Product Updates
The Fastest Growing DEX on Ethereum
A lot of people are disappointed with this cycle so far: too many memecoins and A.I. vaporware.
So now people are people looking for solid utility protocols that generate revenue. There's one protocol that is crushing all metrics right now, and truly making DeFi great again. That protocol is Fluid (formerly InstaDapp)
Why should you pay attention? Because if you're interested in utility and fundamentals, very few protocols can match what Fluid is doing now.
Right now, Fluid combines money markets and a DEX to make liquidity and debt work harder.
- Smart collateral. Your collateral doesn't just sit there idly, but it also earns trading fees as liquidity in the DEX.
- Smart debt. Borrowed funds are used as trading liquidity, earning fees that reduce your borrowing costs. In some cases, high trading volumes could even mean you're effectively being paid to borrow.
- Much better liquidations. Usually, Fluid also has lower liquidation thresholds and only 0.1% as a liquidation penalty. Compared to competitors, these are much better terms.
There are a bunch of mechanisms and magic behind Fluid. If you want to learn those, read the documentation.
Ultimately, Fluid creates a much better and cheaper product for users. So, I predicted it to keep growing. And the thesis is playing out.
In 100 days, Fluid became the fastest protocol to hit 10B in cumulative volume.
For context, let's compare it with Uniswap, leading Ethereum DEX .
Uniswap handles ~70% of Ethereum L1 trading volume. In contrast, Flux only contributes to ~11.5% of the DEX trading volume on Ethereum.
At first glance, 11.5% might not seem impressive. But look closer.
- 11.5% is an impressive market share for a relatively new DEX.
- Uniswap has thousands of pools. Fluid focuses on high-value pools with ETH, BTC, and stables.
- Whenever Fluid competes in a pair/market, it usually dominates the trading volume.
Below are some examples of Flux pairs that got a huge chunk of trading volume on Ethereum.
- ~40% of deUSD-USDC pairs on Ethereum.
- ~90% of the trading volume of weETH-ETH pair on Ethereum.
- Below is the chart of the sUSDe-USDT pair on Ethereum. Fluid got ~80% of the total volume.
You can see many more examples in this dashboard.
Why does this matter? It shows a pattern of domination. Every time it enters a new market/pair, it rapidly eats up market share.
How? Capital efficiency. Fluid's innovative mechanics, like smart collateral, make it the best place to farm yield.
Better incentives = deeper liquidity = more volume.
In time, Fluid will take the majority market share. They'll dominate most of the pairs they'll enter.
Fluid is targeting $10B market size by 2025. They're already second in trading volume on Ethereum. I'm expecting them to expand to more chains and dominate those markets as well.
So, Fluid is on the path to DEX domination. How does the valuation look?
The market cap of the leading DEX ($UNI) on Ethereum is $5.5 billion. Fluid, as the runner-up, is only valued at ~230 million. It looks relatively undervalued.
If you are looking for a solid DeFi project with upside potential, Fluid should be on your radar.
Sponsored Deep Dive By Coinshift
csUSDL Looping: New High Yield Strategy
Stablecoins should be a big part of your portfolio. Most people just keep stables idle. That's a waste because you can put them to work.
Recently, Coinshift introduced new products that offer massive stablecoin yields. This isn't just an opportunity for investors—it could also fuel major growth for Coinshift itself.
What is Coinshift? They build products for both individuals and businesses.
For companies, they offer an all-in-one platform for asset management, payments, and accounting software — all in one place, all free of charge. Big names like Gitcoin, Aave, and Zapper are already using it
They have products for individuals as well. Below are two yield-bearing stablecoins from Coinshift. (Technically, they're liquid lending tokens.)
- csUSDC: It's a stablecoin issued as a receipt token for supplying USDC to the Coinshift USDC Vault on Morpho.
- csUSDL: It's a similar token, but it's backed by Paxos' USDL stablecoin. The yield comes from USDL's T-Bill investments and interest from lending markets.
Here are the ways to get some csUSDL
- Deposit wUSDL into the Coinshift USDL vault on Morpho
- Swap into csUSDL from USDC on CoW Swap
Right now, you can get up to 38% APY by just holding csUSDL. It includes 3.8% in T-bill yields, 1% in DeFi lending yield, 2.02% in MORPHO rewards, and 25% in SHIFT emissions.
But that's not all. With new csUSDL lending markets, You can take leverage on csUSDL to earn even more yield.
How to earn leveraged yield?
A common strategy to get a high stablecoin yield in DeFi is looping. It's a form of leverage. I'll illustrate with csUSDL. Below is an example of a single loop.
- Step 1: Deposit csUSDL on Morpho to borrow USDC
- Step 2: Convert USDC to csUSDL via Balancer.
- Step 3: Repeat step 1. Aka, use the new csUSDL to borrow USDC
You can loop as many times as you want. With each loop, you'll get more csUSDL yield and additional incentives.
Obviously, farming yield isn't as easy as aping into a memecoin. Before DeFAI agents automate everything for us, you do need to learn a couple of things.
How to take leverage properly?
I'm not someone who takes leverage lightly. It comes with risks. But in the case of csUSDL, the risk-to-reward ratio is pretty solid.
Obviously, when you use any DeFi protocol, you are taking risks associated with it. The same is the case with lending protocols. We are using Morpho to borrow. It is a reliable lending protocol with $3.7B in TVL. So, I'm not too worried about this risk.
Here are the key risks and how csUSDL strategy handles them.
#1. Oracle risk. Lending protocol/vaults use oracles to know the asset prices.
If the oracle has any problem, your position will be affected. If they can be manipulated, your collateral can be liquidated.
