Authors: Alex Xu, Research Partner at Mint Ventures & Lawrence Lee, Researcher at Mint Ventures
Introduction: In the altcoin bear market, fundamental investments are still effective
Undoubtedly, this round of bull market cycle has been the worst for altcoins.
Unlike the historical pattern where various altcoins' prices became active after the initiation of previous bull markets, leading to a rapid decline in BTC's market share, in this bull market, since the market bottomed out in November 2022, BTC's market share has continuously risen from around 38%, currently stabilizing above 61%. This is still under the backdrop of the rapid expansion of the number of altcoins in this cycle, highlighting the weakness of this round of altcoin prices.
BTC market share trend, source: Tradingview
As this market cycle has progressed to this point, it has largely validated Mint Ventures' projections in the March 2024 article (Preparing for the main wave of the bull market: My phase thinking on this cycle). In the original text, I suggested:
Among the four major driving factors of this bull market, three are met, but one is lacking:
BTC halving (supply-demand adjustment expectations), √
Monetary policy easing or expectations of easing, √
Regulatory policy easing, √
Innovations in new asset models and business models, ×
Therefore, expectations for the price of the last round of altcoins—including smart contract platforms (L1/L2), games, Depin, NFTs, and DeFi—should be lowered. Thus, the strategy recommended for this bull market was:
Higher allocation ratios in BTC and ETH (and being more bullish on BTC, with BTC as the main focus in the long term)
Controlling allocation ratios in DeFi, Gamefi, Depin, NFT, and other altcoins
Choosing new tracks and projects to seek Alpha, including: Meme, AI, and the BTC ecosystem
As of the publication of this article, the correctness of these strategies has been mostly validated (except for the performance of the BTC ecosystem).
However, it is worth noting that despite most altcoin projects performing poorly in this round, a few have shown significantly better price performance than BTC and ETH over the past year. The most typical examples are Aave and Raydium, which were mentioned in Mint Ventures' research report published in early July 2024, when the altcoin market was at its lowest.
Since the beginning of July last year, Aave has outperformed BTC by over 215% and ETH by 354% at its peak. Even after a significant price drop, Aave's increase relative to BTC is still 77% and 251% against ETH.
Aave/BTC exchange rate trend, source: Tradingview
Since the beginning of July last year, Ray has outperformed BTC by over 200% and ETH by 324%. However, due to the overall decline of the Solana ecosystem and the significant negative impact from the self-developed Dex Pump.fun, Ray's increase relative to BTC remains positive, significantly outperforming ETH.
Ray/BTC exchange rate trend, source: Tradingview
Considering that BTC and ETH (especially BTC) have significantly outperformed most altcoin projects in this cycle, the price performance of Aave and Ray is more outstanding among the altcoins.
This is primarily because, compared to most altcoin projects, Aave and Raydium have more robust fundamentals, reflected in their core business data reaching historical new highs in this cycle, and they have unique moats, with market shares stable or rapidly expanding.
Even in the 'altcoin bear market,' betting on projects with outstanding fundamentals can yield Alpha returns that surpass BTC and ETH, which is also the primary objective of our research work.
In this research report, Mint Ventures will identify high-quality projects with solid fundamentals from thousands of listed and circulating crypto projects, track their recent business performance and market share, analyze their competitive advantages, assess their challenges and potential risks, and provide a certain reference for their valuation.
It should be emphasized that:
The projects mentioned in this article have certain advantages and attractions in some aspects, but they also face various problems and challenges. Different readers may have completely different judgments about the same project after reading this article.
Similarly, the projects not mentioned in this article do not imply that they have 'poor fundamentals,' nor does it mean 'we are not optimistic' about them. We welcome recommendations for projects you believe in and the reasons behind them.
This article represents the stage thinking of the two authors as of the time of publication, which may change in the future, and the views expressed are highly subjective. There may also be errors in facts, data, and reasoning logic. All opinions expressed in this article are not investment advice, and criticism and further discussions from industry peers and readers are welcome.
We will analyze the project from several dimensions: business status, competitive situation, main challenges and risks, and valuation status. Below is the main text.
I. Lending track: Aave, Morpho, Kamino, MakerDao
DeFi remains the best-performing major track for achieving PMF in the crypto business world, with lending being one of the most important sub-tracks. User demand is mature, and business income is stable, attracting numerous quality new and old projects, each with their advantages and disadvantages.
For lending projects, the most critical metrics are loan scale (Active loans) and protocol revenue, while also needing to evaluate the protocol's expenditure indicators—token incentives.
1.1 Aave: The King of Lending
Aave is one of the few projects that have successfully navigated three rounds of crypto cycles, maintaining stable development in its business to this day. It completed financing through ICO in 2017 (when the project was still called Lend, operating as a peer-to-peer lending model), surpassing the then-leading lending platform Compound in the last cycle, and currently maintaining the top position in lending volume. Aave now provides services on most mainstream EVM L1 and L2.
Business status
Aave's main business model is to operate a lending platform based on a point-to-pool model, earning interest income from lending and liquidation penalties generated during collateral liquidation. In addition, Aave's stablecoin business GHO has now entered its second year, which will generate direct interest income for Aave.
Loan scale (Active loans)
Aave's loan scale, data source: Tokenterminal
Aave's loan scale has exceeded the previous round's (November 2021) peak of 12.14 billion since last November. Its highest peak was at the end of January 2025, with a loan amount of 15.02 billion USD. Recently, as market trading enthusiasm has cooled, the loan scale has also retreated, currently around 11.4 billion USD.
Protocol revenue
Aave's protocol revenue, data source: Tokenterminal
Like the loan scale, Aave's protocol revenue has also steadily exceeded the peak level of October 2021 since last November. Over the past three months, Aave's protocol revenue has mostly remained above 3 million USD per week (excluding GHO's interest income). However, in the last two weeks, as market enthusiasm declined and market interest rates fell, weekly protocol revenue has retreated to the level of just above 2 million USD.
