Market Analysis
A deep analysis of the Platform in business terms. Potential targetted users and a case-study of protocol Economy are the topics discussed.
Target
Implementation of a Lending Protocol on Hedera ecosystem could bring several benefits like enrichment of ecosystem and more interest from the entire Blockchain Industry, but also new financial opportunities to Hedera users. Here's a list of potential target of our platform:
Individual Borrowers: Users who need to borrow digital assets for various purposes, such as leveraging their investments, covering short-term expenses, or participating in yield farming opportunities.
Individual Lenders: Users looking to lend their digital assets and earn passive income through interest payments, without the need for active management or involvement in trading.
Institutional Borrowers: Financial institutions, such as hedge funds or asset management firms that may eventually establish a partnership with Hedera, may borrow assets to hedge their positions, manage risk, or capitalize on arbitrage opportunities.
Institutional Lenders: Banks, family offices, and other financial institutions with surplus liquidity may use lending protocols to diversify their investment portfolios and generate additional returns from the interest on loans.
Cryptocurrency Traders: Traders may use lending protocols to borrow assets for short-selling, margin trading, or other trading strategies.
DeFi Enthusiasts: Users actively involved in decentralized finance projects may use lending protocols to participate in liquidity mining, staking, or other yield-generating activities.
Developers and Integrators: Developers building decentralized applications (dApps) and platforms may integrate lending protocols into their projects to offer borrowing and lending functionality to their users.
Arbitrageurs: Market participants who seek to profit from price discrepancies across different markets may use lending protocols to borrow assets and exploit these opportunities.
Long-term Investors: Investors holding digital assets for the long term may use lending protocols to earn interest on their holdings while they wait for potential price appreciation.
Blockchain and Crypto Enthusiasts: Individuals interested in the growth and adoption of blockchain technology and cryptocurrencies may participate in lending protocols as part of their broader involvement in the space.
Protocol Economy
Studying the economics of a Lending protocol is extremely difficult because the variables to be evaluated are many and of different types: the data that need to be analyzed are not only about the lending protocol, the quality of its services, interest rates and its credibility, but each case is different, because these data should be integrated into a case study that also covers the overall activity of the developers and users, the future plans and investments of the to increase them. In our case, we considered this situation: a context where there is only one lending protocol (no competitors in the chain) within a growing blockchain like Hedera. So, to estimate the potential targets of the platform, we tried to extract key-metrics using DeFi Dashboards and, contextualizing these analytics on Hedera data, according to positive, negative or ecosystem lateralization scenarios, we estimated some potential targets. We can summarize our study in three steps:
Data Gathering: looking for chains with characteristics as similar as possible to Hedera, i.e., promising and growing chains with few or only one Lending protocol in the ecosystem, we extracted the respective TVL dominance of the lending protocols. The data are taken from DeFiLlama, and we can summarize them in this table:
TVL Estimation: Note that the chains are ordered in a descending manner with respect to TVL. As this increases, the TVL Dominance of the Lending protocols tends to increase as the activity is more evenly distributed. In every case considered, lending protocol have a significant dominance that can range from 10 to around 40%. Considering that Hedera has a similar TVL to Conflux and that the project approach should be quite similar to that used by them, we are confident of achieving a slightly higher dominance than that of Conflux's Lending protocol, which is around 10/15 percent. With the implementation of V2 features we hope to achieve higher dominance which would be around 30 percent.
Ecosystem Scenarios: The cryptocurrency market is highly volatile, which can lead to sudden changes in the activity of an ecosystem and its TVL. We do not know if the Hedera team has a network with venture capitalists or large investors who can radically change the dominance of a project, so trying to economically estimate Equilibria's TVL within a volatile market is extremely difficult. To try to give a monetary estimate to the previously calculated % TVL Dominance, we identified three scenarios: one positive, one negative, and one lateralization. Considering the volatility of Hedera's TVL on 60-day timframes on both growth and decline scenarios, keeping the same rates, we roughly estimated a positive scenario of growth over the next two months (+60%), one of lateralization (+0%) and another of decline (-35%). Definitively, the range in which the TVL of Equilibria could vary could be between $1mil and $5mil. For extra caution, our target in the medium term (when V1 is released, functioning and we complete all the planned promotional goals) is $1mil TVL in the 6 months after V1 release.
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