During the time when other chains are focused on the MeMe market and continuously attracting attention due to various unexpected events, Sonic Labs, formerly Fantom, has concentrated on the development of DeFi. Sonic has announced several new measures to incentivize DeFi projects within its ecosystem, resulting in a 500% increase in TVL on the Sonic chain over the past month. What has Sonic done, and how can retail investors participate in the Sonic ecosystem?
Old chain, new layout, what has Sonic done since AC's return?
Fantom achieved great success in 2021, with its TVL peaking at $8 billion. However, after chief developer Andre Cronje left and the end of DeFi Summer, Fantom gradually faded from the spotlight. At the end of last year, AC returned and upgraded the Fantom brand to Sonic, with the former star team using new technology to build a new chain, which indeed achieved good results within two months of its launch.
In just two months, Sonic grew from $0 to over $500 million in TVL, with a net inflow of $110 million in external funds into Sonic, primarily from Solana, followed by Base and ETH. The DEX trading volume on Sonic also exceeded $1 billion.
How did Sonic achieve this in such a short time? First, for a DeFi chain, a stablecoin funding channel is essential. After integrating USDT into Sonic, the total market cap of stablecoins has increased by 59% this week. DeFiLlma shows that the current total market cap of stablecoins such as USDT, USDC, scUSD, stkscUSD, and USDC.e has exceeded $100 million.
In addition to Euler, the native lending platform Silo and the staking platform Beets have provided significant liquidity for assets like ETH. Sonic has also nested three DeFi protocols—Lombard Finance, Ether.fi, and Rings Protocol—using a nested staking model to bring users yield leverage and point bonuses. In a mutually beneficial scenario, liquidity from BTC is brought into Sonic, akin to a triangle offense in basketball.
The starting point of the offense is Lombard Finance, a DeFi project focused on Bitcoin, best known for launching LBTC, a liquid staking version of Bitcoin. Users stake BTC on Ethereum, Base, or BNB through Lombard and receive a 1:1 "LBTC."
The intermediary is Ether.fi, which collaborates with Lombard to launch the first Bitcoin liquid re-staking token "eBTC." eBTC uses LBTC as collateral in the background, allowing eBTC holders to potentially earn multi-layered rewards, benefiting from both LBTC's staking rewards "backed by actual Bitcoin" and Ether.fi's re-staking strategy on Ethereum. eBTC can also be deposited into Rings on Ethereum to mint scBTC.
The endpoint of the offense is Rings, which allows users to deposit various tokens, from stablecoins to Ethereum and the aforementioned LBTC and eBTC Bitcoin derivatives. Users can deposit these assets into Rings Protocol to mint yield-bearing "sc" version assets, including scUSD and scETH, in addition to scBTC. According to Sonic's current reward mechanism, holding, using, or staking these assets can yield weekly rewards. Rings utilizes Veda Labs' farming strategy to generate returns from deposited assets and distribute them back to users through protocols on Ethereum and Sonic.
To attract early developers and new users, Sonic has simultaneously launched a Hackathon focused on DeFAI and the Sonic Meme Mania competition to expand its user base in AI and MeMe.
The prize for this hackathon is equivalent to $295,000 in $S, supporting the development of AI agents for executing social and on-chain operations on Sonic. It has already attracted 18 AI projects and 485 technical personnel, with the registration deadline set for February 25.
The Meme competition has a total prize pool of 1 million $OS, with the highest market cap among participants nearing $7 million. The infrastructure for Meme coins on Sonic is still relatively underdeveloped, raising questions about whether it will adopt Solana's strategy to capture the Meme market while developing DeFi as the fastest transaction chain.
However, the main new influx comes from yield farmers and DeFi players. Sonic plans to airdrop a total of 200 million $S tokens as incentives, with a one-year release schedule. The first quarter lasts 6 months, accounting for 40-60% of the total airdrop. Of this, 25% of the airdrop will be immediately tradable tokens, while 75% will be tradable locked NFT certificates. Users can trade the NFTs or destroy a portion of them according to the unlocking schedule in the table below to provide liquidity for $S and unlock early. This flexible airdrop unlocking model has attracted many users.
What opportunities are there in the Sonic ecosystem with rumored high yields?
How to Obtain Airdrops?
Currently, the proof for obtaining airdrops is points, with three types of airdrop points: Passive Points (PP) require holding whitelist assets in a Web3 wallet. Activity Points (AP) require providing whitelist assets as liquidity in participating projects. DApps Points (Gems) are allocated based on contributions to the ecosystem by developers.
According to on-chain analyst @phtevenstrong's estimated APR and provided strategies, users have many ways to participate and achieve good yields.
The $S token currently has a fully circulating supply, with no VC shares, thus avoiding dilution risks. Currently, nearly half of the liquidity has been locked (31% of the total supply is staked + 5-10% of $S locked in DeFi protocols). Assuming 50% of the airdrop occurs after 6 months, the estimated average points TVL during that period would yield an additional 20% APR when TVL is $300M and an additional +12.5% APR when TVL is $500M.
Basic Points Mining Strategy
Rings Protocol's scETH looping strategy: By staking Ethereum (ETH) on Rings Protocol, users mint yield-bearing scETH. They then collateralize scETH on the Euler platform to borrow Wrapped Ether (WETH), setting a loan-to-value ratio (LTV) of 91.5%. The borrowed WETH is reinvested, theoretically achieving 10x leverage. This strategy can yield a theoretical annualized return (APR) of 87.49%, not considering Rings points and rEUL rewards.
Silo Finance's stS/S Hedging Loop Strategy
Borrow stS tokens on Silo Finance, setting a 95% LTV to achieve 20x leverage. Then stake the borrowed stS tokens, which can earn 2.4% lending yield and 5.3% staking yield. This entire process can stack a 10% points reward, enhancing the total yield. The base yield of this strategy is 7.7%, plus the 10% points reward, totaling 17.7%. The complete strategy's APR can reach 74%.
Reverse Hedging Arbitrage Strategy
Borrow stS tokens on Silo Finance to gain an 8x points bonus. Then lend the stS tokens to earn a 4.1% lending yield. Additionally, you can earn 0.5 Silo points daily. The base yield of this strategy is 4.1%, along with the daily reward of 0.5 Silo points. Although the yield is not high, the relative risk is also lower.
As the MeMe market gradually cools down, DeFi has returned to the public's view. Sonic, specializing in DeFi, has achieved excellent growth in its first three months. After integrating the DeFai concept, the challenge is how to establish a foothold amidst the hype and Monad's pressure by leveraging Sonic's high-performance chain and AI to create a new DeFi paradigm. It is hoped that more interesting innovations will emerge from the competition among numerous projects, bringing new vitality to the market.
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