Original Title: "The Six Pillars of On-Chain Protocol, HyperEVM Faces Off Against Ethereum"

Original Source: Lord Zuo's Crooked Neck Mountain

Ethereum returns with DeFi once again, with Aave/Pendle/Ethena making rehypothecation a leverage amplifier. Compared to the Ethereum-based stack with ETH as the benchmark during DeFi Summer, the leverage curve supported by stablecoins like USDe is more gentle.

We may be entering a warm, long cycle, where the examination of on-chain protocols will be divided into two parts. The first part involves more asset types, and external liquidity will be more abundant in anticipation of a Fed rate cut. The second part examines the extreme values of leverage multiples, corresponding to the process of secure deleveraging, i.e., how individuals can safely exit and how the bull market will end.

Crypto Six Protocols: Ecosystem and Token Interaction

On-chain protocols and assets are numerous, but under the Pareto principle, we only need to focus on parameters such as TVL/transaction volume/token price. To focus more, we should pay attention to the few entities indispensable to the on-chain ecosystem, and then examine their relationships within the ecosystem network, considering both individual importance, ecosystem connectivity, and the highest potential growth of new protocols.

Image Description: DeFi TVL Overview, Image Source: @zuoyeweb3

In terms of DeFi TVL composition, Ethereum accounted for over 60% of the DeFi TVL in July, while Aave's share of the Ethereum ecosystem TVL was also over 60%. This represents the 20% in the Pareto principle, and the remaining protocols must have strong ties to both to be included in the ranks of the main beneficiaries.

With the launch of the rehypothecation trio, it goes without saying the interconnection between Ethereum, Aave, Pendle, and Ethena. Adding Bitcoin, WBTC, ETH, USDT, and USDC are de facto DeFi base assets, but USDT/USDC and Lido, for example, only have asset attributes and lack ecosystem value. Competitors like Plasma and Stablechain are just beginning to compete.

To differentiate slightly, a protocol can have multiple values. For example, Bitcoin mainly only has asset value, meaning everyone needs BTC, but no one knows how to utilize the Bitcoin ecosystem. This does not mean BTCFi is a scam (head pat for survival).

On the other hand, ETH/Ethereum has dual value, as both ETH itself and the Ethereum network are needed, including the EVM and its extensive DeFi stack and development infrastructure.

Further dividing based on asset and ecosystem value, assessing the degree to which top protocols are "needed," with being needed as an asset worth one point and being needed for ecosystem value worth one point, the following table can be summarized:

Pendle/Aave/Ethena/Ethereum/HyperEVM/Bitcoin form the strongest links among the six protocols, where any pair can be interconnected, requiring at most one additional protocol or asset link.

Let's briefly explain:

1.Ethena <> HyperEVM: USDe has been deployed to the HyperEVM ecosystem

2.Pendle <> HyperEVM: $kHYPE and $hbHYPE rank first and third in the trending list

3.Aave <> HyperEVM: Hyperlend TVL accounts for 25% of HyperEVM ($500M vs. $2B), being a friendly fork of Aave, committing to sharing 10% of profits with Aave

4.BTC/ETH are the two largest trading pairs on Hyperliquid and can be used for depositing and withdrawing through Unit Protocol

5.Pendle, Aave, and Ethena have integrated, though the asset nature of USDe is recognized, with $ENA ecosystem value slightly falling short

6.Pendle's new product Boros is based on the funding rate for trades, with BTC and ETH contracts being the preferred choice

7.Aave requires WBTC and various types of ETH, such as staked ETH, especially with Ethereum's ecosystem value being needed by Aave/Pendle/Ethena, providing on-chain support for ETH price

8.The most unique aspect here is that the Ethereum ecosystem unidirectionally requires BTC, while the Bitcoin ecosystem does not require any external assets

9.Ethena has no current relationship with Bitcoin/BTC

10. HyperEVM/Hyperliquid is the most proactive external ecosystem, giving off a strong "I am here to join this family" vibe.

By statistics, these are the six most closely linked assets, and the introduction of any other ecosystem and token requires more assumption steps. For example, Lido, ranked second in TVL, has a weak relationship with Hyperliquid and Bitcoin. Additionally, after Pendle "abandoned" the LST asset to pivot to YBS, Lido's Ethereum on-chain ecosystem interactivity will weaken.

Building upon the highest ranking of 7 for BTC, and based on the influence on other protocols, the six assets are divided into three nodes. Please note that this is not a depiction of their asset value but a ranking of importance within the ecosystem:

BTC/ETH is the strongest infrastructure, with BTC excelling in value attributes and ETH's ecosystem status being unshakable. If Solana is added for calculation of the degree of linkage, it will be found that it does not match the linkage of Hyperliquid/HyperEVM to Ethereum. The core reason is the transactional attribute of Hyperliquid itself, combined with HyperEVM being more closely aligned with the EVM ecosystem.

