Building for the Inevitable Mass Adoption Phase: Navigating the Deceptively Busy DeFi Industry

Newton’s Third Law of Motion says that for every action, there’s an equal and opposite reaction. And while Newton wasn’t an expert on DeFi, his law holds true in today’s deceptively busy industry.

If you look at the price charts of most major altcoins, and even most TVL charts, you’d think DeFi was dead. But under the surface, we’re building for the inevitable mass adoption phase to come.

Decentralized Stablecoins: A Reaction to Centralized Crypto Failures: Tether and Circle's Downside and the Need for Change

This is where Newton’s law comes into play. 2022 was a disaster for crypto, to say the least. Centralized institutions left and right failed on every metric, but especially honesty and transparency. As a result, we have the equal and opposite reaction: perhaps the busiest building market that crypto/web3 has ever seen.

One narrative that’s exploded due to the failures of centralized crypto players is overcollateralized, decentralized stablecoins. Tether and Circle each have their own downsides, be it lack of transparency and/or censorship of transactions, and they also make up over 86% of the total stablecoin market. Obviously, something needs to change.

Upon the successful Shanghai update in April, unstaking and withdrawing staked ETH became possible, leading to another major narrative: LSDs. This means there’s a lot less risk to staking ETH, which means that the amount of staked ETH should grow meaningfully for quite some time. However, it also opens the gates for a plethora of new products.

Unleashing the Potential of ETH LSDs: Exploring the Growth of New Stablecoins Backed by ETH LSDs

Now, we can combine those two narratives to get an array of new stablecoins backed by various ETH LSDs. Lybra Finance has been the leader in this field so far, accruing over $200m in TVL with their ETH and stETH-backed eUSD stablecoin in under 2 months. Another emerging player is the well-funded PrismaFi, whose acUSD stablecoin will be backed by a basket of LSDs, including wstETH, cbETH, rETH, sfrxETH, and WBETH.

Introducing senUSD: Expanding Collateral Possibilities: How Seneca Protocol Backs senUSD with LSDs and Yield-Bearing Assets

Seneca aims to add another piece to this puzzle with our senUSD stablecoin. Here’s the idea: senUSD will be backed not just by LSDs, but also various types of other yield-bearing assets.

These will include LP tokens from the best liquidity sources in DeFi (Curve, Balancer, and Uniswap v3 primarily), as well as yield-bearing stablecoins and lending markets receipts (e.g. USDC deposited into lending markets, or crvUSD omnipool receipts).

Obviously, we love to see the speed at which this innovation is growing. But at the same time, we want to take it to the next level. Ultimately, we’re expanding the capital efficiency of DeFi.

The Power of Composability in DeFi: Leveraging DeFi's Advantage Over TradFi for Enhanced Capital Efficiency

In order for DeFi to expand and become an attractive place for global money to settle, there’s no question that we need to prioritize capital efficiency. Fortunately for us, DeFi has a clear advantage over TradFi: composability.

Because of composability, capital can do multiple things at once. This makes assets like LSDs and LP tokens possible and accessible to everyone. This is one area with which TradFi simply can’t compete, so we need to leverage it as much as we can.

Extending Collateral Possibilities with Seneca Protocol: Enabling a Wider Range of DeFi Users and Additional Yield Opportunities

Seneca is doing this by extending the possibilities of what users can post as collateral against loans. This unlocks several benefits, such as offering services to a wider selection of DeFi users, paying additional yield on staked tokens, LP tokens, etc.

Capital Efficiency Amplified: Borrowing Against LP Tokens

Let’s use LP tokens as an example. Today, most liquidity providers deposit token pairs into DEXs and collect trading fees. The trading fees may be nice, but there’s also issues like IL, managing liquidity range, and more.

Seneca is basically adding another layer on top of this process. Instead of settling for (usually) meager rewards, LP token holders can add another source of passive income without having to buy anything else. All they’d have to do is lend their LP tokens on Seneca and earn interest.

Bringing Assets Together on a Powerful Dapp: Seneca Protocol's Vision for Uniting Stablecoins, LSDs, LP Tokens, and More

However, the capital efficiency doesn’t end there! Not only can you add another source of passive income, but you can also borrow against your LP tokens. Those borrowed funds would then likely go back into DeFi in some way, expanding the overall market. Creating ways to do as much as possible with your money – that’s the power of capital efficiency! Stablecoins, LSDs, LP tokens, and many other assets all have critical parts to pay, and Seneca is aiming to bring them all together on the same powerful Dapp.

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