The vault for our strategy uses a chainlink Oracle feed. It is audited by Spearbit.
#2. The unwinding problem. At some point, you need to deleverage. And you might have to do it step by step. It might involve converting your collateral asset, csUSDL in our case, to USDC.
If there isn't enough liquidity to convert your asset, you could run into problems. It might take days to get the asset.
Thankfully, csUSDL doesn't have this issue. It has a csUSDC/csUSDL pool on Balancer with $5.5M in liquidity. So, you can always redeem USDC.
If you want to learn about the liquidity of Coinshift stablecoins, read this.
#3. Liquidation threshold. The loan-to-value (LTV) ratio refers to the percentage of value you can borrow against the total value of your collateral. The liquidation threshold is the LTV value at which you will be liquidated.
For example, if you deposit $10K and the liquidation threshold is 80%, you'll get liquidated if your debt exceeds $8K.
Excluding the lending protocol risks, below are how you could exceed the threshold.
- Decline in collateral value
- Increase in borrowed asset value
- Accumulation of interests.
Usually, the solution to this risk is to borrow well below the maximum allowed LTV.
In our case, we're taking leverage with stablecoins. So compared to volatile assets, we don't have to worry about changes in asset values too much. csUSDL is backed by blue-chip collateral assets curated by Steakhouse. So I'm not worried about depegging.
But you do need to worry about the accumulation of interest. Which leads to...
#4. Borrow rates. This is the interest you've to pay. It's added to your debt over time.
Check the projected borrow rate to make sure your debt won't dramatically increase and liquidate you. It'll be visible on the lending platform.
You have to monitor the borrow rate to prevent liquidation. If you're getting close to liquidation, add to the collateral or repay the debt.
In the case of csUSDL looping, you don't have to worry about it in normal circumstances. The yield on csUSDL could offset the borrowing rate. However, there could be extreme scenarios where the borrow rate exceeds the native yield.
#5. Health factor. It is a ratio derived from the value of collateral versus the value of the borrowed amount, adjusted for the liquidation threshold.
A high health factor (e.g., 3.0) means low risk. A low health factor means you're at risk of liquidation.
After calculating potential returns from the strategy, you can decide if you want to do it.
Want an easy way to track your health factor, annual return, and net ROI? here's a good one. You just have to input metrics like the borrow rate and lending rate you're earning.
Potential of Coinshift
I believe csUSDL will drive massive growth for Coinshift.
My argument is based on a comparison with Resolv, the protocol behind USR stablecoin.
Resolv had been live for several months. But TVL had stayed low until December 2024 (~$37M).
Everything changed when lending markets for USR launched. Users could use USR as collateral on Morpho and Euler and borrow USDC. They could also supply USR and earn a yield on it.
This was a big utility unlock. The TVL grew from ~$37M on December 1st to ~$650M today. That's a 17x!
Coinshift has even better conditions for explosive growth:
- Higher leverage potential: csUSDL has a 96.5% liquidation threshold, allowing up to 28x leverage. USR's threshold is 91.5%, meaning fewer loops.
- Lower risk. Resolv uses a delta-neutral strategy. It's seen as riskier than csUSDL, which is backed by Paxos's USDL and allocation management by Steakhouse.
- Morpho vault strategy. Instead of spending months to attract USDC lenders, they're partnering with teams like Steakhouse.
Looping csUSDL is an opportunity to earn a high stablecoin yield. Similar to how Resolv grew rapidly, I'm also expecting growth for Coinshift.
You can get in early now.
🤖 Agent Arena
Nuffle Labs, which describes itself as a "universal restaking protocol", introduced staking for Base-native assets. The first token is $stVIRTUAL.
Vader agent team published an article guide on tokenomics for Agent launches, especially on the Virtuals platform.
Reintern claimed that he compared ChatGPT and REI. And that REI is better for crypto-related technical and wallet analysis.
Arc released the Rig Onchain Kit. It's a toolkit that equips your agents with Onchain capabilities and native interactions on Solana and EVM networks.
🚀 DeFi Catalysts
Ethereum now has the largest short position against it in ETH history. It grew 500% since November 2024.
Arbitrum announced an Ethereum-wide interoperability solution: Universal Intents Engine. The goal is to enable <3s for crosschain swaps across any ETH L2s.
Ondo Finance, the largest RWA project, announced its own L1 chain. The chain is adding features like permissioned validators to attract institutions.
Balancer launched v3 on Arbitrum. They're offering 100% Boosted Pools, Hooks, and Custom AMMs.
MilkyWay introduced restaking for USDC. They're partnering with Noble Chain for this project.
Solayer introduced $LAYER, its governance token. The eligibility checker is now live.
Ink is the new chain from Kraken. Here's a guide from Atoms Research on how to become a top 1% user on Ink.
Rise Chain announced that the Rise testnet is coming soon. There's also a 100M $RISE in total prizes for builders.
XMTP, a network aiming to be a secure and private messaging layer, launched its testnet.
Lido has made the Community Staking Module (CSM) permissionless. The goal allow anyone to be a community staker.
Ethereum is upgrading the gas limit to 36 million. It'll increase Ethereum blockspace by ~20%. >50% of the validators signaled to increase the gas limit.
🐦⬛ X Hits
- Some market takes.
- Trends in web2 & web3 AI Agents
- AI-generated social sentiment report on Berachain
- How to value chains before they even launch?
- Simple framework for portfolio management.
😂 Meme
Until next time,
Edgy
Today's email was written by Edgy and Yayya.
DISCLAIMER: I'm NOT a financial advisor. This content is for education and information purposes only. Crypto and DeFi are risky and speculative. Please do your research before investing.
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