With the crypto market continuing to grow at a rapid rate over the last couple of years, the domain of decentralized finance (DeFi) has witnessed a tremendous amount of innovation, be it within the realm of yield farming, staking, etc. To put things into a financial perspective, one can see that since the start of 2024 alone, the total value locked (TVL) within this space has risen from $56 to a little over $97 billion.
Through this exponential growth, Sonne Finance, an EVM-compatible lending and borrowing protocol, has grabbed the attention of DeFi enthusiasts across the globe. To elaborate, since its launch back in October 2022, the project’s Total Value Locked (TVL) has risen from $6 million to a whopping $46.4 million (as of March 2024).
As part of this article, we will seek to disseminate a detailed understanding of the project, discussing its key aspects, functionalities, and core utilities. So, without any further ado, let’s jump straight into the heart of the matter.
What is Sonne Finance and How Does it Work?
Sonne Finance is a cutting-edge, EVM-compatible liquidity market protocol that initially launched on the Optimism network and subsequently expanded its reach to the Base ecosystem. It stands out in the DeFi market thanks to its peer-to-peer (P2P) lending solutions that are fully decentralized, transparent, and non-custodial. This means users retain full control over their assets without the need for an intermediary to oversee transactions.
At its core, Sonne Finance draws inspiration from established platforms like Compound Finance and AAVE, allowing users to lend any supported assets within its ecosystem while facilitating the use of their capital to borrow other supported assets. This mechanism is designed to provide flexibility and liquidity as well as enabling users to manage their investments more efficiently.
What Makes Sonne Finance Unique?
High-Liquidity Money Markets: Sonne has meticulously selected a range of assets to ensure high liquidity and robust market activity. As things stand, the platform supports several high-demand cryptocurrencies, including but not limited to Wrapped Ethereum (wETH), USD Coin (USDC), Tether (USDT), DAI, Optimism (OP), and Synthetix USD (sUSD).
Unique Tokenomics: Inspired by the success of Velodrome Finance, Sonne Finance has chosen to launch its liquidity on Velodrome, adopting a novel approach to tokenomics. Unlike traditional models that offer free tokens to liquidity providers, the protocol employs the strategy of bribing, which enhances the farm APR for its liquidity pair and incentivizes staking on Velodrome.
This approach is designed not only to expand liquidity but also to acquire VELO. Crucially, 100% of the VELO earned through these strategies will be distributed among Sonne stakers, underscoring the platform's commitment to rewarding its community and supporting the growth of its ecosystem.
Dynamically Adjusted Incentives: To maintain a competitive edge and deliver high market efficiency, Sonne Finance employs a dynamic incentive model, one that ensures liquidity providers and borrowers are rewarded appropriately, encouraging sustained engagement and investment in the platform.
Partners and Audits
Sonne Finance has undergone a thorough audit conducted by the specialists from Yearn Finance's yAudit team. This extensive review covered every one of Sonne's contracts and strategies, ensuring a meticulous examination of the platform's security and operational integrity.
Moreover, the project has also participated in the Chainlink Build Program, which aims to accelerate ecosystem growth and long-term adoption of on-chain lending/borrowing by gaining enhanced access to Chainlink's Oracle services and technical support.
Lastly, Sonne Finance was awarded a 250k OP grant from L-2 rollup network Optimism, the entire amount of which was allocated to lending, borrowing, and staking rewards within the decentralized liquidity market protocol.
Conclusion
With the crypto ecosystem continuing to expand and grow at a monumental rate, platforms like Sonne Finance stand primed to transform the digital finance landscape. Most recently, Rivo — a DeFi Yield Marketplace with Smart Contract Wallet — integrated the Sonne USDT vault. The strategy allows users to lend their deposited USDT, earning interest and SONNE as incentives. Moreover, the accrued rewards are automatically converted into USDT and deposited back into the strategy via Beefy Finance, streamlining the process for users.