Opinion: Mark Bonon, CEO of Polygon Labs
Defi financing needs a reality examination. Protocols have chased growth through the distinctive symbol emissions, which is an annual percentage percentage (APYS) for years, just to see liquidity evaporates when the incentives dry. Defi current situation is very driven by Mercenery Capital, which creates artificial ecosystems governed by collapse.
The industry was arrested in a devastating course: the release of the governance code, generously distributed to liquidity providers to enhance the closed total value (TVL), celebrate growth standards, watch without power or strength while farmers withdraw their capital and move to the next hot protocol. This model does not build a permanent value – it creates temporary delusions of success.
Defi deserves a better approach to creating value and capital efficiency. The current return model by emissions contains three fatal defects that continue to undermine the capabilities of the industry.
Inflationary emissions
Most of the DEFI revenue comes from symbolic emissions of inflation instead of sustainable revenue. When the local protocols are distributed as bonuses, they reduce the value of the distinctive symbol to support short -term growth. This creates an unsustainable dynamic as the first valuable participants extract while later users stumble in obtaining reduced assets.
Capital
The mercenary capital dominates Defi liquidity. Without structural incentives for long -term commitment, capital is transmitted freely to any protocol that provides the highest temporary return. This liquidity is not sincere – it follows opportunistic paths instead of the basic value, leaving protocols vulnerable to the sudden capital.
Unbalanced incentives
Wrong incentives prevent protocols from building sustainable bonds. When the distinctive symbols of governance are used primarily to attract liquidity through emissions, protocols fail to capture the value for themselves, making investment in long -term development impossible.
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These problems have played over and over again through multiple Defi courses. The “Defi Summer” for 2020, the 2021 cultivation boom and the subsequent collision the same pattern: unimportant growth followed by devastating cramps.
Protocol -owned liquidity
How can this be fixed? The solution requires the transition from the economic models extracted to renewal, and the liquidity of the protocol is one of the most promising methods of solving this problem. Instead of renting liquidity through emissions, protocols can build permanent capital bases that generate sustainable returns.
When the protocols have liquidity, they gain multiple benefits. It becomes resistant to the capital during the market drop. They can generate consistent revenues for fees that flow to the protocol instead of temporary liquidity providers. More importantly, it can create a sustainable return derived from actual economic activity rather than symbolic inflation.
Use physical assets to generate the return
It provides the physical assets it provides another path towards sustainability. Summary assets usually sit there and do not contribute much to the connected liquidity capabilities of Blockchains. Through the bridge bridge, the assets in the bridge are republished to low -risk strategies and the return on ETHEREM, which is used to capture reinforced returns. This protocols allows the incentives of the participants with long -term health, a boost of capital efficiency.
In order to ripen Defi, protocols must give the real return priority – the returns resulting from actual revenue instead of symbolic emissions. This means developing products and services that create a real user value and pick up part of this value for the protocol and stakeholders in the long run.
While sustainable return models usually produce lower primary returns than emissions, these returns are sustainable. Protocols that build this shift will build flexible foundations instead of chasing vanity measurements.
The alternative is to continue a cycle of prosperity and deception that undermines credibility and prevents prevailing adoption. Defi cannot fulfill its promise to apply a revolution in financing, while relying on unusual economic models.
The protocols that do so will collect the tanks designed for market cycles instead of exhaustion while declining. They will generate a return from providing real benefit instead of printing symbols.
This development requires a collective mentality from Defi participants. Investors need to realize the difference between a sustainable and unimportant return. The builders need the symbol design features that are equivalent to long -term alignment instead of short -term speculation. Users need to understand the true source of their returns.
DEFI's future depends on correcting these basics. It's time to fix our broken return model before we repeat the past mistakes.
Opinion: Mark Bonon, CEO of Polygon Labs.
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