Thala Protocol: The Fully Empowered State with LSD, The Engine for Aptos Ecosystem's Revival

The market is hot, and L1 new public chains are gradually experiencing recovery.

From Solana to Avalanche, we can clearly see the rotation effect and capital spillover in the same L1 track, just like after Inscription became popular on BTC, it will also appear on other chains.

But this kind of rotation needs to be based on a native representative agreement in a certain ecosystem.

Orca on Solana, Benqi on Avalanche, etc. These projects are engines for ecosystem recovery. Following this logic, we find that Thala, the native DeFi protocol on Aptos, has quietly experienced a significant increase.

In early November, Messari had already observed signs of Aptos’s recovery, noting a significant surge in network usage in the third quarter of the year. The official continued support for the development of Thala Foundry, an incubator established in collaboration with Thala, the top DeFi protocol in its ecosystem.

It is not difficult to see that Thala is currently closely connected with Aptos officials.

Considering that the current market focus may not be on Aptos, understanding the development trends of representative projects in this ecosystem in advance will help us capture the next potential opportunity. In fact, we have already explored the products and technical design of the Thala protocol in the article “In-Depth Thala Protocol: The First DeFi Protocol Built on the Aptos Native Stablecoin“ earlier this year.

Nearly a year later, apart from the recent gains, how is Thala’s product development going? What new developments will there be in the future?

After compiling the recent trends of the project, we found that Thala has actually formed the DeFi cornerstone of the Aptos ecosystem, integrating multiple components such as stablecoins, AMM, launch pad, RWA and liquidity staking, and among each component. A virtuous cycle is formed.

On the eve of a possible collective eruption in the L1 ecosystem, Thala is worth further attention.

Building the cornerstone of Aptos liquidity

For a public chain ecosystem, the liquidity market is vital for its prosperity. This is particularly true for a newly established ecosystem, as the market relies on capital volume, capital efficiency, and attention, all of which require support within the ecosystem. Liquid markets provide this support.

When it comes to liquidity, the importance of DeFi is self-evident. From allowing users to use and set up liquidity pools to lending assets, to economic design to lock in liquidity in exchange for staking returns, etc., a good DeFi protocol can activate the funds of the entire ecosystem.

From the development process of the past year, Thala is undoubtedly a comprehensive DeFi protocol that constitutes the cornerstone of Apotos liquidity.

Review its existing product structure:

• MOD (Move Dollar): An overcollateralized stablecoin on Aptos, the minting and supply of MOD can provide liquidity for other DeFi projects and create more use cases and utility.
• Thala Swap: A DEX based on an automated market maker mechanism, with different pool strategies and returns according to different rules.
• Launchpad: A new asset launchpad composed of “liquidity bootstrapping pools” in the aforementioned Swap. It guides users’ liquidity by setting the initial and final weights of two assets over a certain period of time and allows them to participate in the exchange of assets in the pool; simply put, it uses existing tokens to swap for new tokens.

I also mentioned in a previous article that the above three constitute a flywheel for liquidity growth and ecosystem development, and will not be discussed further here.

In addition to these, Thala also launched RWA-related product modules in July. Users can use tokenized assets including corporate bonds, personal consumption loans, treasury bills, etc. as collateral to borrow stablecoin MOD, which further increases the attractiveness and use of its stablecoin.

By summarizing all of Thala’s product components, we can see that Thala is actually performing the function of a comprehensive DeFi platform, creating possibilities for asset liquidity on Aptos.

At the same time, if we further observe the situation within the ecosystem, starting from the TVL indicator, it is easy to see that Thala is the leader among the native protocols in the Aptos ecosystem, and the data has been consistently growing. In the past week, the TVL has increased by over 100%, reaching around $53 million in total.

Leading projects tend to achieve better market performance when funds pour in, but they also need new functional points and narratives as basic support. In addition to Thala’s existing product matrix, what other features can attract more attention and have the potential to ignite market sentiment?

LSD blessing, another possibility of asset income

Recently, the popular JITO has brought vitality to the entire liquidity staking track of Solana, demonstrating the market’s recognition of this track.

Similarly, on Aptos, Thala also launched LSD-related products on November 23. From a technical perspective, LSD maintains the robustness and security of the entire network by staking the native tokens of the public chain. From an asset perspective, it also provides another possibility for creating returns for the native tokens of the public chain.

Based on the original product matrix, the addition of LSD products makes Thala the only complete DeFi solution on Aptos; at the same time, there is currently no other competing product in the entire Aptos ecosystem that provides LSD functions.

It is worth noting that in the next five months, Aptos’ native token APT will undergo a token unlock worth $172 million. Most of these unlocked tokens come from the project’s investors and team itself. From the perspective of maintaining a stable APT price and ensuring the long-term development of Aptos, it is unlikely that the project team will choose to sell a large number of tokens to suppress the APT price.

So where will these extra APT tokens flow to?

Capital always seeks maximum returns, and under the condition that it does not affect the overall market situation, Thala’s liquidity staking product may become an important container for accommodating the massive unlock amount of APT.

In addition, data shows that on Aptos, over 866 million APT tokens (approximately 81% of the total APT supply) are staked in the hands of more than 116 validators.

