When it comes to DeFi, the most common saying is 'Where to put money for the highest returns.' But have you noticed a problem? Most of the time, our money isn't being utilized to its fullest potential. For example, if you have some ETH, keeping it in a wallet is just a dead asset; using it for lending can only accomplish one thing, and while the returns aren't bad, there's not much variety. However, there are many opportunities in the market, so why can't we earn returns while continuing to operate? This is the issue of capital efficiency.
Dolomite emerged to address this problem. It runs on Arbitrum and has a straightforward positioning: it's a platform for more efficient capital flow. In simpler terms, it aims to enable your assets to perform multiple functions on-chain, moving from a single-threaded operation to a multi-threaded one. Doesn't that sound interesting?
I first noticed Dolomite because it is closely linked with projects like GMX and Pendle. For example, if you have a GLP position in GMX, you can already earn returns. However, if you want to participate in other strategies, according to traditional logic, you either have to sell the GLP or simply give up the opportunity. Dolomite provides a third option: you can directly collateralize the GLP, borrow stablecoins, and continue to play elsewhere. This way, your GLP returns remain intact, while also gaining additional liquidity. It’s like you are collecting rent while also using the property to secure a loan for further investments in new projects.
Its mechanism design is actually quite complex. Margin accounts, isolated positions, cross-protocol collateral—these sound a bit technical, but in plain language, they can be summarized in three keywords: concentration, separation, and reuse. Concentration means that all your assets and liabilities are operated in one account, without switching back and forth. Separation refers to keeping assets of different risks apart to avoid a single failure dragging down everything. Reuse means that the assets in your positions can continue to create value rather than sitting idle. These three designs together constitute Dolomite's unique gameplay.
So what is the token DOLO for? It actually has similar functions to many DeFi projects, mainly governance and incentive. When you lock up DOLO, it can be converted into veDOLO to participate in governance voting and determine the future direction of the protocol. At the same time, the protocol will issue oDOLO as a reward to encourage users to borrow and provide liquidity. In the short term, the price of DOLO will indeed fluctuate significantly due to airdrops and selling pressure, but if the protocol can continuously accumulate revenue, the token still has fundamental value support in the long term. The key question is whether it can bind the protocol's revenue with the token, which is something many projects do poorly, and Dolomite must resolve this.
Speaking of use cases, Dolomite's value is quite evident. For ordinary users, it makes money more usable. For example, if you collateralize ETH, you could originally only borrow stablecoins, but now you can also play with some leverage or continue to participate in new protocols. For strategy players, it is even a treasure tool, allowing for circular lending and compounded returns. For institutions, the amount of capital is large, and even a 1% increase in efficiency is astounding, so the value Dolomite provides to them is even greater. It can be said that whether you are a small trader or a large investor, you can find a suitable way to use it.
But don’t just look at the bright side; risks are also very real. The first risk is liquidation. If the price of collateralized assets drops too quickly, liquidation will be triggered, and losses are unavoidable. The second risk is external dependency. Dolomite allows you to use assets from other protocols as collateral, and if an external protocol has issues, the risks will also be transmitted. The third risk is the complexity of the mechanism. For newcomers, if they don’t understand the collateral ratio and liquidation line, they might accidentally get liquidated. Therefore, Dolomite is a good tool, but you must understand how to use it; blindly jumping in could be detrimental.
Looking at the larger environment, Dolomite's story actually fits well with the trend. DeFi is entering a new stage, and everyone is no longer satisfied with just 'being able to borrow,' but wants to 'borrow and still do something else.' The popularity of stablecoins and RWA is rising, and institutional funds are increasingly concerned about efficiency, all of which highly match Dolomite's positioning. If it can successfully navigate this track, it has a good chance of reaping narrative dividends in the next bull market.
In terms of price, I believe there will definitely be fluctuations in the short term, especially early selling pressure is inevitable. However, from a medium to long-term perspective, its price logic will increasingly be tied to the amount of locked assets and ecological expansion. If new assets can continue to enter, and the locked amount steadily grows, the price of DOLO will naturally be recognized by the market. Especially once the narrative of capital efficiency is amplified by capital, it may gain an additional premium.
To summarize, Dolomite is a typical project that is 'risky in the early stages, but has potential in the medium to long term.' Its mechanism is indeed more advanced than traditional lending protocols, and the narrative of capital efficiency truly exists. For ordinary users, small-scale attempts can be made to gradually familiarize themselves with operations; for strategy players, it unlocks more ways to play; for institutions, it has the potential to become a tool for capital management. Of course, security and token value capture are two key points that it must address.
My personal view is that Dolomite is worth paying attention to, but not worth blindly over-investing. It is more like a subject for long-term observation; you need to see if it can run the logic in this narrative of capital efficiency and whether it can survive the bear market. If it can accumulate enough ecology and users before the next bull market, then the price performance of DOLO may exceed expectations. What do you think? Will Dolomite become the next star in the capital efficiency track, or will it be replaced by larger protocol upgrades? This is quite an interesting question.
