A Year in Review: NEAR DeFi in 2022

By Proximity Labs

Proximity
NEAR Protocol

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Disclosures: Proximity Labs holds $NEAR, $AURORA, and other tokens or investments that may be associated with protocols or projects mentioned in this article. The authors of this article have not purchased or sold any token for which the authors had material non-public information while researching or drafting this report. The statements and content in this article should not be misconstrued as a recommendation to purchase or sell any token, or to use any protocol. This article also contains forward-looking statements about third-party projects that the authors have no control over and, as such, actual future developments may be substantially different from the expectations described in the forward-looking statements for a number of reasons, including those that are not under the control of the authors. The content of this article reflects the opinions of its authors and is presented for informational purposes only. This is not and should not be construed to be investment advice.

Index

I. Proximity’s Role in the NEAR Ecosystem

II. NEAR DeFi 2022 Recap

i. On-chain, Non-custodial, Decentralized Trading is On the Rise

ii. Central Limit Orderbooks (CLOBs)

iii. Capital-efficient AMM DEXs: Concentrated Liquidity, Hybrid AMMs, LP-based Perps

iv. DEX Aggregators

v. Money Markets: Community Lending Pools, Orderbook-based p2p Lending, Margin Trading, and Non-liquidatable Loans via Options Strategies

vi. Liquid Staking

vii. Infrastructure to Support a Booming Ecosystem

  • Interoperability
  • Stablecoins
  • Wallets
  • Portfolio Management Tools
  • Analytics
  • Fiat On/off-ramps

III. Looking Forward to 2023

What a year for the markets, especially for crypto. As 2022 is coming to an end, we at Proximity wanted to recap the most notable DeFi trends from this past year and highlight how they have developed in the NEAR DeFi ecosystem.

Proximity’s Role in the NEAR Ecosystem

Proximity started over a year ago with the goal of helping talented builders establish a healthy and robust ecosystem of open-source DeFi protocols, teams, and infrastructure on the NEAR blockchain. Proximity's role is to provide a full-stack service of financial, technical, and advisory support to the NEAR DeFi ecosystem to achieve this goal.

Proximity initially received a grant of 40 million $NEAR tokens from the NEAR Foundation to further this mission. Over the last 14 months, Proximity has allocated ~8 million $NEAR via investments, grants, and other initiatives. In addition to the remaining treasury of $NEAR, which will be utilized and allocated over a period of several years, Proximity also has multiple years of operational runway in stable assets.

Proximity’s operations have evolved over the last year as we have adapted to providing different services based on the ecosystem’s most pressing needs. Key initiatives that we have spearheaded include:

As we head into the new year, our focus continues to be supporting and growing the number of talented teams and projects in our ecosystem, as well as ensuring that NEAR continues to lead in terms of user and developer experience.

Our goals for 2023 are the following:

  • NEAR is the de facto orderbook chain, with industry-leading decentralized orderbook products;
  • NEAR components enable the most robust, fully-decentralized frontend deployment experience, including full support for Ethereum and its L2 protocols (see near.social widgets for a developer preview);
  • NEAR (and soon NEAR OS) becomes the homepage and entry point to Web3, enabling seamless, safe, and verifiable discovery and usage of the most popular Web3 products from any device. More info about NEAR OS soon.

If you are interested in contributing to the above goals or believe you can contribute to the NEAR DeFi ecosystem in a meaningful way, please reach out to us! Builders can contact us via our website.

And now, on to the year-in-review!

On-chain, Non-custodial, Decentralized Trading is On the Rise

In May 2022, we witnessed the $LUNA/$UST collapse and related contagion extending across the market, resulting in 3AC, Voyager, Celsius, BlockFi, and other prominent lenders to become insolvent. The recent FTX and Alameda fallout has shocked the markets yet again, leaving many to wonder whether we have hit bottom or there is yet more to come.

Through these events one thing has become clear: building a non-custodial and decentralized future is of the utmost importance. The reckoning of centralized actors, combined with improved protocols and more capital-efficient mechanisms, caused DEX volumes to rise in November. At Proximity, we believe the future of finance will be dominated by protocols that can offer a CEX-competitive experience while maintaining the core values of self-custody and decentralization. In this regard, NEAR is extremely well positioned to become the leading trading chain.

We are already seeing this thesis unfold through the rise of orderbook DEXs such as Orderly Network, Spin, and Tonic; as well as capital efficient AMM DEXs with CEX-like functionalities, such as Ref Finance v2 via its discretized liquidity AMM with limit orders.