Token incentives
Aave token incentive expenditures, data source: Aave Analytics
Aave currently still has a substantial token incentive scale, with its daily expenditure on token incentives being 822 Aave, corresponding to about 200,000 USD based on Aave's market price of 245 USD. This elevated incentive value has arisen due to the significant rise in Aave tokens over the last six months.
However, it is important to note that, unlike most projects that directly stimulate business indicators through token incentives, Aave's token incentives do not directly target the core actions of users' deposits and borrowings but incentivize the deposit insurance fund. Therefore, Aave's lending and borrowing business data still arises from organic demand.
However, in my view, the incentive scale on Aave's vaults remains excessively high; the current incentive scale could be reduced by at least more than half. However, with a series of functions in Aave's new economic model, especially with the launch of the new insurance module Umbrella, Aave will no longer use Aave for incentives.
For details about Aave's new economic model, you can read Mint Ventures' article published last year (Opening repurchase dividends, upgrading the security module: An in-depth analysis of Aave's new economic model).
Competitive situation
In terms of loan scale (EVM chain), Aave's market share has remained quite stable, consistently holding the top spot since June 2021. In the second half of 2023, its market share briefly fell below 50%, but it has regained an upward trend starting in 2024, currently stabilizing around 65%.
Data source: Tokenterminal
Aave's competitive advantages
As of my analysis of Aave last July, Aave's core competitive advantages have not changed significantly, mainly coming from four aspects:
1. Continuous accumulation of security credit: Most new lending protocols experience security incidents within their first year of launch. Aave has operated to date without any smart contract-level security incidents. The safe and stable operation of a platform over time builds up significant security credit, which is often the top priority for DeFi users when choosing lending platforms, especially for larger whale users, such as Sun Yuchen, who is a long-time user of Aave.
2. Bilateral network effects: Like many internet platforms, DeFi lending is a typical bilateral market where depositors and borrowers are both supply and demand sides. The growth of one side will stimulate the growth of the other side's business, making it even harder for later competitors to catch up. Furthermore, the more abundant the overall liquidity of the platform, the smoother the liquidity inflow and outflow for both depositors and borrowers, making it more attractive to large fund users, who in turn stimulate the growth of platform business.
3. Excellent DAO management level: The Aave protocol has fully realized DAO-based management, which, compared to a centralized management model, has more thorough information disclosure and more comprehensive community discussions on important decisions. Additionally, a group of highly skilled governance institutions, including leading VCs, blockchain clubs from universities, market makers, risk management service providers, third-party development teams, and financial consulting teams, are active in the Aave DAO community, leading to a rich and diverse governance participation. From the operational results of the project, Aave, as a latecomer to point-to-pool lending services, has balanced growth and security well in product development and asset expansion, achieving surpassing the older brother Compound, with DAO governance playing a key role in this process.
4. Multi-chain ecological positioning: Aave has deployed on almost all EVM L1/L2, and its TVL is basically at the top position on each chain. In the upcoming V4 version under development, Aave will achieve the connection of multi-chain liquidity, further highlighting the advantages of cross-chain liquidity. Aave will also expand to Aptos (the first non-EVM chain), Linea, and return to Sonic (former Fantom).
Main challenges and risks
Although Aave's market share has steadily increased over the past year, the rapid development speed of new competitor Morpho should not be underestimated.
Relative to Aave's collateral asset categories, various risk parameters, oracles, etc., which are uniformly managed by Aave Dao, Morpho has taken a more open approach: it provides an open lending foundation protocol that allows permissionless construction of independent lending markets, freely selecting collateral assets, risk parameters, and oracles. Additionally, it has introduced vaults constructed by professional third-party institutions like Gaunlet, where users can deposit funds into the vaults, and the managing institutions weigh risks before deciding where to lend the funds for profit.
This open combination approach is more conducive to Morphos' rapid entry into newer or niche lending markets. For example, the new stablecoin projects Usual and Resolv have built lending markets on Morphos, allowing users to obtain project returns or points through circular loans.
More information about Morpho will be analyzed in detail later.
In addition to competition from the Ethereum ecosystem, Aave's development is also influenced by competition from other high-performance L1 ecosystems. If the ecosystem represented by Solana continues to encroach on Ethereum's territory, Aave's business ceiling, which heavily relies on the Ethereum ecosystem, will undoubtedly be limited.
Additionally, the highly cyclical nature of the crypto market will directly affect Aave's user demand. When the market enters a bear cycle, the speculative and arbitrage space in the market rapidly shrinks, leading to a significant decline in Aave's lending scale and protocol income. This is also a commonality among various lending protocols, and will not be further elaborated.
Valuation reference
From a vertical valuation reference perspective, Aave's current PS (the ratio of fully diluted market value to protocol revenue) is 28.23, positioned in the median range over the past year, and there is still a significant distance from the peak PS values of over 100 during the 2021-2023 high periods.
PS of mainstream lending protocols (using FDV as the benchmark), data source: Tokenterminal
In horizontal comparisons, Aave's PS metric is significantly lower than those of protocols like Compound, Silo, and benqi, but higher than that of Venus.
However, it must be considered that DeFi, like traditional financial enterprises, has extremely strong cyclicality in its earnings multiples, often exhibiting a trend where PS drops rapidly in bull markets and is higher during bear markets.
1.2 Morpho: The rising star
Morpho originated as a yield optimization protocol based on Compound and Aave, initially being a parasite project reliant on the two. However, in 2024, it officially launched the permissionless lending foundation protocol Morpho Blue, directly competing with leading lending projects like Aave. After the launch of Morpho Blue, it experienced rapid business growth, gaining favor with new projects and assets. Currently, Morpho provides services on Ethereum and Base.
Business status
Morpho owns several products, specifically including:
1. Morpho Optimizers
Morpho's initial product is designed to enhance the capital efficiency of existing DeFi lending protocols (such as Aave and Compound). By depositing user funds on these platforms and earning base yields while matching funds based on lending demand, it optimizes the efficiency of fund utilization.
Morpho Optimizers, as Morpho's first-generation product, accumulated a large number of users and funds, allowing it to avoid a cold start after the subsequent launch of Morpho Blue. However, despite still holding substantial funds, the rate optimizations provided by the matching function of Morpho Optimizers have become negligible, and this product is no longer a focus of Morpho's development. Since December last year, deposits and borrowings have been prohibited.
