BNB Chain DeFi Thematic Macro Overview:
BSC (renamed to BNB Chain) is a clone of Ethereum running in a more centralised, modified POS (not POW) concensus arrangement with only 21 validators, permitting much higher speeds and lower fees than Ethereum. The combined effects of ETH '1.5' with L2s, sidechains (Gnosis/xDAI, Polygon) and mempool gas wars, plus the recent significant flow of transactions towards BSC may or may not collectively act to keep Ethereum L1 workload/gas fees reasonable. EIP1559 will not change this, nor arguably will the launch of ETH2 in a year or so. Ethereum gas fees will continue to rise and fall, surging at times of market volatility and DeFi liquidity will flow back and forth in a ‘liquidity war’ between Ethereum itself, EVM-compatible ALTL1s like BNB Chain (formerly Binance Smart Chain), Ethereum sidechains like Polygon & Gnosis/xDAI, and other Ethereum L2 rollups like Arbitrum, Optimism and zkSync.
Rewards/yields offered for DeFi liquidity on ALTL1s like BSC will have to be much higher to attract otherwise fragmenting liquidity, and fees should be much lower. In the case of BSC, with some node centralisation also comes much better BSC marketing in gas fee-sensitive markets in Asia, plus the utility of the Binance BNB token to pay fees. BSC is effectively a (slightly) decentralised, distributed architecture extension to the Binance empire, with international fiat on/off-ramps. The forgoing suggests that BSC DeFi could attract and sustain significant TVL/fees relative to the rate of rewards tokens issued. Last year, BSC struggled with performance (some say the nodes will not scale) and security issues, as a plethora of hacks have exploited less-competent BSC cut-paste-fork initiatives.
Ethereum gas prices will probably never really be low enough for retail investors, and liquidity will continue to flow back and forth across alternative chains and layers like the tides. EVM-compatible less-congested lower-fee L1 chains like BSC are strong candidates to attract DeFi TVL/fees to token holders. Consistent with this theme, PowerPool has launched $BSCDEFI, a BSC-native basket/index offering average retail investors gas-efficient, broadly-diversified exposure to BSC DeFi with automated harvesting of intrinsic yield/rewards using the affiliated PowerAgent Automation Network
The $BSCDEFI/BNB launch pool on PancakeSwap offers opportunities to add extrinsic yield from staking the basket token, and once TVL reaches sufficient levels, listings will be sought on lending sites like Venus adding to opportunities for adding staking yield. Once effective shorting vehicles like Beta Finance (and perhaps Spartan) are available on BSC, PowerPool will also have the option to launch an additional delta-neutral hedged BSC basket/index permitting farming the (insane) yields being offered by BSC DeFi with limited volatility downside given the automated hedging options via borrowing/shorting.
Phase 1 of $BSCDEFI went live mid-2021 as a diversified basket of native DeFi tokens but without auto-harvesting of intrinsic yields on the underlying tokens. Once PowerPool’s next-gen smart vaults and automation is fully tested, $BSCDEFI Phase 2 will be launched with the latest code-base enabling auto-harvesting of intrinsic yields, and eventually adding options for extrinsic yield and hedging. Once $BSCDEFI volumes are sufficient, the objective would be to achieve at least one CEX listing (Binance).