitive rates to other staking solutions for these coins.
FXS options (sdFXS/FXS or cvxFXS/FXS) are great ways to get exposure a token on which Iβm quite bullish (NFA!) with great CRV benefits, with lower impermanent loss risk.
PUSd makes particular sense if youβre lending art on JPEGβd, given you get a bonus for depositing on the PUSd side.
Europoors may be keen on USDC + EURs, to hedge exposure to both coins with upwards of 30% CRV rewards to boot.
If you want to place upside bets on any of OHM, TOKE, PAL, BADGER, YFI or SDT, you may as well deposit ETH/WBTC into these Curve pools and get >20% $CRV bonus on top of it.
Once you bridge your funds off of Ethereum, itβs a ghost town. The best and only option for the medium sized chains are Curveβs implementation of TriCrypto. At max boost this can earn you as follows:
Fantom: 7.6%
Avalanche: 7.36%
Polygon: 5.27%
Arbitrum: 5.26%
However⦠why would you bother doing this when the yield for TriCrypto on Ethereum is so much better. On mainnet, the trading fees alone are rivaling sidechain rewards.
For these four chains, TriCrypto is your only option earning >1% rewards. The only other options you might consider here would be EurtUSD on Polygon (1.41%) or Geist on Fantom (1.79%)
The remaining chains all constitute the real long tail β their volume and deposits are an order of magnitude lower and they have no TriCrypto implementation to provide cross-asset utility. However, these chains nearly all feature a pool earning north of 10% for those hunting yield. Your options are presented here without comment on their risk (do your own research):
xDai: The Mai stablecoin pool with 15.35% GNO rewards
Optimism: Synthetixβs sUSD pool with 11.34% CRV rewards
Harmony: 3Pool here provides. 13.01% CRV rewards, but beware the low TVL and imbalance
Moonbeam: sdDOT Concentrated has 42.14% LDO rewards
Not listed is Aurora, with just $18K in its only pool, a 3pool earning no rewards.
Curve talk (07/21) Here:
https://www.zipeventapp.com/streaming/list/REDEFINE-TOMORROW-2022