Preface
Many newbies who have just entered the cryptocurrency circle think that the cryptocurrency circle only has the secondary market and is a place to play. This is also because many people don’t know how to play the DeFi project. Looking at so many projects on the chain, they don’t know what they do. Today we will continue to use the Sui chain for a practical teaching. Teach everyone how to play the DeFi protocol.
First of all, why did we choose Sui Chain? The most important reason is that Sui Foundation subsidizes some projects in Sui ecosystem every year. This also leads to the fact that the income of DeFi protocol on Sui Chain is much higher than that of other public chains. And the price of Sui token is relatively stable, which makes Sui Chain have a lot of players.
Simple gameplay
Scallop
Let me first introduce our scallop project. Scallop is the first integrated DeFi protocol on the Sui blockchain, integrating lending, stablecoins, and DEX functions. According to DefiLlama data, as of July 2024, its TVL has reached US$580 million , accounting for 32% of the Sui ecosystem DeFi market share, and is currently the fastest growing financial protocol on the Sui chain.
We can see it on the homepage of scallop. Some tokens have very high APY, which can reach more than 50%. This income is already very high for most people.
Then it should be noted that because we stake by purchasing the corresponding tokens, we will need to bear the risk of token price decline. It is also possible that the loss of token price decline within a year will exceed the return on stake.
Of course, we can see from scallop that the utilization rate of this loan is still relatively high. For example, many DeFi veterans use sca tokens and wal tokens for secondary loans. In general, the price of the currency will not fall dramatically. There is also a high probability that the tokens you stake will also have very good returns, and the overall returns will be superimposed.
Navi protocol
NAVI Protocol is the lending protocol with the highest TVL ($382 million) on the Sui blockchain, accounting for 61% of the Sui lending market. Unlike simply copying the Ethereum lending protocol, NAVI innovatively combines circular lending with a dynamic interest rate model to create a DeFi 2.0 solution that adapts to high-frequency trading environments.
Compared with scallop, Navi has the most prominent advantage of being able to conduct revolving loans.
What is a revolving loan?
Let's take a simple example
- Deposit SUI as collateral (minimum collateral rate 125%)
- Then borrow from the pool through the pledge
- Then put the borrowed sui into the pool as collateral
What are the benefits of revolving loans?
From the screenshot, we can see that the annualized return on sui's pledge in navi is more than 4.8, and the loan interest rate is 1.7. There is a 3-point interest rate spread in the middle.
Currently, the amount of Navi single-currency loan is 70% of the collateral.
If you pledge 100 dollars of sui. According to the current rate of return, you can get a total of
100*4.8%+（100*0.7）*（4.8%-1.7%）+（100*0.7*0.7）*（4.8%-1.7%） = 108.48
In total, the annualized return is 8%. Although it is not as high as the staking return of scallop mentioned above, it is more stable. The price fluctuation of sui tokens is not taken into account.
Advanced Gameplay
Do you think that these are the only ways to play DeFi on the Sui chain? Then you are totally wrong. Through some combinations, you can even get higher returns. But you need to take more risks.
The above scallop is an example
- Deposit scallop and lend it to earn up to 45%
- You will get SWAL after you get the loan
- Swal is placed in the bucket as collateral, and the loan interest rate is fixed at 13% (currently there is a loan incentive)
- Get the stablecoin buck and buy back the same amount of WAL
- Stake WAL again to obtain
OK, you have now completed two loans. So your annualized return has increased a lot. This is another type of revolving loan, but the risk is a little higher.
Note: Because there is a process of converting swal into stablecoin buck, if the currency price fluctuates too much, you need to pay attention to your liquidation price.
Summarize
After reading the above gameplay, have you discovered a new world? The DeFi gameplay on the Sui chain is much richer than other public chains. It can combine many relatively high returns, but it also means high risks, or hedge risks through other methods.
The above article is only for teaching sharing and does not constitute investment advice
