The Edge Podcast - ZeroLend: Betting On The Next Generation Of L2s - Revelo Intel

The Edge Podcast – ZeroLend: Betting On The Next Generation Of L2s

In this episode of The Edge Podcast, which took place on May 16, 2024, DeFi Dad and Nomatic hosted a discussion with the team from ZeroLend to explore the rapid expansion of their decentralized money market across multiple Layer 2 solutions and the impact on liquidity and borrowing in the DeFi space, and more! Read our notes below to learn more.


Unlocking Liquidity Across Multiple Blockchains

  • DeFi Dad mentions that ZeroLend has become the number one lending and borrowing protocol on zkSync Era and Linea, and the second largest on Manta, as well as the fourth largest on Blast. 
  • Ryker introduces himself as Steven and shares his background in computer science and math, and his previous project, MahaDAO, which marked his entry into DeFi and crypto in 2020. Ryker explains that his passion lies in building tech products and DeFi Legos, with a focus on community involvement.
  • Ryker explains that ZeroLend started as a money market and continues to innovate in lending and borrowing. Their focus is on unlocking liquidity for assets that might otherwise be illiquid. ZeroLend launched on zkSync in July 2023 and quickly became the leading money market on that platform. They have since expanded to other chains like Manta and Linea, where they also hold significant market positions. ZeroLend continues to grow and expand to more chains and assets, with a strong track record of growth over the past 11 months.

ZeroLend’s Approach to Differentiation and Success

  • Ryker attributes ZeroLend’s success to their ability to move quickly, listing new assets and deploying on new chains rapidly. They prioritize speed without sacrificing risk management and security, following principles from larger protocols like Aave and Compound. ZeroLend works with Chaos Labs for risk management and highlights audits and security. Their aggressive approach to listing assets and providing liquidity has met the demand for borrowing against illiquid assets, driving their growth. Ryker believes their upcoming ZeroLend v2 will further enhance these capabilities.
  • Ryker highlights ZeroLend’s focus on providing better incentives, such as attractive interest rates for suppliers and low borrowing fees. They have successfully listed unique assets like Liquid Restaking Tokens (LRTs), which offer interesting incentives and points for users. LRTs, which can only be supplied but not withdrawn, are ideal for a lending market as they have a decent risk profile and provide users with significant incentives. Ryker highlights that finding the right incentives, like LRTs and Eigenlayer points, has been key to their growth.
  • Ryker explains that ZeroLend has listed RWA assets like Wrapped $USDM from Mountain Protocol, backed by US Treasury bills. While RWAs are promising and evolving, ZeroLend has seen more growth with LRTs. He notes that RWAs need liquidity for various purposes, and by listing them as collateral, ZeroLend enables users to borrow stablecoins like $USDT or $USDC and utilize these assets more effectively. However, LRTs have shown more substantial growth compared to RWAs.

ZeroLend’s Expansion and Token Launch

  • Ryker views account abstraction as a significant enhancement, providing a more seamless user experience. Features like signing transactions with fingerprints improve the usability of the protocol. He sees account abstraction as a 10x improvement, making interactions with the protocol more user-friendly. Ryker highlights that while they are excited about account abstraction, it is one of many innovations they are working on to improve their offerings.
  • Ryker explains that ZeroLend aims to be on every chain and create lending markets for every asset, particularly by leveraging native tokens of new chains. They see significant liquidity opportunities in expanding to these chains. Currently, ZeroLend is on six chains: zkSync, Manta, Linea, Blast, Ethereum mainnet, and X Layer. They are number one on zkSync, Linea, and X Layer, and in the top three or five on the others. While they want to expand further, they are cautious due to the time and resources required for risk management, testing, and incentives. Ryker describes X Layer as a new chain backed by OKX with a strong connection to ZeroLend, where they aim to unlock liquidity for OKX tokens and other assets.
  • Ryker says that Linea has been the fastest-growing chain for ZeroLend, with the protocol reaching $85 million in TVL within two weeks. He attributes this growth to their alignment with Linea and ConsenSys. Although Linea is currently their largest market, Ryker expresses gratitude for zkSync, where ZeroLend initially grew. He notes that all new Layer 2s have substantial growth potential that ZeroLend aims to capture.
  • Ryker shares excitement about the token launch, which aims to decentralize the protocol with minimal governance involvement. Inspired by Curve Finance’s $CRV token, the ZeroLend token is a veToken (Vote Escrow Token) model. Users can stake the token for periods ranging from two weeks to four years, earning voting power to influence emissions, interest rates, and other aspects without requiring governance proposals. Ryker highlights their goal to push the limits of what a lending protocol can achieve with its token, minimizing politics and centralized governance. The token went live this week, and they are eager to see its impact.

ZeroLend’s Future Plans and Innovations

  • Ryker explains that while the airdrop narrative is strong, ZeroLend aims to provide long-term value to its token holders. The protocol intends to distribute a significant portion of any airdrops received (like the recent Pyth airdrop) to users who stake $ZERO tokens. This strategy is aimed at fostering a strong token ecosystem and providing value to their community. ZeroLend plans to give back around 80% of the airdropped tokens to stakers, rather than keeping them for the treasury.
  • Nomatic asks about the alignment between B2B (business-to-business) and B2C (business-to-consumer) four-year lockers in the veToken model, and whether the protocol envisions other protocols locking up $ZERO tokens. 
  • Ryker draws a parallel to the Curve Wars, where protocols compete for voting power, showcasing the demand for tokens. He hopes to see a similar dynamic with ZeroLend, where both users and protocols stake $ZERO tokens to gain voting power and influence protocol decisions. The aim is to achieve true decentralization with diverse stakeholders, avoiding dominance by any single entity.
  • Ryker shares that ZeroLend v2 aims to combine the best aspects of established protocols like Aave and Compound with newer ones like Morpho and Instadapp Fluid. The goal is to deliver a substantial improvement in the lending protocol space, introducing innovative features that go beyond UI enhancements and better incentives. While development has started, the timeline for v2’s release is within the year, subject to rigorous testing and auditing to ensure security and reliability.

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Show Information

  • Medium: YouTube (Video)
  • Show: The Edge Podcast
  • Show Title: ZeroLend: Betting On The Next Generation Of L2s
  • Show Date: May 16, 2024