Due to a very low matching rate, the rate optimization by Optimizers is only 0.07%, source: https://optimizers.morpho.org/
2. Morpho Blue (or abbreviated as Morpho)
Morpho Blue is a permissionless lending foundation that allows users to create custom lending markets. Users can freely choose collateral assets, loan assets, liquidation ratios (LLTV), oracles, and interest rate models, creating independent markets. The design of the protocol ensures that external governance intervention is unnecessary, and market creators can manage risks and returns based on their evaluations, thus meeting different market needs.
After the launch of Morpho Blue, its rapid business growth quickly put pressure on the lending leader Aave, which subsequently launched a merit incentive program for users. In addition to rewards for users following the incentive rules using Aave, addresses using Morpho would face reduced incentives.
Before the launch of Morpho Blue, most isolation lending market projects targeting niche and new assets were generally unsuccessful, such as Euler and Silo. Most funds still occurred on centralized management lending platforms like Aave, Compound, and Spark that use mainstream blue-chip assets as collateral.
However, Morpho Blue has basically paved the way, and its success stems from multiple aspects:
Having a long-term, good security record. Before the launch of Morphos Blue, Morphos Optimizers had long carried a significant amount of funds without any issues, which has built a good brand trust among DeFi users.
The foundational protocol focuses solely on the lending market and has opened up the design of supported assets, asset parameters, oracle selection, and the management authority of financial funds, which brings several benefits.
This further opens up the market freedom of lending, allowing for quicker responses to frontline lending market demands. New protocol asset issuers actively come to Morpho to build markets and provide leverage services around their assets, while professional risk service institutions like Gaunlet can launch their own managed financial vaults, directly profiting from the performance fees of the vaults, breaking away from the previous single model of charging for services to large lending protocols (Aave, Compound, Venus).
Enabling further specialization in lending services allows various participants in each link to perform their respective roles, fully competing in the free market based on Morpho Blue, enriching the range of product options. More importantly, through the 'free outsourcing' of each link, it eliminates the costs associated with the team operating relevant businesses, such as frequent protocol upgrades and code audits, and specialized risk service provider fees.
3. MetaMorpho Vaults
MetaMorpho Vaults are asset management tools designed to simplify the lending process, providing liquidity and yield opportunities. Users can earn returns by depositing assets into vaults managed by a professional team, which optimize based on unique risk configurations and strategies. Currently, the main destinations for the funds absorbed by various Vaults are the various lending markets built on Morpho Blue.
Morpho's product structure diagram
Having understood Morpho's product situation, let's take a look at Morpho's main business data.
Loan scale (Active loans)
Morpho's loan scale, data source: Tokenterminal
Morpho's highest total loan scale is similar to Aave, peaking at the end of January at 2.35 billion USD and currently at 1.9 billion USD.
Morpho has not yet officially launched protocol fees, so no protocol revenue has been generated. However, we can observe the amount of its fee (the total income obtained by depositors from the protocol) and use this to estimate the protocol revenue that Morpho could obtain if it opens the fee switch in the future.
Comparison of Morpho and Aave's fees, data source: Tokenterminal
In February 25, Aave generated a total fee of 67.12 million USD, while Morpho generated 15.59 million USD.
In February 25, Aave generated 857,000 USD in protocol revenue from a total fee of 67.12 million USD, indicating an approximate fee retention rate of 857/6712 = 12.8% (only an approximate calculation).
Considering that Aave is a lending protocol operated by Aave Dao, while bearing various operating expenses of the protocol, all income from the lending market can flow into the project treasury.
Morpho is a foundational protocol serving the lending market, on top of which many third-party participants, such as market creators and vault operators, are active. Therefore, even if Morpho opens the protocol fee switch in the future, the ratio of protocol revenue it can extract from the generated fees will certainly be lower than Aave (because it needs to share with other service providers). I expect that Morpho's actual fee retention rate should be around 30%-50% of Aave's, which means 12.8*0.3%*(30%~50%) = 3.84%~6.4%.
We can calculate (3.84%~6.4%)*1559 to derive the hypothetical protocol revenue that Morphos could generate from the total fees of 15.59 million USD created in February, which is approximately between 598,700~997,800 USD, accounting for 7%~11.6% of Aave's protocol revenue.
Token incentives
Morpho is also using its token Morpho for incentives. However, unlike Aave, Morpho directly incentivizes users' deposit and borrowing actions, while Aave incentivizes deposit insurance. Therefore, the organic nature of Morpho's core business data is not as strong as Aave's.
Morpho's token incentive dashboard, source: https://rewards.morpho.org/
According to Morpho's token incentive dashboard, in the Ethereum market, Morpho currently provides a comprehensive subsidy interest rate for borrowing behavior of about 0.2% and a comprehensive subsidy interest rate for deposit behavior of about 2%; in the Base market, Morpho currently provides a comprehensive subsidy interest rate for borrowing behavior of about 0.29% and a comprehensive subsidy interest rate for deposit behavior of about 3%.
However, regarding token incentives, Morpho has been making adjustments with a relatively high frequency, having launched three proposals since December of last year to continuously reduce the subsidies for user deposit and borrowing behavior.
The most recent adjustment of Morpho incentives occurred on February 21, reducing the number of reward tokens for Morpho on ETH and BASE by 25%. After adjustments, Morpho's annual incentive expenditure will become:
Ethereum: 11,730,934.98 MORPHO/year
Base: 3,185,016.06 MORPHO/year
Total: 14,915,951.04 MORPHO/year
Based on today's (March 3) market price of Morpho, the corresponding annual incentive budget is 31.92 million USD. Given Morpho's current protocol scale and generated expenses, this incentive amount seems quite substantial.
However, it is expected that Morpho will continue to decrease its incentive expenditures and eventually stop subsidies.
Competitive situation
Data source: Tokenterminal
From the perspective of total loan amount market share, Morpho accounts for 10.55%, slightly higher than Spark, but still has a significant gap from Aave, placing it in the second tier of the lending market.