· Within Ethereum, the interaction between Lido/Sky and the existing six protocols is insufficient.

· Outside of Ethereum, the interaction between Solana/Aptos and the existing six protocols is insufficient.

However, Solana needs to support its own DEX to accommodate more external assets, naturally leading to more assumption steps. SVM's compatibility with the EVM ecosystem will also be more challenging. In short, everything about Solana needs to be developed independently.

Image Description: Connectivism, Image Source: @zuoyeweb3

Nevertheless, within the network of relations, Ethereum's ecosystem synergy is the strongest. $1 of Ethena comes through ETH hedging, then enters Pendle and Aave for value circulation. The Gas Fee generated on top becomes the support for ETH's value.

Aside from Bitcoin naturally relying on BTC for value self-circulation and self-circulation, ETH is closest to a value loop. However, this is the result of proactive action, and the combination of Hyperliquid/HyperEVM is still on the way. Whether it can achieve the synergy between transactions (Hyperliquid), ecosystem (HyperEVM), and $HYPE remains to be seen.

This is a hypothetical process of increasing entropy step by step. BTC only needs itself, ETH needs its ecosystem and token, $HYPE needs transactions, tokens, and ecosystem.

Is There an End to the Expansion of DeFi?

As mentioned earlier, Hyperlend needs to share revenue with Aave. However, Aave's influence is not limited to this. In fact, Aave is the key player in the circular lending system initiated by Pendle and Ethena, assuming the leverage role in the entire circular system.

Aave is the closest entity to becoming Ethereum's on-chain infrastructure, not because of its highest Total Value Locked (TVL), but due to a comprehensive consideration of security and fund size. For any public chain and ecosystem, the safest way to launch a lending mode is through a compliant fork of Aave.

Image Description: Aave and Hyperlend revenue sharing setting, Image Source: @zuoyeweb3

In the Hyperlend forking template, a 10% revenue share is the foundation. In addition, there is a 3.5% allocation of the native token to Aave DAO and 1% to stAave holders. In other words, Aave sells itself as a service to various ecosystems. This is where its ecosystem value and token value interact.

However, it is not without competitors. Maple has expanded to HyperEVM, and new lending protocol forms like Fluid and Morpho are heating up with new assets like YBS. While HyperEVM is the strongest competitor in the Ethereum EVM ecosystem, it may not always remain peaceful.

In terms of proactivity, Bitcoin and HyperEVM are absolute extremes. HyperEVM is transferring traditional transaction types to the chain through HIP3, bridging liquidity between HyperCore and Hyperevm through CoreWriter, and supporting its front-end agents through Builder Code.

Furthermore, it leverages Unit Protocol and Phantom to bridge funds from the Solana ecosystem, siphoning all on-chain liquidity, which is also a way of expanding infrastructure.

In summary:

· Pendle targets all divisible asset types, starting from fixed income, expanding beyond perpetual contracts to the broader derivative market, which is essentially the interest rate swap market.

· Ethena aims to build the third stablecoin pole starting from the core of $ENA and $USDe, $USDtb, using the DeFi circular lending model and treasury strategy. While the primary use case of USDT/USDC remains trading and payments, USDe hopes to become a risk-free asset in the DeFi space.

· Aave has already established itself as the de facto lending infrastructure tightly integrated with Ethereum.

· Bitcoin and Ethereum represent the limits of the blockchain economic system, and their scalability forms the basis of DeFi growth. That is, how much of BTC's scale can be migrated to DeFi and how much room for growth DeFi still has.

· Hyperliquid/HyperEVM has closely integrated into the existing DeFi giants in the ecosystem. While its TVL is far behind Solana, its growth prospects are greater. Solana's narrative lies in defeating the EVM system from a public chain perspective.

Conclusion

The Crypto Hex Protocol assesses the degree of interconnection between protocols. It does not mean that other protocols lack value; rather, a high degree of collaboration tightness will exponentially increase the liquidity and utilization efficiency, benefiting all. When one gains, all gain.

Of course, when one loses, all lose as well. This requires an examination of DeFi's anchor change — the subsequent development of transitioning from ETH to YBS. As a high-value asset, ETH tends to be more aggressive in leverage, while YBS, such as USDe, is naturally more price-stable (not value-stable). DeFi LEGO built on it is more robust, and excluding extreme de-pegging scenarios, theoretically, it can smoothen the curve of leveraging and deleveraging.

The seat in the Crypto Pantheon is limited, and newcomers can only forge ahead vigorously, make friends with existing gods, and build the strongest protocol network to earn a place for themselves.

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