Figure 1. DEX to CEX Spot Trade Volume (as a percentage of total CEX volume)
Figure 2. DEX Volume across different decentralized AMMs and CLOBs on-chain

Central Limit Orderbooks (CLOBs)

By Q3, NEAR saw three strong orderbook platforms launch on mainnet:

Orderly Network positions itself as an orderbook infrastructure layer with a risk engine, matching engine, and shared liquidity, allowing different frontends to build on top of it. Such products can be spot DEXs, perps, options, lending/borrowing; and even ERC20 tokens on Aurora could be tradeable on Orderly without bridging via EVM support through cross-contract calls.

Orderly first launched on mainnet two months ago with WOOFi DEX offering spot trading and, since then, it has achieved $130M+ in cumulative volume with $5M+ in liquidity, 4.8k+ unique users that have deposited $8M+, and over 192,000 transactions. Perps are expected for January 2023 with options and other products set for a later debut.

Figure 3. Orderly’s daily new users (source: Pikespeak)

Spin is a fully on-chain orderbook DEX with both spot and perps on mainnet, and options coming soon. Spin announced this year they are partnering with Calimero Network to operate a private shard to ensure up to 200K TPS (transactions per second), and it is currently engaging users through an airdrop campaign for early adopters. Spin has 9.1k+ unique users (+64% in the last 30 days) and has handled over 417,000 transactions on spot and 565,000 transactions on perps.

Figure 4. Spin’s daily new users (source: Pikespeak)

Tonic is a fully on-chain and open-source orderbook DEX with spot trading live on mainnet and perps coming before the end of the year. With 1.3k+ users (+125% in the last 30 days) and over 414,000 transactions, Tonic has kickstarted the growth of its ecosystem by integrating CellFi, which is a decentralized LP for CLOB DEXs via bots that allows you to create special trading strategies, DCA and TWAP orders, and others.

Figure 5. Tonic’s daily new users (source: Pikespeak)

The activity of decentralized perps and options on-chain has significantly increased in 2022 across all chains and we think this trend will continue in 2023. Perps will have a strong presence on NEAR in 2023, with Spin perps already live on mainnet, Tonic perps set to launch before 2023, and Orderly perps to debut by early Q1 2023.

Given Proximity’s commitment to the development of a robust orderbook ecosystem on NEAR, we recently launched a $10M Orderbook Fund for projects to leverage and build atop the existing Central Limit Orderbook (CLOB) infrastructure provided by these protocols. If you are interested in participating, please apply here.

#OrderbooksAreNEAR

Closing The Gap: Capital-efficient AMM DEXs

While CLOBs are normally a more capital efficient way to trade, AMMs on NEAR have also made strides this year to close the gap between CEXs and DEXs.

If you have ever traded on Uniswap V3, you will have noticed that you don’t need deep liquidity to avoid a huge price impact. Concentrated liquidity allows LPs to provide liquidity in tighter ranges. Ref Finance has just launched their V2 with a next-gen concentrated liquidity model called the Discretized Liquidity AMM (DLAMM), which also enables limit orders with near-zero slippage. Besides, Ref also supports multi-chain liquidity aggregation via cross-chain contract calls between Ref, on NEAR mainnet, and other DEXs in Aurora such as Trisolaris, thanks to the true cross-chain composability that NEAR offers.

Figure 5. On the left, graphics representation of the Discretized Liquidity AMM (DLAMM) model by Ref Finance. On the right, UI for Limit Orders.

Another upcoming capital-efficient AMM on NEAR native is Veax. It is a Hybrid AMM DEX that raised $1.2M to bring a suite of TradFi trading products to DeFi. Among its features, the most promising are adaptable liquidity pools, true margin & derivatives, an Orderbook UX, and smart contract OTC trades and auctions for illiquid tokens.

On the Aurora side, we find three exciting trading protocols:

  • Arctic also features a DLAMM DEX and has collaborated to implement Ref V2. Arctic plans to launch their native token $ARC and their veNFT model in 2023.
  • Derivio is building an institutional-grade LP-based derivatives platform that will offer margin-based perpetuals, binary options, and interest rate trading, with dynamic market-neutral LP protection.
  • Holdr, a friendly fork of Balancer, is an automated portfolio manager and trading platform that provides LPs an opportunity to mitigate impermanent loss and to take advantage of self-balancing portfolios similar to traditional index funds. They just launched a liquidity bootstrapping pool (LPB) event for its token $HLDR.

DEX Aggregators

With so many interesting options to trade on, DEX aggregators are a fundamental part of an ecosystem. In 2022, NEAR saw the launch of two aggregators, Perk and Arbitoor, which allow users to trade not only across AMMs pools but also across CLOBs, and in the future across Aurora and different shards. Fluxus Finance is also launching its DEX aggregator soon on mainnet, along with a host of other DeFi products such as a portfolio dashboard, auto-compounder, and vaults.

With the discretized liquidity feature of Ref Finance V2, Veax’s hybrid AMM, three Orderbooks, and Aurora-based trading platforms, users are assured to get an optimal quote when trading on NEAR. Perk will also help users auto-manage LP positions in protocols with concentrated liquidity and aggregate yields from money markets to make the most out of yield farming.