Morpho's competitive advantages
Morpho's moat mainly comes from the following two aspects:
1. A good security history. The Morpho protocol is not old; since the launch of its yield optimization product, it has been operating for almost three years without any significant security incidents, accumulating a good safety reputation. Its increasingly large amount of absorbed funds also indirectly attests to user trust.
2. Focusing on the foundational lending protocol. The benefits of this approach have been analyzed above, facilitating the entry of more participants into the ecosystem to provide richer and faster lending market options, enhancing specialization in the division of roles, and reducing operational costs of the protocol.
Main challenges and risks
The point season activities of Kamino's first season lasted for three months, with a total of 7.5% of the total tokens distributed as a Genesis airdrop. The second season's point season also lasted for three months, distributing a total of 3.5% of the tokens.
According to tokenomist data, the amount of new token unlocking for Morpho in the coming year is equivalent to approximately 98.43% of the currently circulating token total, meaning the token inflation rate for the coming year is close to 100%. A significant portion of these tokens belongs to early strategic investors, early contributors, and Morpho Dao. The large-scale token liquidation may exert substantial pressure on token prices.
Valuation reference
Although Morpho has not opened the protocol fee switch yet, we have already made revenue projections based on the fees it has created. Its fee in February implies that the estimated protocol revenue may be between 598,700~997,800 USD.
Based on its FDV of 2,138,047,873 USD as of today (March 3), combined with the revenue data above, its PS is: 178~297, which is significantly higher than the valuation level of other mainstream lending protocols.
PS of mainstream lending protocols (using FDV as the benchmark), data source: Tokenterminal
However, if calculated based on circulating market value, Morpho's current (March 3) circulating market value is 481,361,461 USD (Coingecko data), with its PS being: 40.2~67, which does not seem too expensive compared to other lending protocols.
PS of mainstream lending protocols (using MC as the benchmark), data source: Tokenterminal
Of course, using FDV as a market cap reference is a more conservative valuation comparison method.
1.3 Kamino: The top player in Solana
Kamino Finance is a comprehensive DeFi protocol based on Solana, established in 2022. The initially launched product is an automated management tool for concentrated liquidity, and it now integrates lending, liquidity, leverage, and trading functions. However, lending is its core business, and most of the protocol's income is also contributed by the lending business. Kamino has various charging items, and the fees for lending include: a share of interest income, an initial fee charged once during borrowing, and liquidation fees. The fees for liquidity management include: deposit fees, withdrawal fees, and performance fees.
Business status
Loan scale (Active loans)
Kamino's main data indicators, data source: https://risk.kamino.finance/
Kamino's current loan scale is 1.27 billion USD, peaking at 1.538 billion USD, which also occurred in late January this year.
Kamino's loan scale trend, data source: https://allez.xyz/kamino
Protocol revenue
Total protocol revenue for Kamino, source: DefiLlama
January was the highest revenue month for Kamino, reaching 3.99 million USD. However, February's revenue was also decent at 3.43 million USD.
Kamino's protocol revenue comes from lending, source: DefiLlama
The lending portion accounts for the majority of Kamino's protocol revenue. For example, in January, the revenue from lending accounted for 89.5% of the protocol revenue.
Token incentives
Unlike other lending protocols that directly incentivize users with tokens, Kamino adopts a new incentive method that emerged during this cycle, i.e., the 'seasonal point system.' Users can earn project points by completing the official designated incentive actions, and at the end of the season, the total amount of tokens awarded in each season is distributed based on individual point ratios.
The point season activity of Kamino's first season lasted for three months, with a total of 7.5% of the tokens sent as a Genesis airdrop. The second season's point season also lasted for three months, with a total of 3.5% of the tokens sent.
Based on the current token prices, the total amount of 11% KMNO tokens distributed in the two seasonal activities mentioned above is valued at 105 million USD, and the high token rewards have been a key driver of Kamino's rapid business data growth over the past year.
Currently, Kamino's third points season is still ongoing. Unlike the previous two seasons, the third season started on August 1 of last year and has continued for over six months without conclusion. However, this has not slowed down Kamino's protocol growth. If the third season's airdrop remains similar in scale to the second season, the airdrop incentive value is expected to be between 30 to 40 million USD.
It is worth noting that one of the main functions of Kamino's KMNO token is to accelerate users' point acquisition in the seasons through staking, which enhances user stickiness to both product and token holdings.
Competitive situation
On the Solana chain, the main lending protocols include Kamino, Solend, MarginFi, etc.
Kamino currently occupies 70%~75% of the market share (measured by loan scale), and its market share in Solana is even stronger than Aave's position in Ethereum.
Solend: Once led in 2022~2023, but its growth slowed in 2024, with market share dropping to less than 20%.
MarginFi: After experiencing a management crisis in April 2024, a large number of user assets withdrew, and the project's share fell to single digits.
Kamino's total locked value has remained in the top two in Solana, second only to Jito, which focuses on staking. Its lending TVL has also significantly surpassed former competitors like Solend and MarginFi.
Kamino's competitive advantages
1. Rapid product iteration and good delivery capability: Kamino was founded in 2022 by members of the Hubble team, originally positioned as the first concentrated liquidity market-making optimizer on the Solana chain. This pioneering product has enabled Kamino to meet user needs in concentrated liquidity market making and provide automated, optimized yield liquidity vault solutions. On this basis, Kamino has further expanded into lending, leverage, trading, and other product modules, forming a full-stack DeFi product matrix. Such integrated DeFi projects spanning multiple scenarios are rare, and to this day, the Kamino team continues to explore new businesses.
2. Positive ecological integration capability: Kamino has been actively building a cooperative network both within and outside the Solana ecosystem. A notable example is the integration with the PayPal stablecoin—Kamino is the first Solana protocol to go live and support PYUSD lending, occupying a major position in the expansion of this asset. Additionally, Kamino launched leveraged products related to JitoSOL in collaboration with the Solana staking project Jito, attracting a large number of SOL stakers into the Kamino ecosystem. When Kamino Lend announces its follow-up upgrade to V2 in 2024, it plans to introduce new features such as order book lending and support for real-world assets (RWA), and open modular interfaces for other protocols to connect. These initiatives will further embed Kamino into the underlying financial infrastructure of the Solana ecosystem; the more projects build on Kamino, the more new capital will prefer to flow into Kamino, making it harder for competitors to shake its position.
