Why Building A Strong DeFi Ecosystem Matters More Than Trading Volume

The total trading volume of DEXs in the last 24 hours was $19.18 billion at the time of writing, and it has been rising consistently since 2021. The current DEX vs. CEX dominance rate is 49.22%. This data is impressive, without a doubt, but not unambiguous. Studies suggest that the returns of token prices are significantly positive when trading volume is experiencing large increases, but negative in other cases.

The extreme dependence between volume and returns is asymmetric in the negative and positive tails of the distributions on the ends of the scale. Above extreme positive thresholds, the dependence is significant, but it doesn’t even exist below extreme negative ones. The stark asymmetric dependence between volume and returns indicates that the DeFi market may be inefficient.

It’s necessary to look beyond mere trading figures when it comes to serving DeFi users comprehensively and properly. As a whole, DeFi suffers from siloed blockchains and ecosystems, hindering collaboration and innovation. Value-focused platforms like THENA aim to attract partners who increase benefits for their users. Partnerships with other platforms enable asset diversification, with users accessing stablecoins, tokenized assets, and crypto within the DeFi ecosystem. Forward-looking DeFi platforms provide opportunities for diversification, which appeal to both retail and institutional users. Investors are interested in innovative financial products and want to create customized financial instruments and track as many asset prices as possible, and partnerships provide new ways to gain exposure to different markets or protect oneself from risk.

No DeFi platform should be an island entire of itself

THENA was conceived as a DeFi SuperApp set to mainstream onboarding with a CEX-grade experience. It is a highly modular liquidity layer, currently meeting liquidity needs from a network of more than 50 partners, including needs for stablecoins, memecoins, AI tokens, tokenized RWA, and other assets.

THENA was founded in early 2023 as the liquidity layer of BNB Chain to solve DEX inefficiencies by aligning incentives among token holders, liquidity providers, projects, etc. The platform remains community-focused and intuitive while delivering institutional-grade liquidity solutions to DeFi. It quickly became the 2nd-biggest DEX on BNB Chain by trading volume and fees. Among the novel liquidity management strategies it has pioneered are automated concentrated liquidity tools. The ecosystem includes the spot DEX THENA, where users can generate passive income; ALPHA, a perpetual DEX with 270+ crypto pairs; social trading platform ARENA; and WARP, an upcoming launchpad. Partners can bootstrap liquidity and incentivize their token ecosystem. By offering scalable liquidity, it continues to expand its already vast ecosystem. One of its highlights is “reimagined V3,3”, an upgrade for liquidity management and BNB Chain’s primary liquidity hub. V3,3 motivates existing community members and attracts new users through wealth-spreading incentives like revenue sharing.

The surprising benefits of ecosystem growth

Benefits include lower transaction costs, increased accessibility to financial services, greater financial independence, and faster, more transparent transactions. Partnerships in DeFi are collaborative relationships between platforms, finance protocols, or projects that improve offerings and expand market reach. They often focus on sharing resources, integrating technologies, and developing joint strategies to promote growth. They can take various forms, such as tech integrations, liquidity provision agreements, or joint marketing efforts. Collaborations aim to leverage each partner’s strengths, improve user experiences, and enhance DeFi market efficiency. 

Liquidity partnerships pool resources to improve liquidity for dApps

Liquidity partnerships are the leading type of DeFi partnerships. They focus on combining resources to improve dApp liquidity. Projects that collaborate on liquidity provisioning ensure lower slippage and better market depth, which helps attract more users to their ecosystems. An example of a stellar liquidity-focused collaboration is the partnership between Aave and Curve Finance, which enables users to optimize yield farming strategies, improving cross-platform liquidity.

Collaborations between platforms enable seamless cross-platform transactions and token swaps, facilitating a vibrant ecosystem. Increased liquidity incentivizes user engagement and leads to higher trading volumes and stability of the overall market.

Another prominent type is protocol partnerships, where two or more blockchains cooperate to enhance user experience and interoperability. These partnerships often allow for seamless transactions between platforms by integrating services.

Strategic partnerships focus on mutual growth

Projects enter into strategic partnerships to attain mutual growth. These collaborations often capitalize on shared technology and user bases to augment each project’s visibility and adoption. Considering the market’s competitiveness, such alliances are becoming more common as a critical tool to achieve market penetration.

These partnerships can also improve security. Collaboration between DeFi platforms yields the benefit of audits and shared security measures, limiting vulnerabilities. This collective security approach enhances trust among users, which is crucial to any DeFi platform’s sustainable development. Platforms build a shared ecosystem by leveraging complementary strengths and pooling resources and expertise.

Partnerships help resolve existing and emerging challenges

Broadening the ecosystem via partnerships involves crafting new solutions to address existing and emerging challenges in DeFi. Partnerships bring different perspectives and ideas together to address challenges. One of these is regulatory uncertainty: evolving regulations impact the DeFi space and the partnerships within it. US President Donald Trump is pioneering crypto-friendlier regulations, which will positively affect DeFi by association.

As the number of partnerships increases, so do the potential complications. Transparency and trust are paramount in DeFi, and the lack of an established reputation can hinder collaboration. While CeFi partners also conduct due diligence on each other, building trust in a decentralized environment requires more effort, as there are no central registers to check and determine a platform’s financial status and history.

On a final note, aligning motivation and objectives between partners remains a concern. Dissimilar goals, visions, or strategies result in friction, and partners must define their objectives and expectations clearly and in advance. Successful platforms build ecosystems based on mutual understanding and trust.

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