Money Markets

Despite the demand for borrowing and leveraging diminishing in a downward market, decentralized money markets have proven their value this year in light of the fall of prominent institutional lenders and associated insolvency issues.

The NEAR ecosystem has three main money markets: Burrow on NEAR native; Bastion and Aurigami on Aurora. As of December 19th, Burrow sits at $17M in TVL with $3M in loans; Bastion has $50M in TVL with $6M in loans; and Aurigami’s TVL is $8M with $2.5M in loans. In total, TVL for money markets in NEAR is $75M and the total amount of borrows $11.5M, accounting for a utilization ratio of 15.3%. (Source: DeFiLlama)

The goal heading into 2023 is to generate real and sustainable demand in money markets via, for instance, margin trading, and create more capital-efficient mechanisms thanks to the composability offered by Orderbooks and AMMs. In 2023,

  • Orderly will be introducing community lending pools where LPs lend out assets to market makers while enjoying single-sided liquidity provision with sustainable yields, and will allow orderbook-based peer-to-peer (p2p) loans, optimizing APRs for both lenders and borrowers.
  • Omomo Finance, a spin-off of Blaize.tech and a new money market on NEAR native, plans to offer leverage trading with zero-slippage limit orders on top of NEAR DEXs, starting with Ref’s V2 concentrated liquidity pools. It will cover positions from the borrowing pool and fees are 0% as you can get them back as an LP.
  • Cora Protocol plans to offer non-liquidatable loans with a one-time fee by introducing a new DeFi primitive: lending protocol powered by options strategies. The protocol uses quantitative finance analysis methods to define the optimal borrowing amount, borrowing fee, and associated risk. They just launched their testnet on Aurora.

Liquid Staking

In 2022, Linear Protocol and Stader (from Terra) launched on NEAR, adding to Metapool. Having three liquid staking solutions allows users to diversify their risk and optimize their trading and farming strategies.

These three protocols offer their own derivatives: $LiNEAR ($4.3M), $NEARX ($2M), and $stNEAR ($12.5M), respectively, which distribute your staked $NEAR tokens across different validators pools. These assets are composable, meaning that can be used in lending/borrowing protocols as collateral, traded in AMMs and Orderbooks, and even leverage-farmed in protocols like PembRock.

Infrastructure to Support a Booming Ecosystem

2022 showed that crypto is evolving into an increasingly multi-chain world. Proximity actively contributed to the huge upgrade the NEAR ecosystem saw across the board with bridges, fiat on/off-ramps, stablecoins, wallets, and more.

Interoperability

The Rainbow Bridge between NEAR, Aurora, and Ethereum continues to be one of the most secure and robust bridges in crypto, successfully shutting down exploit attempts and implementing a $1M bug bounty program. According to Nansen, it has surpassed $3.3B+ in bridged assets with over 15,700 unique users, positioning as the 4th native bridge in bridged volume just behind Polygon, Axie, and Arbitrum, and ahead of Optimism. During NEARcon, it was announced that the Rainbow Bridge’s NEAR-native token connector is now live, meaning that users are able able to bridge any NEAR-native token to the Ethereum network.

However, a thriving ecosystem consists of different options that adapt to users' demands. Last month, Multichain, the top bridge by both TVL and volume, joined the NEAR ecosystem with over $30M in initial shared liquidity. Now, you can bridge assets between NEAR and other 15+ chains, including Arbitrum, Polygon, Avalanche, Aptos, and more, in a faster way, especially when bridging from NEAR to Ethereum. Along with Allbridge, Wormhole, and the Rainbow Bridge, Multichain brings a new level of connectivity to the NEAR ecosystem. The integration comes at the right time with orderbook DEXs and Ref v2 providing sophisticated trading options for high frequency traders and market makers that require access to fast, cheap, and secure bridging options; as well as great arbitrage and rebalance strategies.

Stablecoins

Ironically, one of the best trades this year was to hold USD instead of any other currency. People from countries that are suffering from hyperinflation are able to access USD via the blockchain in the form of Circle’s USDC, Binance’ BUSD, and Tether’s USDT, among others. The ease with which people can access USD is one of the main value propositions of DeFi and we consider it fundamental to develop a prominent infrastructure around stablecoins in the NEAR ecosystem.

Figure 6. Growth of stablecoin adoption in the crypto markets (source: Coingecko)

Currently, native $USDT is live on NEAR, available on Bitfinex (and soon on other top-tier CEXs), and can be bridged using Multichain. Ref Finance has already deployed a new native $USDT pool and soon Tonic will be launching perps with native $USDT. Finally, Circle has announced that, in early 2023, native $USDC will be deployed on NEAR.