3. Scale effects and network effects: There is a clear 'the strong get stronger' effect in the DeFi lending space, and Kamino's rapid expansion in 2024 reflects this network effect. A higher TVL and liquidity mean users can borrow and lend more safely with lower slippage, which also enhances the confidence of large funds entering the market. A larger capital scale itself is a competitive barrier: funds tend to flow to the most liquid platforms, further enhancing the scale of those platforms. Kamino enjoys the positive feedback from this network effect through its initial accumulation of liquidity and users.
4. A good track record in risk management. As of now, Kamino has not experienced any major security incidents or large-scale liquidation bad debts. In contrast, competitors like MarginFi have experienced turmoil, pushing ecosystem users toward Kamino.
Main challenges and risks
In addition to common risks faced by newer lending protocols, such as contract security and asset parameter design, potential issues for Kamino include:
Token economics, inflation pressure, and profit distribution
The point system model adopted by Kamino is slightly Ponzi-like, similar to Ethena. If the value of the airdropped tokens does not meet expectations, it may lead to the loss of some users (of course, given the current scale, the project's goals have been achieved). Furthermore, according to tokenomist data, a large amount of KMNO is expected to unlock in the coming year, with an inflation rate as high as 170% based on the currently circulating tokens. Lastly, it seems that all of Kamino's protocol revenue has entered the team's pockets, with no distribution to token holders or even into the treasury. There are no signs of decentralized governance being initiated in the short term. While this is normal in the early stages of the project, if protocol revenue continues to be excluded from the project DAO-controlled treasury without transparent governance and financial planning, all being monopolized by the core team, the expected value of the protocol tokens may further decline.
Development status of Solana's ecosystem
Although the Solana ecosystem has performed significantly better than Ethereum in this round, Solana has yet to showcase any distinctly PMF track types apart from meme projects. DeFi remains the forte of the Ethereum series. Whether Solana can continue to broaden its asset categories and capacities to attract more capital is crucial for Kamino's ceiling.
Valuation reference
Kamino's 30-day protocol revenue, data source: https://allez.xyz/kamino/revenue
Using Kamino's protocol revenue in the past 30 days and its FDV as a benchmark, we calculate its FDV and MC market value (based on Coingecko's market value data) to derive PS.
FDV PS=34, MC PS=4.7, this earnings multiple is relatively low compared to other mainstream lending protocols.
1.4. MakerDAO: Can it bloom anew?
MakerDAO is one of the earliest DeFi protocols on the Ethereum chain, established in 2015, and has been around for ten years. With its first-mover advantage, its stablecoin DAI (including the upgraded USDS) has long been the largest decentralized stablecoin in the market.
In terms of business models, MakerDAO's main income comes from the stability fees paid for generating DAI and the spread of DAI, which is quite similar to the interest spread of lending protocols: borrowing DAI from the protocol incurs a fee, while providing excess liquidity (sUSDS & sDAI) can earn interest.
From a business process perspective, the process of depositing ETH to obtain DAI for CDP (Collateralized Debt Position) type stablecoins is not much different from depositing ETH into AAVE to borrow USDC. Therefore, in early DeFi analyses, many regarded MakerDAO's CDP protocols as a type of lending protocol. Furthermore, after upgrading its brand to Sky, MakerDAO also independently launched a separate lending protocol called Spark, which is why we consider MakerDAO as a lending protocol in this section.
Business status
Loan scale (Active loans)
For stablecoin protocols, the most critical metric is the scale of their stablecoins, which corresponds to the loan scale of lending protocols.
Source: Sky official website
MakerDAO's lending scale is currently close to 8 billion USD, still short of the previous cycle's peak of 10.3 billion USD.
The loan scale of Spark is around 1.6 billion USD, which is higher than the established lending protocol Compound, slightly lower than the previously mentioned Mophro.
Data source: Tokenterminal
Protocol revenue
The concept corresponding to MakerDAO's protocol revenue should be the sum of various protocol revenues, minus the interest costs paid to sDAI and sUSDS. From the chart below, we can see that the stable fee revenue currently accounts for 421 million USD of MakerDAO's protocol revenue, making up the vast majority of its income, while other contributions such as liquidation fees and price stability module fees are minimal.
Historical revenue situation of MakerDAO, source: Sky official website
In stable fees, the DAI generated through Spark is expected to generate an annualized stable fee of 140 million USD. DAI generated directly from USDC can also earn 125 million USD in stable fees; these two parts account for two-thirds of the stable fee, while the remaining stable fees come from DAI generated from RWA (71.83 million USD) and DAI generated from crypto asset collateral (78.61 million USD).
MakerDAO's liability composition and annual income, source: Sky official website
To incentivize the stability fee generated at this scale, MakerDAO expects to pay 246 million USD in deposit costs (Saving Expense) annually. Subtracting the two gives MakerDAO an annual protocol revenue of about 175 million USD, averaging 3.36 million USD in protocol revenue per week.
Of course, MakerDAO has also disclosed its protocol operating expenses, which amount to an annual operating expense of 96.6 million USD. After deducting operating expenses from protocol revenue, it can yield a 'net profit' of approximately 78.4 million USD, which is also the primary source of MKR and SKY repurchase funds.
Token incentives
One of the reasons for the previous brand upgrade of MakerDAO was that it no longer had surplus MKR reserves to incentivize new business expansion. Currently, MakerDAO's token incentives are mainly used to incentivize deposits of USDS. Since the launch of the incentive program at the end of September 2024, 274 million SKY tokens have been released, amounting to about 17.4 million USD, with an annualized incentive amount of approximately 42 million USD.
Source: Sky official website
Competitive situation
Currently, MakerDAO accounts for 4.57% of the stablecoin market share. Stablecoins are one of the clearest demand tracks for cryptocurrencies, and as a veteran stablecoin, MakerDAO has formed a certain moat, including brand effect and first-mover advantage. This was evident during the last liquidity competition war led by Curve, where DAI, as one of the 3CRV tokens, could obtain a large amount of incentives released by other stablecoin projects without any operation.
However, in the competition for stablecoins, MakerDAO's situation is not optimistic. From the market share in the chart below, we can also see that MakerDAO's market share (the pink block) has decreased during this cycle.
Market share of the top ten stablecoins, source: Tokenterminal
I believe the most critical factor causing this phenomenon is that DAI, as the third-largest stablecoin, has lost (or never truly had) the function of a settlement tool. Currently, holding USDT and holding DAI is entirely for different purposes: holding USDT is primarily for use as a settlement tool, while holding DAI is for leveraging and obtaining yields. From this perspective, aside from both anchoring to the US dollar, their commonality seems to be limited.
Stablecoins with settlement functions possess excellent network effects. Unfortunately, DAI hardly has such a function anymore, making it difficult to generate network effects.
In terms of issuance scale, DAI's market share has gradually decreased. DAI has yet to return to the issuance scale of its peak in 2021, while the issuance scale of USDT continues to rise, currently doubling compared to the end of 2021.
Stablecoins that only serve as yield tools have limited ceilings, and scale growth relies on continuous yield stimulation, dependent on many external conditions (such as relatively high U.S. Treasury bond yields). How to form long-term organic growth is key to whether MakerDAO can renew itself in the stablecoin market.
Main challenges and risks
The challenges faced by MakerDAO, in addition to those analyzed above, include competition from newcomers.
A new player in the stablecoin space, Ethena, is developing rapidly, having reached a market scale of 60% of MakerDAO within less than a year since launch. Ethena's core product, also targeting yield-generating stablecoins, has a significant advantage over MakerDAO due to its revenue base—'cryptocurrency perpetual contract arbitrage yield'—which is much higher than MakerDAO's 'government bond RWA yield.' In the medium to long term, if government bond rates continue to decline, USDE will demonstrate a greater competitive edge over DAI.
Moreover, MakerDAO's governance capability is also concerning. The MakerDAO team spends 97 million USD each year, yet the governance results are highly inefficient and opaque. The most typical case is after upgrading the MakerDAO brand to SKY, there was a discussion to revert the brand back to Maker, with the whole process feeling trivial.
Valuation reference
With the protocol revenue calculated at 175 million USD, MKR currently has a PS of about 7.54, appearing relatively cheap compared to its main competitor Ethena (22). Historically, MKR's PS has also been low.
PS of stablecoin projects other than MakerDAO, source: Tokenterminal
II: Liquid staking track Lido, Jito
Liquid staking is one of the native tracks of crypto, providing better liquidity and composability compared to native staking, thus possessing solid demand. It also plays a crucial role in the ecosystem of PoS chains. Currently, the two most important PoS chains, Ethereum and Solana, have the largest protocols in liquid staking, which are Lido and Jito that we will introduce next.
For liquid staking projects, the most critical evaluation indicator is the scale of staked assets (Assets staked, which is equivalent to TVL for liquid staking projects). Since there are third parties—node operators—beyond users in their operational model, the revenue they receive still needs to be shared with node operators. Therefore, compared to protocol revenue, gross profit may be more suitable for assessing liquid staking protocols. Additionally, the protocol's expenditure indicators—token incentives—also need to be evaluated.
2.1 Lido: Cautious in Ethereum
Business status
Lido's business went live at the end of 2020 with the opening of ETH staking. It took Lido six months to secure a leading position in liquid staking on the Ethereum network. Previously, Lido was also the largest liquid staking service provider on the Luna network and the second largest on the Solana network, with its business expanding to almost all mainstream PoS networks. However, starting in 2023, Lido began a strategic contraction and currently, liquid staking of ETH is Lido's only business. Its business model is relatively simple; Lido stakes users' ETH through various node operators and charges 10% of the staking returns as protocol revenue.
Staked asset scale (Assets staked)
Currently, over 9.4 million ETH has been deposited into Lido, accounting for about 8% of the circulating ETH ratio. This has resulted in Lido having over 20 billion USD in staked assets (TVL), making it the largest protocol in terms of TVL among all protocols. At its peak, Lido's TVL approached 40 billion USD.
Data source: Tokenterminal
The volatility of the staked asset scale calculated in ETH is much smaller. Since the beginning of 2024, Lido's staked ETH scale has not changed significantly overall, with the fluctuations in Lido's staked assets being more influenced by ETH price volatility.
Lido's staked asset scale calculated in ETH, source: DeFillama
Lido's staking asset scale continues to grow, mainly benefiting from the gradual increase in Ethereum's staking rate (from 0% to 27%). As a leading liquid staking service provider, Lido has enjoyed the dividends of the overall market scale growth.
Gross profit
Lido extracts 10% of staking returns as protocol revenue. Currently, the distribution of protocol revenue is 50% to node operators and 50% to the DAO, meaning 5% is gross profit. From the chart below, we can see that Lido's protocol gross profit has steadily increased overall, fluctuating between 750,000 to 1.5 million USD in weekly gross profit over the past year.
Data source: Tokenterminal
It can be seen that Lido's protocol revenue is strongly correlated with the scale of staked assets, which is determined by their charging structure. The weekly fluctuations in Lido's protocol revenue mainly stem from the fluctuations in ETH prices.
Token incentives
In the first two years after Lido's protocol launch (2021-2022), Lido spent a massive amount of LDO tokens on incentives to stimulate the liquidity of its stETH and ETH, accumulating over 200 million USD in token incentives over two years. This allowed Lido to maintain ETH liquidity during severe market liquidity crises, such as China's ban on BTC mining in May 2021, the LUNA collapse in May 2022, and the FTX collapse in November 2022, securing a leading position in liquid staking on the Ethereum network.
