This episode reveals how the massive treasuries of Digitally Asseted Trusts (DATs) are poised to ignite a Solana DeFi summer, creating a critical demand for yield-generating protocols and reshaping the economics of restaking.
Introduction to Fragmetric and Jito Restaking
- Restaking is the process of using already staked assets (like staked SOL) to provide economic security for additional protocols or services, earning extra rewards in the process.
- Fragmetric allows users to stake assets like JitoSOL and receive a liquid restaking token (LRT). This LRT represents their underlying staked position plus the additional yield from securing new crypto networks (NCNs) like Jito's Tip Router and Switchboard.
- Sang also touches on the project's community-focused branding, centered around a white tiger mascot inspired by his Korean heritage. This mascot has become a key part of their identity, leading to an NFT collection and Sang's memorable appearances in costume at crypto events.
How Solana Restaking Generates Real Yield
- The primary yield source is Jito's Tip Router, a decentralized infrastructure for distributing MEV (Maximal Extractable Value) rewards. NCNs running the Tip Router receive a portion of these MEV tips as compensation, which is then passed on to restakers.
- Sang contrasts this with EigenLayer on Ethereum, where many of the initial actively validated services (AVSs), like data availability layers, do not yet generate significant revenue, making it difficult to produce yield for the billions in deposited assets.
- Sang states, "I'm more bullish on Solana restaking... because we have the best yield flow in the whole blockchain ecosystem."
- He notes that Fragmetric's
fragSOL (with over $100M TVL) is generating a 3-4% APY from the Tip Router alone, with additional yield expected from partners like the oracle network Switchboard after its token generation event (TGE).
The Technical Edge: Token 2022 and Reward Distribution
- Token 2022 is an updated token standard on Solana that includes advanced features. Fragmetric uses its "transfer hook" capability.
- The transfer hook allows Fragmetric's program to monitor all transfers of its
fragSOL token. This creates a record of each user's holding period, enabling direct, precise airdrops of NCN reward tokens (like Switchboard's upcoming token) without needing to sell them for SOL first.
- This technical solution is a key advantage, as it prevents the constant sell pressure on NCN tokens that occurs when rewards are swapped to a base asset like ETH or SOL before distribution. This makes Fragmetric a more attractive partner for new networks.
The Core Thesis: How DATs Will Drive a Solana DeFi Summer
- DATs are publicly traded companies that hold digital assets like Solana in their treasuries, similar to MicroStrategy's Bitcoin strategy. Examples include DeFi Dev Corp (DFTV) and Sharp Technology.
- These companies are raising hundreds of millions to acquire SOL. However, Solana's high inflation rate (around 7% staking APY) creates immense pressure for these treasuries to generate yield to offset dilution and grow their SOL-per-share value.
- This necessity will force DATs to deploy their massive SOL holdings into the Solana DeFi ecosystem, seeking yield through staking, restaking, and lending protocols.
- Sang argues, "I strongly believe that all the Solana DATs will bring Solana DeFi summer... the criteria [for retail investors choosing a DAT] would be how much yield they are going to generate with their SOL treasury."
Winners in the DAT-Fueled DeFi Ecosystem
- Liquid Staking & Restaking: Protocols like Jito and Fragmetric are positioned to be primary beneficiaries, as they offer a straightforward way for DATs to earn yield on their SOL. Fragmetric's infrastructure, which accepts various LSTs, is particularly "DAT-friendly."
- Lending Protocols: Platforms like Camino, which focus on institutional-grade security and risk management, are likely destinations for DATs looking to lend their assets and generate further yield.
- Infrastructure Providers: Sang believes Jito is a major winner due to its robust LST infrastructure and deep integrations across the Solana DeFi landscape.
The Unique Dynamics of the Korean Crypto Market
- The market is dominated by retail investors, including a significant demographic of middle-aged individuals who actively trade assets like XRP on local exchanges like Upbit.
- There is a strong culture of airdrop farming and memecoin trading, driven by hundreds of local Key Opinion Leaders (KOLs) with large Telegram communities.
- A key market feature is the "Kimchi Premium," where cryptocurrencies on Korean exchanges trade at a 3-4% premium compared to global markets. This creates arbitrage opportunities known as "Potari," where traders buy on global exchanges and sell on Korean ones.
- For projects targeting Korea, IRL (in-real-life) meetups with merchandise and food are a surprisingly effective strategy for building community and driving adoption, as demonstrated by projects like Eclipse.
Post-TGE Learnings and Market Sentiment
- Despite a significant price drop post-launch, Sang stands by the decision to generously reward early contributors through the airdrop, viewing it as essential for community building.
- He acknowledges the difficulty of maintaining hype after the token launch and the TVL drop from a peak of $330M to $140M as point farmers exited. However, he believes the initial points program was crucial for bootstrapping awareness and growth.
- The current market sentiment is tough for new altcoins, with capital flowing towards major assets like SOL and ETH. This environment has forced even projects with strong revenue, like Pump.fun, to conduct aggressive buybacks to support their token price.
Fragmetric's Future Roadmap and Vision
- The roadmap includes
fragBTC (which uses Jupiter's JLP for yield) and the upcoming fragUSD, a yield-bearing stablecoin.
- The strategy is to provide optimized, single-click yield solutions for major assets (SOL, BTC, USD). Users deposit an asset and receive a receipt token (
fragSOL, fragBTC, etc.) that can be further utilized in other DeFi protocols.
- This positions Fragmetric as a yield abstraction layer, catering to users who want optimized returns without managing complex DeFi positions themselves.
Conclusion: The Future of Restaking
The conversation concludes that while the initial hype around restaking has cooled, the underlying technology remains valuable for decentralizing crypto networks. The key challenge was that the narrative and capital inflows grew much faster than the ability of new networks to generate sustainable revenue. Sang believes the technology needs more time—perhaps three years—to mature and find its footing as core crypto infrastructure.
Strategic Summary
The episode highlights that Digitally Asseted Trusts (DATs) are a key emerging trend, creating institutional-level demand for DeFi yield on Solana. Investors and researchers should closely monitor how DATs deploy their treasuries, as their capital flows will likely signal which staking, restaking, and lending protocols are poised for significant growth.
