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Sonne Finance: Optimism about fast-growing lending deals in the flywheel effect

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The original title: "Sonne Finance: Optimism flywheel effect of rapid growth in lending agreement | veDAO institute"

Source: veDAO Research Institute

Sonne Finance is the first native platform to launch a loan agreement on Optimism, aiming to become the leading lending platform by offering the deepest level of liquidity in order to offer the highest competitive incentives. It is currently ranked the 9th largest ecological Optimism with TVL reaching $40 million, a rapid increase of 60% in the last two months, ranking second only to AAVE among lending projects. With Optimism of Sonne Finance's technical and financial support likely to more than double in volume over the next three months, let's look at some of Sonne Finance's optimism and tips on how to stand out from the crowd.

Sonne Finance Profile

Sonne Finance is a fully decentralized, transparent and unmanaged peer-to-peer lending agreement that attracts significant user and liquidity by offering low volatile losses and high returns, and by offering incentives that are more substantial than other agreements. The platform provides currency markets for WETH, USDC, USDT, DAI, OP, SNX, etc. The goal is to be optimistic about the Optimism that offers the most competitive incentives in the money markets and the most liquid primary lending programs.

There are two types of Staking pools available in Sonne Finance's Stake staking section for the pledger to choose from. The primary objective of the staking pool is to distribute agreement revenue and token incentives such as VELO to the pledger. Agreement revenue is generated by charging fees according to the reserve coefficient of different pools. The riskier the pool is, the more expenses will be generated in this way, and the corresponding returns will be more:

-sSONNE staking pool:

The corresponding rewards are SONNE tokens, VELO tokens, and OP tokens. The pool reward will be used to purchase SONNE from the market and distribute it to sSONNE's mortgagee.

-uSONNE staking pool:

The corresponding rewards are USDC tokens, VELO tokens and OP tokens. The pool reward will be used to purchase the USDC from the market and distribute it to the mortgagee of uSONNE.

One person on Twitter calculated that the pledgers received up to 45% annual interest on the proceeds of the deal. And why are the returns so high? And why do VELO tokens and OP tokens appear in Sonne Finance's pledge incentives? That brings us to Sonne Finance's unique token economy model.

Sonne Finance's flywheel effect in OP

Sonne's token strategy is based on Velodrome and Optimism by constructing an innovative flywheel:

Velodrome is the biggest DEX on Optimism, with TVL leading all DEX events by a wide margin. Velodrome has two tokens, VELO, an ERC20 token, and veVELO, an NFT governance token that functions like a veCRV and votes on each liquidity pool reward weight, by pledging VELO. In the past half year, the new VELO is almost all used for pledge lock warehouse, and all kinds of projects are actively accumulating more veVELO, competing for the liquidity incentive brought by voting and the distribution dividend of increased commission.

What sets Sonne apart from other protocols is that instead of simply rewarding liquidity providers with SONNE tokens, SONNE is bribing VELO and veVELO holders with SONNE tokens to vote for SONNE/USDC token pairs on Velodrome, As a result, the APY of the USDC/SONNE LP is higher. As a large LP of the token pair pool, Sonne will get more liquidity incentive of VELO tokens and increase the fee to increase the dividend.

Sonne uses the SONNE tokens pledged by the user as liquidity to Velodrome to provide a good APR return (for example, adding SONNE tokens to the USDC/SONNE token pool). VELO locked in Sonne can earn votes and rewards. So you get the reward OP token from OP ecology. These two portions, as rewards for the SONNE Pledge, will go 100% back to the user who pledged the SONNE token (80% for the first three months, and 100% of the agreed revenue after the team token begins to be unlocked).

The logic of the flywheel effect can be understood as follows:

- Platform projects on Velodrome compete to bribe veVELO holders, and transaction fees increase as DEX works well

-veVELO token holders get paid more because of bribes

-VELO token price increases

As an important LP, the APY increased due to the vote of veVELO, and the number of VELO obtained increased. At the same time, the price of VELO token increased, so the income increased continuously

-Sonne Finance will receive 100% of VELO tokens and commission dividends, OP eco-reward OP tokens, etc. back to SONNE's pledge users

-Sonne's mortgage income continues to improve, attracting more pledges and liquidity

-Sonne provides more liquidity to Velodrome and continues to bribe veVELO holders with SONNE tokens

The Velodrome agreement also attracted more liquidity as VELO tokens rose in price

Better liquidity further boosted transaction fee income

You can see that the flywheel looks like a combination of Sonne Finance and Velodrome, one layer on top of the other. The Flywheel's current run has not only given Sonne Finance and Velodrome a burst of growth, but also given Optimism the opportunity to build its own native DeFi Lego based on Velodrome, Sonne Finance is the perfect fit for the important building blocks of lending.

However, the flywheel firmly binds the two together, both prosperity and loss. As two important agreements of Optimism ecology, we also expect OP ecology to make use of and promote the flywheel effect, and promote the construction of OP DeFi Lego with its strong fund and strength behind it. Sonne Finance is also understood to be applying for the next round of Optimism sponsorship, which is used to inspire borrowing, and could see a surge in TVL if it goes through.

Token allocation

The total supply of SONNE tokens is 100,000,000. The distribution diagram and specific contents are as follows:

60%-60,000,000 - Farm bonus + used for bribery (community);

-- 19%-19,000,000 -- Agreement increase;

-- 12%-12,000,000 -- Team; (Three months cliff, two years vest)

-- 3.5-3,500,000 -- LGE liquidity generation participants;

-- 3%-3,000,000 -- Community airdrops

-- 2.5%-2,500,000 -- initial liquidity;

Currently, 40,419,431 Sonnes have been released on the market, with a token price of about $0.17 per coin and a market value of about $6.8 million.

Future growth momentum

Sonne Finance is currently the 9th largest ecological project of Optimism, with TVL reaching $40 million. In the last two months, TVL increased by 60% to reach $40 million, ranking second only to AAVE among loan projects. The recent boom has been fueled not only by the flywheel effect created by Velodrome, but also by grants from OP Ecology and the complementary effect of Sonne Finance's sister agreement.

Sonne Finance launched a sister agreement on Kava, Mare Finance, in which much of the initial supply was airdropped to SONNE pledges. Meanwhile MareFinance will get many from EquilibreAMM (DEX) on the KAVA veNFT, thus to build their own and a flywheel. These two similar sister agreements will be mutually supportive of each other's development, and hopefully the flywheel effect will bring vitality and mobility to their ecosystems, attract more users and generate significant revenue for both.

If you are interested in the Sonne Finance loan Agreement or the OP Eco Flywheel and want to learn more about it, the following media are available for you to use: