『 Scallop: Could it be the next Pendle? 』 Scallop @Scallop_io is one of my favorite protocols in the SUI ecosystem. To discuss SUI yield strategies, we must first talk about Scallop. Although its mechanism is not quite the same as Pendle, Scallop gives me the early Pendle vibes ~ I trust my intuition (I entered most of my Pendle at $0.5). 1️⃣ Scallop vs Pendle Comparison 🔹 Scallop's market cap is 1/40 of Pendle's; TVL is 1/20. 🔹 Scallop's token "lock-up rate" is similar to Pendle's, but here's the key: the average lock-up period for Scallop tokens is 3.7 years, while Pendle's is only 1 year. What magic does Scallop have that makes users willing to lock up for an average of 3.7 years? (We'll get to that later) 🔹 In the past 30 days, fee revenue for Pendle was 900k, while Scallop was 1.45m, slightly higher than Pendle. // 2️⃣ The Charming Mechanism of Scallop The core gameplay of Scallop is to purchase $SCA, lock it into veSCA, and then significantly boost yields (I think it's worth buying). Benefits of locking veSCA: 1. Loyalty Program: Depending on the amount and duration of veSCA locked, you receive airdrops periodically, though this part of the yield is currently not much. 2. Referral Program: When others use your link, they get a discount on borrowing fees; you also receive a portion of the borrowing fees. Feel free to use my link: 3. Yield Boost ⭐️⭐️⭐️ This is the key, the core gameplay 🔥 This is why everyone is willing to lock up for 3.7 years. Example: You deposit a sum into Scallop and borrow USDC. The borrowed money can earn rewards, which will be higher than the interest. Suppose you lock 100,000 veSCA for 4 years. Borrow $20,000, APR reward can be up to 4x (maximum) = APR 40% Borrow $50,000, APR reward 3x = APR 30% Borrow $100,000, APR reward 2x = APR 20% PS: APR is variable (All the above are APR after deducting interest, the more veSCA you stake, the larger the amount you can boost) ✅ Key ~ Key ~ Key "Different lending pools have different boost conditions" You can try to allocate loans to maximize yields. For example: USDC's reward APR for your borrowed amount has reached the maximum of 4x, but there is still room to borrow more, the reward multiplier will decrease, but you can borrow from different stablecoin pools USDY / FDUSD / USDT to maintain the reward APR at 4x. Additionally, SUI / ETH / WAL lending pools can also be played this way. ✅ Key ~ Key ~ Key ~ Key The money you borrow Can be layered again, staked in other protocols to earn an annual yield of 7% ~ 20% PS: The picture below shows the top 3 whales He can achieve an APR of nearly 60% just in Scallop 🔥 // 3️⃣ Notes on Using Scallop 🔹 Scallop has only been out for about a year, and hasn't undergone long-term risk resistance testing. 🔹 Only 40% of $SCA tokens are unlocked, with 60% still not in circulation. 🔹 The price of $SCA has increased by 100% in the past month. 🔹 SUI ecosystem rewards subsidies are only until the end of this year, whether there will be reward subsidies next year to keep APR attractive is unknown ~ // 4️⃣ My Thoughts I am optimistic about the SUI ecosystem because my experiences with several protocols have been pleasant. SUI is actively developing both internally and externally. Scallop's mechanism is very appealing to me, and it is strongly recommended by the big players I know. It has actual fee revenue, and even without SUI subsidy rewards in the future, it has the ability to generate revenue and share it with users. In the future, it might create a flywheel effect, replicating Pendle's legendary price surge from the bottom. This article introduces Scallop. In the next article, I will write about: Scallop's yield strategies with other protocols.