Thread by @mindaoyang

1/ DeFi layering is a better analytical framework for DeFi protocol v.s the fancy x.0 gimmick.

DeFi Layer 1 features protocols with strongest liquidity stickiness, ability to penetrate vertically and horizontally, these are asset layers (stablecoin, pegged-asset, yield-tokens)

2/ layer2 are functional protocols (lending, dex, swap) and layer 3, applications (aggregators, AMM optimizers, investment DAO etc).

DeFi L1 has the benefit of NOT segregating its liquidity while expanding across chains/layers, easy to launch into functional protocols

3/ Most value will sink into DeFi L1, very likely, a DeFi L1 can be sprang up into its own SC layer 1.

SC platforms command huge premium by extracting monetary velocity from dapp built upon it, DeFi L1 also has the advantage of extracting such velocity from DeFi L2/L3 protocols

4/ Hence, DeFi L1 has a very different valuation model, where most its premium comes from monetary velocity and network effect and less fee-multiple-driven.

Look for those built as DeFi L1 from the ground up and able to organically grow beyond its self-incentivized liquidity or

5/ manage to have 3rd parties contributing to its asset formation; and DeFi L2/L3 which are able to sink or convert protocol liquidity into its own fungible asset layer sustainably, or even better, have the mechanism to have others incentivize the formation.