After this, Lido's spending on token incentives sharply decreased, with recent spending on token incentives falling below 10 million USD in the last year. Moreover, the main direction of token incentives is toward the ecosystem. Lido does not need token incentives to maintain its current market share.
Data source: Tokenterminal
Competitive situation
In the liquid staking projects on the Ethereum network, few projects can compete with Lido. Currently, the second-ranked liquid staking project, RocketPool, has a staking asset scale that is less than 10% of Lido's.
Among newer projects, a significant competitive pressure on Lido comes from the Liquid Restaking project ether.fi. However, as of now, ether.fi's staked asset scale is only close to 20% of Lido's, and with the token issuance by Eigenlayer, the growth rate of ether.fi's staked asset scale has rapidly slowed, making it unlikely to challenge Lido's position in Ethereum staking.
Source: Dune
In its long-term development process, Lido has formed a certain moat:
The good liquidity and composability of stETH (wstETH) bring network effects. In addition to the liquidity advantages mentioned above, stETH is accepted as a staking asset by all major lending or stablecoin protocols, boasting incomparable composability advantages among LSTs, which will to some extent influence the choices of new stakers.
Accumulating security credit and brand recognition: Since its launch, Lido has generally not encountered significant security breaches. Coupled with its long-standing market leadership, it has become an important consideration for whale users and institutions when choosing staking service providers. For instance, Sun Yuchen and Mantle, which developed mETH independently, were typical representatives of using Lido's services before.
Main challenges and risks
The major challenges Lido currently faces stem from the demand for decentralization on the Ethereum network.
For PoS chains, stakers determine the formation of consensus. The Ethereum ecosystem currently has the most persistent pursuit of decentralization among mainstream PoS public chains, hence discussions about the scale of Lido inevitably seem somewhat 'harsh': when the scale of Lido's staked assets reaches 30% of the Ethereum network's staking scale, voices have continued to call for limiting Lido's scale growth. The Ethereum Foundation has also been continuously adjusting its staking mechanism to prevent the emergence of 'overly large single staking entities.'
For dapps, business development is not supported or even restricted by its only public chain, which is the biggest challenge for Lido in the long term. Although Lido has been aware of this and began cutting off all business on other chains starting in 2023, aiming to focus on Ethereum as its important target, the results do not seem significant so far.
On the other hand, although the current staking rate of ETH is still below 30% (28%), there is still a significant gap compared to other leading PoS chains like Solana (65%), ADA (60%), and SUI (77%). However, the Ethereum team has never wished for too many ETH to enter staking, previously suggesting to limit the staking rate to a maximum of 30%, which makes Lido's future market increment space appear relatively limited.
Moreover, ETH itself has performed poorly in this round, and Lido, as a project closely correlated with both concept and business data to ETH prices, has naturally struggled in this cycle.
Valuation reference
Over the past year, LDO's PS has been at a historically low level, especially in the last six months, where its PS has consistently been below 20.
It is also worth noting that within this year, there exists the possibility of protocol revenue transforming into $LDO revenue. Starting in 2024, the community has repeatedly proposed to allocate protocol revenues (the 5% portion that goes to the DAO) to $LDO holders; however, the core team has clearly opposed this from a cautious perspective, and multiple governance process votes have not passed. However, with the substantial easing of the regulatory environment and the protocol starting to officially generate 'profits' (protocol revenue minus all expenses, including team salaries, still yielding surplus) in 2024, the core team has formally discussed 'linking protocol revenue directly to LDO' in its goals for 2025. We hope to see $LDO start to obtain the staking revenue of the protocol in 2025.
Lido's protocol economics (the blue and purple line in the chart represents the protocol's 'net profit'), source: Dune
2.2 Jito: Quietly thriving in Solana
Business status
Jito is the leading provider of liquid staking services on the Solana network and also serves as the MEV infrastructure for the Solana network. They also began offering restaking services in 2024. However, the current scale of Restaking is still relatively small, with TVL just exceeding 100 million USD, and the sources of income from Restaking are not clear. Jito's main businesses remain the first two: liquid staking services and MEV service provision.
Jito provides a liquid staking service on Solana similar to Lido on the Ethereum network, staking the SOL deposited by users through node operators into Solana's staking, extracting 10% from users' returns as protocol income.
In terms of MEV, the Jito labs team previously extracted 5% of all income. However, at the end of January this year, with the launch of NCN (Node Consensus Networks) and the formal implementation of proposals like JIP-8, the Jito protocol has begun to obtain 3% of MEV income, specifically distributed as follows: Jito DAO receives 2.7%, staked JTO Vault receives 0.15%, and jitoSOL and other LST stakers receive 0.15%.
When users conduct transactions on Solana, the gas fees they pay can be divided into three categories: base fee, priority fee, and MEV tip. Among them, the base fee must be paid, while both the priority fee and MEV tip are optional payments, mainly used to improve the priority of the transaction. The difference is that the priority fee aims to enhance the priority of the transaction during the on-chain phase, which is a unified setting of the Solana protocol and belongs to the validators (i.e., stakers); while the MEV tip is a separate agreement between the user and the MEV service provider, aimed at gaining higher transaction priority at the MEV service provider to have their transaction constructed first (and then on-chain), with specific allocation determined by the MEV service provider.
Currently, Jito's MEV service returns 94% of the fees collected to validators, with 3% extracted by Jito labs and 3% allocated to the Jito protocol. In the previous Solana network's gas fee, the proportion of base fees is negligible, while the scales of priority fees and MEV tips are comparable.
The REV of the Solana network (i.e., all fees paid by users) comes from: Blockworks
In both liquid staking and MEV, Jito has near-monopoly leverage in the Solana ecosystem, which allows it to derive more value from MEV income (Jito's MEV position in the Solana ecosystem is akin to Flashbots in the Ethereum ecosystem).
Next, let's look at the specific data for Jito:
Staked asset scale (Assets staked)
Currently, Jito's staked asset scale (liquid staking) exceeds 2.5 billion USD.
Data source: Tokenterminal
Calculated in SOL, Jito's staked SOL amount is 15.82 million, accounting for about 3% of the total circulating SOL. Over the past year, the amount of staked SOL has shown a linear upward and stable trend.