However, only 0.4% of the total mentioned above (approximately $28 million) actively participate in the liquidity staking protocol, resulting in the value gained by the wider DeFi ecosystem being negligible.

Due to the lack of native assets in the emerging ecosystem, LSD can serve as an effective means to bootstrap liquidity and create new use cases for the protocol. Undoubtedly, this provides a naturally favorable external environment for Thala to attract more asset staking.

Moreover, from the product’s perspective, Thala clearly has a monopoly advantage as there are no competing products within the ecosystem. It can further amplify this advantage through its stablecoin and AMM mechanisms. After understanding the expectations and benefits in these business aspects, let’s focus on the specific design of Thala’s LSD product.

1.Assets involved in Thala liquidity staking：

• thAPT: A non-replaceable deposit certificate linked to APT at a 1:1 ratio.
• sthAPT: A resettable deposit certificate that increases in value over time by accumulating validator rewards.

2. The form and function of these assets：

• thAPT is a deposit certificate that can directly mint and exchange APT. They allow users to deposit APT into the Thala protocol and receive an equal amount of thAPT on behalf of their staked APT.
• sthAPT represents the staking income. Users mint sthAPT by depositing thAPT into Thala’s LSD module, which reflects the income gained by users from staking APT through Thala validators.

3. Liquidity staking process and participating roles:

• Users deposit APT into the Thala protocol and obtain thAPT.
• Users can choose to store thAPT in the LSD module and cast sthAPT, which has the property of increasing in value over time.
• Validators are responsible for running network nodes, maintaining the security and stability of the network, and are rewarded for this.
• The thAPT-APT stable pool provides liquidity and supports transactions between thAPT and APT.

4. Benefits for different participants:

• The benefits received by sthAPT holders include 100% of sthAPT validator rewards plus 80% of thAPT validator rewards.
• The remaining 20% ​​of thAPT holders’ validator rewards are used to incentivize the thAPT-APT stable pool on ThalaSwap, provide liquidity and earn rewards.
• Validators receive APT as rewards by running nodes and maintaining network stability. Thala APT itself does not charge commissions, but nodes entrusted to ParaFi Technologies and Bware Labs (two blockchain service providers) will charge a 7% commission.
• For liquidity providers, Thala will reduce stable pool emissions, increase support for thAPT-APT pairs, and provide more incentives for early participants.

In short, Thala’s liquidity staking allows APT holders to stake their assets in the form of tokenization and earn potentially high returns through sthAPT while maintaining the liquidity of their assets. This mechanism also provides rewards for validators who maintain network security, while incentivizing the provision of liquidity and enhancing the vitality of the entire ecosystem.

After the blessing of LSD, Thala actually has a more complete product structure. LSD + stable currency + swap trading (AMM) + launchpad multiple components work simultaneously, making it the first choice for one-stop DeFi infrastructure on Aptos.

To participate in the Aptos ecosystem, Thala is definitely an essential component. Its unique positioning within the ecosystem, coupled with its versatile product portfolio, enhances the potential and growth opportunities of the products.

Near-term catalysts

In addition to adding LSD, what catalysts does Thala currently have to propel its growth?

Based on the official data panel of the project, as of the time of writing, the total locked value of Thala has exceeded $55 million, primarily consisting of APT assets. This proportion may further increase with the unlocking of APT as mentioned earlier and the market’s discovery of the value of other L1 platforms.

Additionally, according to DefiLlama’s data, the market value of the Thala project is currently only around $9.74 million, while the project’s total value locked (TVL) has reached $55 million (based on the official dashboard). This means that a relatively small project is supporting assets worth several times its own market value, which may indicate that Thala is currently undervalued by the market.

Beyond the data surface, the following events also deserve our attention.

• More CEX support: MEXC recently passed a vote and decided to list the native token THL of the Thala project.

• OKX Wallet Plugin provides support: Users can now directly access the Thala protocol through OKX’s Web3 wallet, enabling various functions such as asset exchange, staking, and minting. With the feature of supporting more chain assets, OKX Wallet eliminates the cost of transferring assets across chains to Thala, making it easier for users to participate in the Thala protocol.

• Create a $1 million new DeFi protocol incentive plan with the Aptos Foundation: Both parties stated in a statement that they would establish Thala Foundry in the hope of inspiring developers to come up with “unique strategies and use cases powered by the Aptos L1 blockchain.” Considering that the incentive plan is prone to more new protocols, and these new protocols often have token or functional partnerships with original investors, Thala’s financial support is also a positive for the project itself. catalyst.
• Call for Aptos official pool on Thala:Thala’s official Twitter post expressed the hope that Aptos can use the Launchpad function to launch new tokens, which can not only successfully use Thala functions, but also increase the richness of the ecosystem. At the same time, from the perspective of execution costs, there is no need for new projects to choose a launch pad and then add liquidity to another DeFi protocol. Thala’s multiple products can meet demand at the same time, which also increases expectations for cooperation with new projects.

Overall, although the Aptos ecosystem is currently not as popular as Solana and others, it does not mean that it has no possibility of breaking out and attracting attention.

Thala is the leading “all-rounder” in the Aptos ecosystem. The more comprehensive the product, the more narratives it can capture. A dormant show may have just begun.

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