Author: timzz

In the past, the dominance of the dollar relied on the U.S. military and U.S. propaganda leading the world's finance.

Today, blockchain is the U.S. military and U.S. propaganda of the new era.

The large-scale on-chain integration of U.S. stocks and the future issuance of fusion assets (a new type of asset combining traditional and Crypto assets) have ushered in new developments for DeFi. After the emergence of new assets, the first beneficiaries are trading protocols. With the fee switch for Uni activated in the past few months, Uni's Fully Diluted Valuation (FDV) has tripled. This article mainly discusses where the trends will go after trading and what I consider the holy grail of DeFi.

Why DeFi is Needed

Before discussing DeFi, let's talk about why DeFi is needed.

In the past, maintaining the dollar hegemony relied on the U.S. military and U.S. propaganda. The following chart shows the share of the dollar in global foreign exchange reserves; although the share has decreased from 65% to 58% in the past 10 years, it remains the dominant currency in international reserves. In the last 10 years, as the amount of U.S. debt reached 40 trillion dollars and the fiscal deficit for 2025 was projected to be 1.8 trillion dollars, with the 2026 fiscal deficit also (projected to) exceed 2 trillion dollars, the proportion of the fiscal deficit to GDP has significantly surpassed the GDP growth rate (~ 5.8% vs ~ 1.9-2.2%). Some economies are already derisking from the U.S. dollar and U.S. debt. For the dollar, blockchain could be another lifeline; the U.S. can distribute U.S. dollar debts and dollar-related assets through blockchain technology, with the issuance, trading, borrowing, and derivatives of stablecoins around DeFi being the main effective substances of this lifeline. (Detailed discussion https://x.com/timzz_sleep/status/1942134973584040433)

Foreign exchange reserves

The development of things is often not linear. In 2017, there was hope that Security Token Offerings (STO) might bring new narratives and funding to the cryptocurrency industry. It wasn’t until 2026, with the surge of AI stocks and the tokenization of stocks by Binance and Robinhood, that this narrative truly began. In recent weeks, both the SEC and CFTC have released corresponding innovation exemption proposals; regarding the Clarity Act, my thought is “better late than never,” as blockchain represents the U.S. military and propaganda of the new era. The question to negotiate here is merely who will make the weapons, not whether to make them.

The Five Core Business Models of DeFi

After all this, let’s get to the point—the holy grail of DeFi in my mind.

The five core business models of DeFi are: stablecoin/asset issuance, lending, asset management/yield aggregation, trading, and derivatives.

According to the revenue rankings of top 15 protocols by DeFillama, there are 5 stablecoin issuers, accounting for 79.8% of the income share from the top 15 protocols in 30 days; followed by DEXs, accounting for 11.8%. Trading often captures the first wave of growth from asset issuance; derivatives are dominated by Hyperliquid, accounting for 6.6%; followed by lending, accounting for 1.8%. The small share here is mainly because protocol profits come from the interest margin on loans, where the interest paid by borrowers mostly goes to lenders, with protocols only cutting off a portion as profit. Since it is the beginning of a bull market, the asset management and yield aggregator categories have not yet entered the top 15, but it is expected that protocols similar to traditional money market funds will enter the top 15 in the future.

Revenue by protocol top 15 - Defillama

The Holy Grail of DeFi is the Right to Mint Currency

Stablecoin/asset issuance generates revenue directly from reserve assets or excess collateralized loan interest. After scaling, marginal costs are very low and have first-mover advantages.

As of now, the top three issuers by issuance volume are Tether, Circle, and Sky.

Among them, Circle and Tether's stablecoin issuance model uses short-term U.S. bonds and U.S. dollars as collateral, then issues corresponding stablecoins. The majority of the protocol's profit comes from SOFR, which is significant in a high-interest environment. However, there could also be situations similar to those at the turn of 2021, where SOFR and short-term government bond yields dropped to 0, significantly damaging the protocol's profits.

Sky’s stablecoin issuance mechanism is primarily based on over-collateralization, following the native DeFi model. In recent years, as SOFR rates have risen, Sky has increased the ratio of Real World Assets (RWA) in its collateral structure. Compared to Tether and Circle, it is more flexible, able to shift between RWA and DeFi based on market conditions. Moreover, the governance model of subDAOs also enhances the resilience of protocols.

Stablecoins face an impossible triangle: decentralization, capital efficiency, and price stability. Tether, Circle, and Sky each have advantages in this impossible triangle. However, only Sky operates on a relatively decentralized model rather than a single entity.

“Central Banks” Issue Assets, “Commercial Banks” Distribute Assets

The holy grail of DeFi is the right to mint currency, and asset distribution post-minting is also a major focus for various “central banks.” Distribution here includes the liquidity of stablecoins, trading, lending, payments, and so on.

The distribution of USDT benefits from first-mover advantages, with trading on major centralized exchanges and payments in non-North American regions forming the barriers to entry for USDT.

The distribution of USDC includes Coinbase, derivatives trading on Hyperliquid; the question here is whether it can maintain its position after removing implicit subsidies, along with the competitive barriers for Circle after the launch of numerous “USDC” tokens.

The distribution of USDS/DAI comes from a deep integration of various DeFi pipelines, relying on subDAOs like Spark for expansion. The subDAO model allows Sky to retain the functionality of a central bank while mobilizing other independent teams to support the expansion of the USDS/DAI main thread.

Spark relies on the “commercial bank” aspect of the “central bank,” possessing a relatively comprehensive capital distribution model (Spark liquidity layer + Sparklend lending), and uses USDS as an intermediary layer to establish a foreign exchange layer for stablecoins, providing liquidity exchanges for emerging stablecoins like RLUSD and pyUSD.

DeFi is Just Beginning

DeFi is just beginning. The next four years will be a period of deep integration between DeFi and U.S.-style finance. The U.S. will distribute U.S.-style assets through blockchain, and the winners of U.S. stocks will convert part of their profits into BTC and gold assets, creating a reciprocal relationship with endless vitality.

DeFi's “central banks” and the commercial banks relying on them will experience a significant growth period.

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