Wallets

While one year ago only a couple of wallets were available on NEAR native, multiple options have arisen in 2022. The NEAR ecosystem comprises of web wallets (NEAR Wallet, MyNearWallet), browser extension wallets (Sender, Nightly, Meteor), mobile wallets (Here, Opto), hardware wallets (Ledger), institutional-grade wallets (Fireblocks, BitGo), and even Ethereum wallets such as MetaMask via NETH, which was announced 2 days ago.

Developed by Proximity, NETH is a smart contract that enables your Ethereum account to sign transactions and remotely control your paired NEAR account, allowing you to directly interact with NEAR dApps using your Ethereum wallet. It is compatible with MetaMask* and you can already use it in dApps such as Ref or Burrow. For more information about NETH, including how to create and account, click here.

Figure 7. NETH integrated into Wallet Selector. Select NETH to start using MetaMask on NEAR dApps.

The variety of both software and hardware solutions, combined with innovative features such as transactions using a linked phone number instead of an address (Here Wallet), integrated in-wallet DeFi services (Meteor), institutional-grade support, and Ethereum compatibility (NETH<>MetaMask), NEAR offers one the best onboarding experiences when it comes to wallets. And soon, in 2023, zero balance accounts will be ready so that you won’t need any $NEAR for the storage cost when you initially set up an account.

Additionally, the release of the NEAR Wallet Selector plugin by Pagoda has smoothened the wallet integration process for dApps, as well as providing a unified interface for wallet options on NEAR.

*NETH is not affiliated with MetaMask or its parent company Consensys Software, Inc.

Portfolio Management Tools

Adding to the improved user experience provided by wallets, NEAR also saw the introduction of portfolio management tools in 2022. Most notably, Pulsar and Leap Wallet launched their portfolio tracking & management tools for NEAR, both coming directly from Terra. You can track your assets across multiple wallets and aggregate information on debt, DeFi positions, NFTs, performance over time, activate notifications, and more.

Figure 8. Pulsar UI
Figure 9. Leap Wallet UI

Analytics

Launched last summer, Pikespeak.ai is the Nansen of NEAR. It provides access to live and historical on-chain data with visualizations of the most fundamental Web 3 use cases: DeFi, DAOs, NFTs, Gaming, etc. You can track contract calls, inflows and outflows to/from dApps, monitor wallet activity, contracts deployed, NEAR validators performance, and many other on-chain analysis. The project will start its integration with Aurora and Ethereum in early 2023.

Figure 7. In the last 24 hours, Binance NEAR hot wallet has processed over 2,100 $NEAR transfers, already accounting for 3.5M+ $NEAR outflows from the platform. You can track in real time what's happening on the hot wallet dashboard.

Fiat On/Off-ramps

Fiat on/off-ramps are crucial to lower the entry barrier to crypto and gear it towards mass adoption. In 2022, NEAR saw multiple fiat on/off-ramp solutions enter the ecosystem. On top of Moonpay, which was NEAR's go-to solution until now, NEAR is now also supported by Transak, Ramp, and Onramper. Transak, most notably, has already been integrated on Ref Finance, enabling fiat-to-crypto payments at the dApp level.

Looking Forward to 2023

2022 has been a year of exponential growth for NEAR: the number of wallets skyrocketed from 2 million to 20 million, the number of transactions just passed 250 million, and developer activity has grown through bull and bear. It is safe to say our year in review, even confined to DeFi, is far from comprehensive and there is a lot more brewing underneath the surface.

On that note, here are a few things to look out for DeFi on NEAR and Aurora in 2023.

  • Orderbooks: perps on Tonic; options and more on Spin; perps and lending pools on Orderly; and a thriving ecosystem of DeFi products built on top of these orderbooks.
  • Upcoming launches in early 2023: Veax and Omomo (NEAR native), Derivio and Cora (Aurora).
  • Stablecoins: full integration of native $USDT and native $USDC in top-tier CEXs, bridges, on/off-ramps, and DeFi protocols.
  • Decentralized front-ends for DeFi through NEAR Social and NEAR OS.

Happy holidays — see you in the new year!

About Proximity Labs

Proximity is a research and development firm focused on supporting the NEAR DeFi ecosystem. Consisting of former members of the NEAR Foundation, Binance US, Consensys, Facebook, and more, Proximity works closely with projects building on NEAR, whether through its investment arm, grant program, open-source software solutions, or by deploying its deep expertise to help design impactful strategies and serve as a bridge between DeFi teams and ecosystem participants. It has advised numerous bluechip DeFi projects contributing to the NEAR’s and Aurora’s recent success.

Website · Twitter · Get in Touch · $10M Orderbook Fund

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Proximity
NEAR Protocol

Proximity is a R&D firm supporting projects building DeFi applications on NEAR and Aurora through grants, advisory services, and developer support