Confidential DeFi at scale, live today. Zama is the fastest growing confidentiality protocol for onchain finance. Today, Zama expands confidential access to 16 curated yield vaults across 5 institutional curators and 5 assets: USDC, USDT, AUSD, WBTC, and tGBP, all deployed on @Morpho. The same trusted curators and strategies that institutional capital already uses, now with confidential entry. Alongside the vaults, the Zama Confidential Swap Protocol goes live. Swap between confidential assets without exposing intent or size. Curated by: Armitage by @wintermute_t, @Bitwise, @flowdesk_co, @RockawayX, @SteakhouseFi Access: @Morpho, @utila_io, @yield_xyz, @zerion Incentives: @pendle_fi, @merkl_xyz With support from: @Tether (USDT), @BitGo (WBTC), @tokenGBP (tGBP), @withAUSD (AUSD) Shield, send, deposit, earn, and swap, all confidentially at:

1inch Network has added 10M 1INCH tokens in incentives for LPs on 1inch Aqua, with a further 500k USDC boost from the 1inch DAO. And we’re launching with @BNBCHAIN as our first co-incentive partner. The 1inch Network incentives run for 3 months through @merkl_xyz: 5M 1INCH in volume rewards and 5M 1INCH in partner co-incentives. Every swap your positions fill earns you swap fees, plus a share of the 1INCH campaign rewards based on the volume you handle. More volume, more rewards. Available across 80+ 1INCH markets.

A lot of people pinged us at @merkl_xyz about the donation trick Steakhouse is using to boost the APR on the EURCV vault. It's an elegant way to reward every depositor in a vault at once, and Steakhouse is a serious player. But the mechanism has real downsides, on top of the transparency point already raised here (depositors can't tell the yield is incentivized, and there's no visible schedule or end date). A few that matter: You only get one lever: the total APR. Some providers don't want to pin the final rate, they want to add a fixed spread, say +2% on top of whatever the native yield is. Donation can approximate that but can't guarantee it. There's nothing keeping the payout rate below the NIM that Forge earns on the EURCV this vault allocates, so you can end up paying out more than you make. Rewards have to be paid in the vault's asset. Fine if you're a stablecoin issuer sitting on that currency, but if you're a chain or protocol wanting to incentivize in your own token, you'd have to sell it first. You can't differentiate who receives the yield. If you only want to reward users who came through a specific app or UI (say Robinhood), there's no way to gate it. Same goes for any customization of the payout: it's simply not possible It only rewards holders going forward. No retroactive distributions. On Morpho, the APR cap is global. If the underlying markets yield more than 4%, the vault stays stuck at 4% and depositors taking the liquidity risk don't capture the upside. You can raise the cap, it's one parameter, but then you risk burning through the reward budget fast if you're not actively bringing it back down as native yield falls. More subtle, and this one cuts against intuition: direct donation is actually less capital efficient for the issuer. In a claim-based setup, a share of users never claim, and that unclaimed budget can come back to you. With donation everything is paid out automatically, so you lose that breakage.

A lot of people pinged us at @merkl_xyz about the donation trick Steakhouse is using to boost the APR on the EURCV vault. It's an elegant way to reward every depositor in a vault at once, and Steakhouse is a serious player. But the mechanism has real downsides, on top of the transparency point already raised here (depositors can't tell the yield is incentivized, and there's no visible schedule or end date). A few that matter: You only get one lever: the total APR. Some providers don't want to pin the final rate, they want to add a fixed spread, say +2% on top of whatever the native yield is. Donation can approximate that but can't guarantee it. There's nothing keeping the payout rate below the NIM that Forge earns on the EURCV this vault allocates, so you can end up paying out more than you make. Rewards have to be paid in the vault's asset. Fine if you're a stablecoin issuer sitting on that currency, but if you're a chain or protocol wanting to incentivize in your own token, you'd have to sell it first. You can't differentiate who receives the yield. If you only want to reward users who came through a specific app or UI (say Robinhood), there's no way to gate it. Same goes for any customization of the payout: it's simply not possible It only rewards holders going forward. No retroactive distributions. On Morpho, the APR cap is global. If the underlying markets yield more than 4%, the vault stays stuck at 4% and depositors taking the liquidity risk don't capture the upside. You can raise the cap, it's one parameter, but then you risk burning through the reward budget fast if you're not actively bringing it back down as native yield falls. More subtle, and this one cuts against intuition: direct donation is actually less capital efficient for the issuer. In a claim-based setup, a share of users never claim, and that unclaimed budget can come back to you. With donation everything is paid out automatically, so you lose that breakage.

Discussions around securities backed loans are heating up, especially stocks as collateral. For stocks there's consideration around stock split but feels that ERC-8056 solves this + oracles / curators are working on it already. TLDR stocks are coming earlier than you think.

