Crypto Use Cases

Aug 02, 2024

I’ve read a lot about crypto use cases over the years. I think there are some clear winners so far, and some areas for further exploration. All figures used are pulled from Defillama’s data.

Winners:

Lending/Borrowing

Large accounts like Venture Capitalist Funds, wealthy “whales”, and even institutional capital from traditional finance are known to use lending to increase the reach of their “farming” potential
Some protocols like Aave, Maker (through Spark), and Compound have stood the test of time and still have billions of total value locked
149 protocols exist with at least $1 million of capital locked - like other software moats, strong brands and product experiences have gained trust in a space which has a strong open source tradition.
Critique: There is an oversupply of lending markets for sure. TVL doesn’t mean the capital is truly sticky.
Critique: Terrible cybersecurity for something as important as lending.
Hope: More assets will be used as collateral for lending and earning.

Payments

Blockchains work well to send money back and forth, as long as there is an internet connection. The main downside are fees, but those have become cheaper on Ethereum Layer 2’s, Bitcoin Layer 2’s, Solana, Aptos, Sui, Cosmos, and myriad of other networks. It makes sense that folks looking to maintain value on the Bitcoin or Ethereum networks are willing to pay a premium to store it as the safest and most trustworthy level.
Critique: Everything goes back to fiat in the end to buy goods/services.
Hope: Crypto becomes more acceptable medium of exchange and is able to buy more goods/services.

Store of Value

Bitcoin/Ethereum have retained sticky capital due to their technology, culture, and story, How sticky - that is the question. sticky enough to survive some strong financial headwinds…
Theoretically Ordinals are a SOV
Theoretically NFTs could be a SOV
Critique: Classic case of the greater fool/ponzis
Hope: Adoption of the story has happened, from nation states to companies.

Crypto Native Use Cases - Caveat - these are still profit seeking and money oriented use cases. Maybe there is interest earned for securing a networking, or a bribe attained from using a protocol early.
- Restaking: Although untested, the restaking narrative has proven out in terms of popularity. Re-leveraging staked ETH for the security of other rollups or applications has been popular, with over $76 billion dollars worth of ETH being used for restaking, liquid staking, or liquid restaking.

- Decentralized Exchange: Different models being built and tested every day. There has been proven revenue generating models using the Ve-model pioneered by Andre of YiFi fame. Defillama is a good example of how an excellent aggregator can make navigating the pockets of liquidity easier.

Areas for further exploration:

- Censorship resistant and private blockchain with a decentralized stack which truly frees people from coercion control: there are projects pursuing this:

Logos

Namada