Source: Jito official website
In the MEV field, Jito is nearly monopolistic in Solana, with over 94% of the 394 million SOL staked using Jito's MEV services.
Source: Jito official website
Gross profit
Currently, Jito's protocol revenue consists of two parts: they collect 10% of the earnings generated from liquid staking and 3% from MEV income. Currently, Jito allocates 4% of the liquid staking earnings to node operators, so the gross profit from the liquid staking portion is 60% of the revenue. Since currently there is no separate source to find Jito's gross profit statistics, we analyze it based on Jito's revenue situation, as shown in the following chart:
Data source: Tokenterminal
It can be seen that Jito's revenue is entirely related to the popularity of the Solana network. Its revenue has seen a significant increase since October 24, exceeding 1 million USD each week. This revenue has two notable peaks: 4 million USD and 5.4 million USD on the weeks of November 20 and January 20, respectively, corresponding to two major speculative booms on-chain. However, Jito's revenue has also rapidly declined recently as the Solana chain has cooled.
Regarding MEV, it might be because the MEV income distribution has just been launched, as I have not found any statistics on this part in the current mainstream data statistics sites or Dune. However, we can estimate based on the total MEV income of Jito. The following chart shows the total MEV income of Jito:
Total MEV income of Jito, source: Jito official website
Jito's total MEV income situation aligns with the revenue trend of Jito's liquid staking segment. At the peak on January 20 of this year, total MEV income was 100,000 SOL. After October 2024, the average daily MEV income is around 30,000 SOL, with a minimum value of 10,000 SOL.
We back-tested this period's revenue using a 3% protocol revenue rate, with the highest single-day revenue being 3,000 SOL, roughly 840,000 USD at the time, and the highest weekly revenue being 14,400 SOL, about 3.7 million USD. The average daily MEV income was 1,000 SOL (approximately 170,000 USD). Detailed forecasts of this income segment were previously made in the JIP-8 proposal; interested readers can refer to it.
Overall, aside from the current income from liquid staking, income from MEV can roughly increase Jito's revenue scale by 50%;
From the scale of gross profit, the gross profit of the income from liquid staking is on average around 600,000 USD per week, while the gross profit of MEV income is as high as 95% (only the 0.15% allocated to jitoSOL does not count as gross profit, while the portions entering the DAO and JTO Vault can be counted as gross profit), resulting in a weekly gross profit of approximately 1 million USD, which can increase Jito's gross profit scale by about 150%, with an annualized gross profit scale of around 85 million USD.
It should be noted that Jito's revenue and gross profit situation are strongly correlated with the popularity of the Solana network. Recently, after the meme trading craze on the Solana network faded, its daily revenue has dropped to about 10% of its peak, with significant data fluctuations.
Token incentives
Whether in liquid staking or MEV, Jito has not incentivized its business with tokens. The only token incentive counts as a one-time airdrop of 10% at its launch.
Competitive situation
Restaking has not yet produced real PMF, so we will primarily analyze Jito's competitive situation in liquid staking and MEV.
In Solana's liquid staking market, although Jito only officially launched its business in 2023, it has surpassed its predecessors Marinade and Lido, which once occupied over 90% of the entire Solana liquid staking market due to their own reasons.
The market share of Solana's liquid staking, source: Dune
Starting at the end of 2023, Solana's liquid staking market has welcomed more players, with more players like Blazestake and Jupiter joining the fray one after another, but Jito's market share has not been affected. However, starting in October 2024, the SOL liquid staking products from exchanges (mainly Binance's bnSOL, also including Bybit's bbSOL) caused a decline in Jito's market share, mainly due to the inherent advantage of centralized exchanges in custodial assets. They transitioned SOL financial products from native staking to liquid staking, providing users with a better experience, and thus their share rapidly increased. We can also see from the above figure that the incremental portion from bnSOL and bbSOL is relatively 'independent,' and does not encroach on the share of certain LST protocols.
Currently, over 90% of staking in Solana is still native staking, with less than 10% being liquid staking, which has significant room for improvement compared to Ethereum's approximate 38%. Of course, for ordinary users, participating in Solana's native staking is much easier than participating in Ethereum's native staking, so the proportion of liquid staking in Solana may not ultimately reach Ethereum's proportion, but liquid staking still provides relatively better liquidity and composability. In the future, Jito will still benefit from the overall increase in the scale of Solana liquid staking.
Market share of Solana's staking, source: Dune
In the MEV field, Jito, which holds over 90% of the market share, has virtually no competitors, and this portion of market space mainly depends on the future activity on the Solana blockchain.
Overall, Jito has a relatively solid leading advantage in both liquid staking and MEV fields on the Solana network. Previously, when the SEC's ETP working group consulted on the ETF staking issue, Jito was invited, which indirectly shows this.
Main challenges and risks
Jito's current business and revenue are highly dependent on the popularity of the Solana network. Therefore, the main risks Jito faces come from this dependency. After the market cooled down following TRUMP and LIBRA, the enthusiasm for meme projects quickly faded, leading to a rapid decline in SOL prices and consequently a swift reduction in Jito's business revenue. Whether Jito can regain momentum mainly depends on the popularity of the Solana network in the future.
In the liquid staking field, competition from centralized exchanges may affect Jito's market share.
From an investment perspective, another possible risk is that the circulation ratio of JTO tokens is less than 40%, with a significant 15% unlocking just last December, and it will continue to unlock linearly over the next two years, resulting in an inflation rate of 62% within the next year. The selling pressure from early investors is also a potential risk factor.
Source: tokenomist
Valuation reference
With the recent surge in Solana's popularity, the fully diluted PS valuation of JTO has rapidly declined, now down to about 33, and this valuation does not yet consider the recent MEV income. If MEV income is included, the fully diluted valuation of JTO will drop to around 22.
Data source: Tokenterminal
Additionally, JTO may also accelerate income distribution, as 0.15% of the MEV income collected by the protocol has already been allocated to JTO stakers. With the continued growth of income in the future, more income may be distributed to JTO stakers.
