Logistics, manpower,  and definitely superior technology. 

And speaking of superior tech in the DeFi lending wars, we found two challengers bringing huge guns to a knife fight.

We aren’t kidding – these new entrants threaten Aave and Compound’s position. 

In fact, in the last six months, they’ve grown their combined TVL close to $2B and may soon be stealing market share from the incumbents.

Who are these challengers, and what do they do better than Aave and Compound? 

Let’s find out.

TLDR 📃

• Aave and Compound dominate DeFi lending, with a combined TVL of $10.02B, but face challenges. 
• Despite challenges, Aave and Compound remain dominant in DeFi due to first-mover advantage and scalability.
• Radiant Capital and Morpho Labs are riding on newer technology to challenge Aave and Compound. 
• Radiant Capital's token ($RDNT) faces downward pressure due to Bitcoin's influence, needing to break resistance at $0.25 - $0.2375 for potential upside.

Disclaimer: Not financial or investment advice. Any capital-related decisions you make are your full responsibility.

The DeFi lending leaders 👑

The traditional lending system, over time, has posed several challenges to its users, such as low financial inclusivity plus slow and cumbersome processes. Solving the traditional lending challenges has made DeFi lending a land of new possibilities and opportunities for investors and financial enthusiasts.

The DeFi lending sector currently sits at $13B TVL, signalling the huge interest in the space. This interest is facilitated by how the sector increases capital efficiency by allowing users to enjoy additional benefits beyond buying low and selling high.

Spearheading the DeFi lending competition are Aave and Compound. 

Both projects currently dominate the DeFi lending space with a combined TVL of $10.02B, which accounts for 76.9% of the Total Locked Value of the DeFi Lending space. 

While Compound uses computer calculations to determine how much interest borrowers pay and lenders earn,  Aave uses a liquidity pool model to pool users’ deposits. Aave dynamically determines interest rates based on the supply and demand of assets. 

Aave is the clear leader here. It has a TVL of $7B, but Compound is no pushover. However, Aave’s market-leading position is powered by superior technology, and that’s why the new challengers also pose a threat. 

The DeFi lending challengers 🥷

While Aave and Compound have succeeded significantly, they still have some challenges. Now, two protocols are circling with intent, waiting for an opportunity to dive in and steal the spotlight. 

A 20x potential in Radiant Capital 🔆

Radiant Capital is one of the key challengers in the DeFi lending space. It aims to solve the challenge of fragmented liquidity across multiple lending protocols – problems Aave and Compound have failed to tackle. 

Since its launch in July 2022, Radiant Capital has seen a continuous rise in its TVL, reaching heights as high as $764M in TVL from a $58M low. This proves the in-flow of liquidity into the ecosystem.

Currently, Radiant capital sits on $584M TVL and a Mcap of $72M.  While that looks small, our back-of-the-napkin calculation says there’s a 20x upside here. 

Radiant Capital can become a household name in the DeFi lending space due to its distinct approach to how users manage borrowing and lending. But aside from Radiant Capital, another lending protocol stands out in innovation. 

Playing smarter with Morpho Labs 🧚‍♀️

The Morpho protocol overshadows both compound and Aave because of its suite of smart contracts. Smart contracts are the building blocks of DeFi protocols, and Morpho has built some innovative contracts to improve the capital efficiency of existing lending protocols. Its smart contracts connect to existing liquidity pools while maintaining the underlying liquidity and liquidation guarantees.

Morpho Labs has evolved with a TVL close to $1B, yet it remains a  tokenless project. So, how do you get a slice of the pie? 

Well, you won’t have to wait for too long. Morpho Labs looks very enticing to investors who seek profit through airdrops.

Morpho Labs has raised $18M in funds from venture capitalists A16z and Variant Fund to conceptualise this airdrop opportunity. Now, we can’t wait to see how it all unfolds.

 In the meantime, what does the chart say about $RDNT, the radiant capital’s token? 👇

Price analysis 📊

Bitcoin's recent endeavours left many assets in a rough spot, and RDNT wasn’t left out.

We saw a loss of support a few days ago, and the asset is currently retesting as resistance. Unfortunately, the structure turned bearish when RDNT dropped under the grey region between $0.25 - $0.2375. 

This now hints at further downside; our nearest support level is $0.1935. We don't think RDNT has a reason to descend to that level unless  Bitcoin takes another dive. 

Nonetheless, some downside isn't off the table, and we'll need its price to break past the $0.25 - $0.2375 region if we were to see more upside from here.

Cryptonary’s take 🧠

The DeFi lending sector, in the previous bull run, grew to about $130B TVL and currently sits at $13B. The difference shows the probable upside movement for this sector in DeFi, and on a conservative note, there’s almost a 1,000% upside from the current TVL to the previous peak.

Though lending tokens don’t seem to be doing well due to emissions, a revamp in token economics will see a different story, which is the case of $RDNT

With the tokenless nature of Morpho Labs, the best move is to continue using the protocol so you can qualify for future forms of incentivisation whenever the team decides to launch a token.

Nonetheless, we think Aave and Compound will continue to be market leaders because of their first-mover advantage in the short-to-medium terms. However, if they stay static on the innovation front, it is only a matter of time before the contenders capitalise on their weaknesses to take over the market.

Overall, the  DeFi lending sector will keep growing, and we will be here to profit from the products and the tokens.

As always, thanks for reading.🙏

Cryptonary out!