And just like that, MegaETH’s @aave deployment enters an unsubsidized, sustainable era, only a calendar quarter after TGE. We see today a completely borrower-funded lending APY on par with Ethereum Aave. Rewards distributed by Merkl had been tapering for some time, as the deployment ended up with excess liquidity compared to demand, and with its major collateral, which could not support Aave’s targeted 90% utilization. The tapering of those rewards finally hit the elastic point in some large LPers’ demand to lend USDM, resulting in a more rational size. Simultaneously, the introduction of stcUSD from @CapApp as collateral meant there was finally a yield bearing collateral able to sustain borrowing at the traditional Aave utilization target (borrow ~4%), which boosted rates as well. There are a couple lessons I think we should take away from this. 1) In a post-Kelp world, it’s a long process for Aave to onboard new collateral assets. I personally think they need to find ways to streamline this, because much of Morpho’s success has been the ceding of vast swaths of the lending market to them voluntarily. This is good and bad for them - they have kept their nose clean about onboarding *financially weak* assets, unlike the independent curators. But it also leads them to existential risk-level concentration for rail risks, as we saw with Kelp. An Aave with 50 collaterals that builds in an expectation of some losses as part of the business is stronger than an Aave with 10 collaterals and needs to seek external financing in my opinion. 2) This is a low-yield environment, and even many moderate-risk assets simply can’t support borrowing even below the risk-free rate. (s)USDe is an excellent example. You have what is a multi-strategy, actively managed credit fund, and it can only pay a few bps premium over a 4-week tbill? Even if you are willing to sit with that risk-reward on the belief the team will bring you better days in the future, it’s just not an asset you can borrow against at any reasonable rate. Even assets like syrupUSDC/T and stcUSD only get you to a modest rate in lending markets. 3) On rewards: MegaETH Aave rewards worked fairly rationally, but not perfectly so. Initially begun in a world where Aave could/would onboard multiple collaterals and e-modes, it was rational for a new deployment to err on the side of oversupply of stablecoin inventory, since no supply means no lending. (s)USDe also had higher yield 3 months ago, and a softening of the returns from the workhorse collateral on the deployment made the slow speed of post-Kelp asset listing even more painful. 4) Collateral uniqueness. For any market not named Ethereum, Aave really needs more differentiation. stcUSD is only listed in MegaETH Aave, so there is no other venue. But when you look at the most recent deployment, on Monad, you only see MM USD as a novel asset, which is not yield bearing. You can see the ossification of Aave risk tolerance in real time, as Monad launched with only familiar assets otherwise. That those familiar assets listed even in the face of literally zero liquidity is an indicator that Aave risk tolerance is very low, and makes the future of non-Ethereum deployments a question mark. If those deployments only offer leverage against assets all competitors take, and any given deployment is unlikely to have an asset different from the mainnet Aave, what is the competitive advantage? Add in that the typical interest rate curve on stablecoins only gets lenders to the risk-free rate at 90% utilization, and there is no room for a risk premium, except in the form of rewards. And all rewards have to be planned with their sunset in mind. But mostly? Low rate environments are just really challenging for everyone until DeFi discovers a way to lend to someone for purposes other than leveraged crypto exposure (whether asset price or asset yield)

Interesting spike pattern on Aave around midnight. Probably someone exploiting some reward campaign I guess or wanting to pump numbers at each EoD Also interesting to see that the borrow rate was arbitraged between the two venues.

Steakhouse's EURCV Prime vault is intriguing. UI shows 4% APY, 0% incentives, but ~78% of the $100M deposits are sitting idle. The remaining allocation earns closer to ~1.3-1.4%. Blended organic yield is actually ~0.3%. So where does the yield come from? The vault's holding address has received ~546,100 EURCV across 22 transfers since Feb, roughly weekly, all from the same sender. Mechanically, it's a straight ERC-4626 donation: sending assets directly into the vault raises totalAssets without minting new shares, so every depositor's share value rises. The address donating also manages Merkl incentives on Steakhouse x AUSD vaults, suggesting this is Steakhouse related address and this likely reads as SG-Forge/Steakhouse incentivising yield to bootstrap the markets while there is no EURCV borrow demand, which is a normal practice. The issue isn't the incentive, it's not disclosing it in the UI. Two things matter for depositors: - The advertised 4% isn't organic, it's incentivised, with no visible schedule or end date. If transfers stop, APY reverts toward the ~0.3% blended rate. - It's invisible on every dashboard depositors actually check, so new entrants can't price the risk. This doesn't seem malicious, Steakhouse are a serious, established player in the space. But the mechanism itself could be used maliciously by less scrupulous curators/protocols, and undisclosed direct-transfer subsidies aren't great practice regardless of intent.

Browse through @merkl_xyz and all you see are stablecoin-based incentives everywhere Competition is rising amongst every stablecoin, lending protocol and fintech The question is when the incentives run out, who will have found true PMF?

Great and underrated point by @joakimhi. Once a stablecoin is lent out, it gets redeemed and offramped via DEX swaps or CEXs (about 80%) -- so it's not the issuer paying that yield. In my experience, that's exactly why stablecoin issuers struggle to make long-term structural yield-share economics work doing deals direct with lending protocols natively.