Saddle Finance: Current Chain Recommendations

Author: Shaun Geer (DancingPenguin) · Bankless Research · July 2022

Current Chains: Summary Recommendations

For the chains that Saddle is currently on, we mainly recommend focusing on partnership and development of the Saddle product rather than new chain deployments at this time.

• ·Continue focusing on Ethereum and Optimism for new partnerships.
• ·Approach Evmos for funding when Saddle is able to deploy other DeFi building blocks, such as lending and bonding.
• ·Reevaluate positioning, branding, and partnerships as new technologies are available for deployment on current chains.

Ethereum

While there is a lot of attention on various L2s that roll up into Ethereum, Ethereum is still the center of DeFi activity and the origin chain for most serious protocols.

Strengths

Ethereum has both a strong first-mover advantage and a proven track record of security. It currently holds the largest total value locked (TVL) of any chain and has the most mature developer ecosystem.

Weaknesses

It is harder to get a foothold on Ethereum deploying currently available technologies. Ethereum also has larger gas fees compared to L2s, making small transactions less economical.

Opportunities

Ethereum is the starting chain of many new protocols, and Saddle can be a bridge between those protocols and Saddle's already-established liquidity pools.

Threats

Ethereum has the largest number of established competitors on any chain. It should be a part of, but not the only focus of, Saddle's chain strategy.

Fantom

Fantom has been experiencing significant turbulence. One large investor has signaled an exit, and the chain's DeFi ecosystem has contracted meaningfully.

Strengths

Fantom was once a contender for the premier DeFi chain and still has community presence, a functioning grant system, and established AMM infrastructure.

Weaknesses

Political infighting and bad debt in several important protocols (including Scream and DEUS) make Fantom a risky deployment target at this time.

Opportunities

Several cross-chain protocols such as QiDao, Beefy.finance, and Yearn still have strong presence on Fantom. If conditions stabilize, there may be an opportunity for Saddle to re-engage.

Threats

The well-established presence of AMMs including SpookySwap, SpiritSwap, and Curve limit the amount of growth opportunity for a new stableswap entrant.

Evmos

Evmos's selling point is an EVM-compatible chain connected to Cosmos's Inter-Blockchain Communication (IBC) protocol, enabling bridging between the Cosmos and Ethereum ecosystems.

Strengths

Evmos has an active grant system. Its IBC connectivity could make it an interesting partnership target once Saddle has broader DeFi module support.

Weaknesses

Evmos has largely been overshadowed by both Kava and Cronos in bridging IBC and EVM chains. The lack of developed bridging infrastructure remains a limiting factor.

Opportunities

As Saddle rolls out its broader DeFi-in-a-box utilities, Evmos itself may be interested in development partnerships and ecosystem funding.

Threats

DEXes are the only well-developed DeFi primitive on Evmos currently. A stableswap deployment would face an immature ecosystem with limited partner protocols.

Kava

Kava has been performing better than Evmos in securing TVL. Like Evmos, it touts itself as a bridge between the Cosmos and EVM ecosystems, but with a more established DeFi base.

Strengths

Kava has strong TVL, largely anchored by its native protocols: Kava Mint, Kava Lend, and Kava Swap. It has a functioning grant system and growing developer presence.

Weaknesses

Kava is still largely underdeveloped, with only 23 protocols in total. It is primarily viewed as a DeFi-only chain with limited general-purpose infrastructure.

Opportunities

While lending and swapping will likely be dominated by native Kava protocols, there is potential room for a stableswap specialist like Saddle to carve out a niche.

Threats

A stableswap already exists as a core, integrated part of the chain. Kava Swap will likely retain a dominant position for native swaps.

Arbitrum

One of two major Layer 2s using optimistic rollups, Arbitrum already has significant DeFi presence and is a high-priority target for most serious protocols.

Strengths

Arbitrum's optimistic rollup provides a more scalable consensus solution than Ethereum mainnet. It has attracted major protocols and has healthy TVL and user activity.

Weaknesses

Optimism has a slight advantage in terms of ecosystem perception, including Vitalik's nod of approval and stronger VC/protocol backing at this moment.

Opportunities

There is no established bonding program on Arbitrum yet. Saddle should aggressively pursue partnerships with yield optimizers and protocols looking for stableswap liquidity.

Threats

GMX is deeply entrenched on Arbitrum. Every major DEX (Curve, SushiSwap, Uniswap) has a presence. The competitive landscape is strong.

Optimism

While Optimism and Arbitrum share similar architectural foundations, Optimism currently has stronger ecosystem momentum and more active protocol development.

Strengths

Optimism has attracted significant investment and new protocol launches. It has a VC-backed ecosystem fund and strong relationships with major Ethereum-native protocols.

Weaknesses

Optimism has a large amount of attention and investment already. Gaining a foothold requires strong differentiation and active partnership outreach.

Opportunities

Curve cannot currently be deployed on Optimism due to Vyper constraints. This creates an opening for Saddle as the leading stableswap solution on the chain.

Threats

Velodrome is reasonably established as the leading DEX on Optimism, but its dominance is not yet absolute. Saddle can still compete effectively with the right partnerships.