On-chain lending protocols discussing the "moat" may be an illusion. On-chain DeFi users are generally more rational and perceptive, lacking long-term loyalty to protocols. When competing protocols increase yields through large-scale subsidies, the TVL of existing protocols can quickly drain away. Smart money on-chain primarily looks at APY, with no loyalty. Imagine if a large capital enters the DeFi lending space with subsidies, combined with a second-tier lending team that has established brand trust (such as collaborating with Morpho or Fluid to ensure the safety of contract code), and offers the following more competitive conditions: - An additional 5% annual subsidy for each liquidity pool; - An increase of 5% in LTV; - Lower liquidation penalties; - A flattened borrowing curve model to reduce interest rate volatility. Then, large users of existing lending protocols like Aave are very likely to migrate. Even after the subsidies end, the new protocol may still retain a...
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