How is the Aptos DeFi ecosystem structured?
Equipped with Move and its own consensus algorithm, Aptos is a blockchain that offers excellent speed, versatility, and an enjoyable development experience once you become familiar with it. However, if liquidity does not flow well between well-developed protocols within the ecosystem, there can be difficulties.
We’ll briefly explore the current Aptos DeFi ecosystem and discuss how it may evolve in the future, as well as speculate on what DeFi projects may be added to Aptos. Modules such as Kana and Econia, DEX Aggregators, will be examined separately in future articles. Additionally, we plan to cover how DeFi functionalities can be developed using the Move language in a separate article.
STABLECOIN
Thala
Thala, which currently holds the top position in TVL within the Aptos ecosystem, is a product that occupies a vast category within the ecosystem beyond just the stablecoin.
Thala encompasses its own Swap, Lending (with Vaults — allowing various assets to be used as collateral and setting separate token pairs for lending against those Vaults), Liquid Staking, ve, Bridge, and Launchpad, making it practically a comprehensive financial institution within Aptos.
However, at its core, there is a clear ambition to focus on yield-bearing stablecoins with $MOD and to create an efficient liquidity supply layer through this. Additionally, Thala offers a wide range of functions, such as combining stablecoin lending to allow certain users within Aptos to utilize leverage when taking DeFi positions, and considering a model where ownership of positions is transferred to Thala in the event of liquidation.
Given that Thala has already established a firm position within Aptos, the next focus is likely on how to attract more assets to Aptos and how to keep them within the Aptos ecosystem without exiting. For this, active airdrops and boosting pools within the Aptos ecosystem should be established first, and financial infrastructure supporting user demand such as leveraging, lending, and yield farming should also be formed.
SWAP
LiquidSwap
Excluding ThalaSwap, which is built within the Thala ecosystem mentioned above, LiquidSwap is the AMM DEX in the Aptos ecosystem that exhibits the highest TVL and trading volume. Starting from various stablecoins transferred through LayerZero, WormHole, and others, LiquidSwap provides swaps for multiple assets and $APT, allowing users to engage in Yield Farming using LPs and LP tokens for pools, making it a very conventional swap platform.
LiquidSwap also features a bridge function created in collaboration with LayerZero, facilitating more active cross-chain swaps and enabling faster transfer of EVM-based assets. When using the Aptos Dex Aggregator developed by Kana Labs, transactions on ThalaSwap and LiquidSwap can be observed. The more AMM DEXes and Swap Pools there are, the wider the profit potential for arbitrageurs, MEV extractors, and others, ultimately leading to increased trading volume and liquidity inflow into the ecosystem.
Therefore, LiquidSwap could consider introducing additional incentives for pools to attract liquidity inflow, or explore scalability towards providing more yield farming strategies, as part of its efforts to enhance liquidity inflow.
Pancakeswap AMM, Sushi Aptos
PancakeSwap AMM and Sushi Aptos are similar yet different. Both provide pairs necessary for cross-chain swaps using protocols like Celer, and they have both added the Aptos network to their already established DEXes, marking a major position in the market. However, there are notable differences between them.
PancakeSwap AMM, for instance, supplies liquidity to pairs like APT-CAKE through its native token, CAKE, demonstrating a certain level of liquidity and trading volume. On the other hand, Sushi Aptos may have room for improvement when viewed solely based on metrics.
While there are voices within Aptos that view compatibility with EVM negatively, recent developments such as EVM L2 meta have shown that eventually Aptos could increase compatibility with Ethereum-based assets. Initially through bridging and cross-chain swaps, and later by introducing EVM L2 to bridge between Aptos and Ethereum, Aptos could expand its economic territory and enhance compatibility with assets from the Ethereum ecosystem.
Lending Protocol
Aries Market
Aries Market, while classified under lending, is moving towards offering more financial services such as margin trading based on lending. In the case of Aries Market, it is utilizing Econia’s module to create functionalities comparable to a DEX (Decentralized Exchange). Therefore, it will be worth observing how smoothly Aries and others like it increase the breadth and depth of user trading through lending in the future, and how seamlessly they connect with other DeFi protocols.
Among Aptos’ major lending protocols, there is also Aptin Finance, which leans towards a conventional lending protocol, so it has been omitted from the discussion.
Liquid Staking
Amnis Finance
Amnis Finance is a liquid staking protocol that ranks second in TVL across the entire Aptos ecosystem. It issues amAPT tokens in exchange for APT and allows users to stake either APT or amAPT to obtain stAPT tokens. AmAPT tokens have separate liquidity pools on PancakeSwap and LiquidSwap, enabling yield farming. Holding stAPT tokens in a wallet automatically accumulates rewards based on stAPT, which can also be used for lending, staking, yield farming, and other purposes.
Amnis Finance offers various additional reward mechanisms/campaigns, such as retroactive campaigns promising $AMI rewards through referrals, NFT redemption, and lotteries. Considering that liquid staking itself is conducive to increasing TVL and trading volume, promising additional incentives to users leads to faster growth compared to other protocols.
Tortuga
Tortuga allows validators to delegate APT and provides $tAPT in return, denoted as LST. Additionally, it’s possible to purchase $tAPT through Thala. With $tAPT, users can provide liquidity to the $tAPT-$APT pool on Thala, use it as collateral when minting stablecoins on Thala, or deposit/lend it on Aries.
Ditto
In Ditto, staking APT converts it into stAPT and provides swap pools based on stAPT. An interesting aspect is how Amnis Finance managed to have users delegate their APT to their protocol before Ditto did, allowing users to mint amAPT and obtain stAPT using APT or amAPT.
From the user’s perspective, there are two choices: staking APT directly in Ditto or taking APT to Amnis Finance, minting amAPT, and staking APT or amAPT to receive stAPT. If Amnis Finance offers a higher APY based on amAPT compared to simply staking APT, users naturally prioritize using Amnis Finance.
Thus, Amnis Finance somewhat demonstrates its role as a re-staking protocol by attaching itself to Ditto, urging users to convert APT into their LST, amAPT, and then encouraging them to obtain stAPT through staking. From Ditto’s perspective, this structure isn’t necessarily negative. It can be advantageous for Ditto to have assets flowing in through Amnis rather than competing directly with Amnis, potentially increasing assets on Ditto. (Of course, the current higher TVL in Amnis may also stem from the fact that Amnis offers relatively more services than Ditto.)
A significant aspect to consider across the entire Liquid Staking camp is how these protocols are integrated into the Aptos ecosystem. All LST created by them must have some utility within the Aptos ecosystem, and the LST supplied to stablecoin collateral pools and swap pools plays a role in providing liquidity back into the ecosystem.
Derivatives & CDP
Merkle Trade
Merkle Trade, which touts itself as the first Gamified Perp Dex, enables trading of various assets, including cryptocurrencies and basic commodities, as well as forex, with leverage of up to 1000x. This project, famous even in Korea, has added gamified elements such as experience points and items. Additionally, it offers a feature where users can stake stablecoins (such as USDC) to claim 50% of the trading fees.
Argo
Argo provides a CDP-based stablecoin called USDA similar to Thala, and it is also structured to allow opening Vaults for Aptos’ LSTs such as tAPT and stAPT. Currently, development has temporarily ceased, prompting the closure of most vaults and recommending users to reclaim their assets.
What’s Next on Aptos?
The Aptos DeFi ecosystem needs justifications. First, reasons for people to willingly purchase APT, and second, reasons for transferring assets from other chains like Ethereum to Aptos.
Let’s take Solana’s Jupiter as an example. Jupiter serves as a DEX aggregator within the Solana ecosystem, supporting perpetual futures and more. Recently, it orchestrated a large-scale airdrop campaign centered around the LFG launchpad to redirect users’ attention back to Solana and bring liquidity back to the Solana mainnet.
The blockchain landscape is competitive, where chains and projects that have faded into obscurity often regain attention due to large updates, airdrops, or new narratives.
While Aptos has been diligently building its DeFi ecosystem, further development requires not only strengthening internal DeFi infrastructure but also attracting external liquidity through enticing new projects, airdrops, and a project lineup tailored to the current narratives like L2 / LSD / zk / DA.
Below, I outline a few concepts for projects that could potentially be added to the Aptos ecosystem.
Aptos L2 (EVM Compatible)
Indeed, it may seem like a choice that Aptos would never make, so I considered excluding it. However, as a highly effective method for rapidly attracting EVM-based assets, I decided to include it for now.
Restaking Protocol
The sector of restaking protocols, which provides an alternative to yield farming for LSTs within Aptos, holds significant potential. As the number of liquid staking tokens (LSTs) and stablecoins grows, protocols that offer utility for these assets will be welcomed.
However, it’s worth noting that many restaking protocols currently maximize profits by ultimately depositing pooled assets into an Eigenlayer. Given that Aptos still lacks high liquidity exchange with ETH-based assets, alternative methods for generating additional revenue using LSTs may be necessary.
Stablecoin Yield Farming
Similar to LST, one could consider automating yield farming based on stablecoins or expanding services based on stablecoin usage.
More Vaults & Yield Bearing Tokens
As mentioned earlier, projects like Argo, which have halted development, and the current scarcity of vault-based lending or yield farming projects may indicate a lack of sufficient options. Furthermore, if these vaults were to be liquified into yield-bearing tokens, it would provide users with enhanced compatibility and yield farming opportunities.
Structured Finance
Although Aptos currently lacks a highly structured financial or derivatives market, there is potential to pursue more risk-isolated forms, such as restructuring lending protocols or securitizing lending and staking positions to divide rights to principal and interest, as seen with projects like Pendle Finance.
To expand into the areas of structured finance and derivatives, considering the addition of protocols for options, synthetic assets, and asset management could be a strategic direction. Additionally, exploring ways to unlock dormant $APT within existing DeFi platforms while simultaneously reducing risk and effectively trading rights associated with $APT deposited in DeFi could be a consideration.
Despite being a technical article, the initial focus on the DeFi ecosystem within the Aptos network is because understanding “what ecosystem is forming” is crucial knowledge for starting protocol development in many Layer 1 and Layer 2 solutions.
For those immersed in the ecosystem, finding missing puzzle pieces and creating and executing methods to increase ecosystem efficiency while building in public seems to be the strategy for builders, including those in growing layers such as Aptos.
In subsequent articles, we will examine approaches like Kana and Econia in DeFi and explore atomic transactions. We’ll also look into how each protocol has implemented simple functions or programs using their respective codes.
Author : Minik
Reviewer : Ryan
