GMeow to all the ambitious builders out there! 🐱
Web3 has started moving past single-use dApps so fast recently that, as a builder, you might feel outdated. Keeping track of every new form of building is a job on its own, but if we could point to one, it would be Web3 super apps, which sometimes make use of one of the oldest strategies known to protocols: The flywheel.
The most successful Web3 super apps share several key characteristics that set them apart from traditional dApps. Multi-protocol integration creates unified user experiences, allowing users to access various services without switching between multiple interfaces. Cross-functional utility extends beyond single-purpose tools, providing value across different use cases and user types.
Network effects that grow with ecosystem adoption represent perhaps the most crucial element. As more users and protocols interact with your application, the value proposition strengthens for all participants. This creates the sustainable growth patterns, or flywheel effects, that define ecosystem-shaping platforms.
Let's start with the example of Convex, which holds over 52% of the total veCRV supply by creating a symbiotic flywheel with Curve. When Convex stakes CRV, it accumulates voting power and directs Curve rewards to Convex LPs. LPs then earn boosted rewards through fee-sharing mechanisms, incentivizing more LPs to join, making Convex gain even more voting power.
Results: Both protocols grew exponentially through complementary design, not competition.
More liquidity means smaller spreads and better execution for traders. Better execution attracts more traders, increasing volume and generating fees. This creates a self-sustaining cycle where each new user increases value for all participants, without depending on inflationary tokens or artificial incentives.
Now, let's talk about DeFi. We all know that the flywheel of DeFi is lending. But what if we could take it to the next level? The key innovation emerges with Aavethena, The base flywheel operates as follows:
However, Aavethena found a way to amplify this even more: Liquid Leverage saw over $1.5B in inflows in just one week after launch, with capacity expanding to $350M for sUSDe and ~$300M for USDe on Aave. Stani Kulechov declared that "Aavethena has been the best primitive of DeFi summer '25".
Aave enabled recursive lending and leveraged positions that unlocked new use cases for USDe, converting it from a synthetic dollar into a yield powerhouse. The speed of growth ($1.5B in a single week) demonstrates how well-constructed flywheels can accelerate exponentially when they achieve product-market fit. Each protocol strengthens the other in a symbiotic relationship that exemplifies the power of composability.
Synthetix is a great example of another unique flywheel, as we can see in the example:
Once again, we can see that innovation lies in composability. Other protocols use Synthetix as a primitive, creating external demand that strengthens the internal flywheel. Let's dive even deeper by looking at Kwenta and Lyra, two projects that were built on top of Synthetix. Lyra and Kwenta are critical integrators that drive the Synthetix flywheel by creating demand for Synthetix infrastructure and generating fee revenue that flows back to SNX stakers.
Lyra utilizes Synthetix Perps to hedge their options AMM using perps positions on Synthetix in order to maintain a delta-neutral position in Market Maker Vaults (MMVs), protecting their LPs from unnecessary directional risk. Every options trade on Lyra creates corresponding perp activity on Synthetix. APYs for LPs can range between 8% - 40%, depending on market conditions. These returns attract capital into the ecosystem, which then requires sUSD (minted by SNX stakers), creating demand for staking.
Kwenta provides traders access to various assets, including more than 40 trading pairs, with an intuitive interface and advanced charting tools. By making Synthetix Perps accessible to everyday traders, Kwenta dramatically expands the user base trading on Synthetix infrastructure. Kwenta's collaboration with Lyra aims to integrate Lyra's options trading experience into Kwenta's suite of spot and derivatives trading tools, allowing traders to combine various perps/options strategies in just a few clicks. This creates a one-stop shop that keeps users within the Synthetix ecosystem.
Together, these integrators create a powerful feedback loop:
The beauty is that both platforms require Synthetix infrastructure to function: Kwenta for perps trading and Lyra for hedging their options positions, making them dependent on and contributors to the Synthetix liquidity pool simultaneously.
This idea can be explored further with Money Legos. Think of DeFi protocols as Lego blocks, but each one is open-source and permissionless. You can stack them together to create something entirely new. This is composability in action. Alchemix shows this perfectly. It offers loans that pay themselves automatically. By depositing sfrxETH into the Alchemix vault, you receive up to 50% back as alETH immediately. Your original deposit stays locked, earning yield to pay off the loan over time. Behind the scenes, multiple protocols work together seamlessly. Ethereum provides the base layer. Frax supplies the sfrxETH (staked Frax Ether). Yearn, Curve, and Convex handle the yield farming. Each protocol plays its part, and together they create something none could do alone: a grand castle of legos where everything connects perfectly. This is the power of composability.
Now let's address the true power of flywheels, which emerges when multiple protocols integrate, creating exponential network effects where the success of one amplifies the value of all the others.
Composability favors protocols on the same chain, Ethereum is currently the home base of DeFi for containing the vast majority of total value locked in DeFi apps. The most impressive examples emerge when protocols create interdependent flywheels.
Curve + Convex + Frax demonstrates this: Frax utilizes Curve pools for its stablecoins, which generate volume and fees. Convex then optimizes yields through veCRV accumulation, attracting more liquidity providers to the ecosystem. This increased liquidity benefits Curve through higher volume, which in turn strengthens its base flywheel. Each protocol amplifies the others in this symbiotic relationship.
Yearn exemplifies advanced composability: its strategies combine Aave lending, Curve yield farming, and protocol governance in one product. A possible user strategy would be to deposit in Aave, use aTokens as collateral, provide liquidity on Curve, stake rewards, and reinvest yields, each step strengthening multiple protocols simultaneously.
What makes a DeFi protocol valuable in a composable environment is the utility created among other DeFi money legos. Keeping the example of Curve Finance, it becomes more essential to DeFi as more protocols use it.
For each new money lego created, hundreds or thousands of new combinations become possible. This creates exponential network effects, not linear, where the ecosystem value grows much faster than the number of protocols.
Flywheels can be amplified through differentiated security features, enabling more robust integrations between established protocols and opening concrete possibilities for builders to construct self-reinforcing systems in the ecosystem.
Zircuit’s SLS infrastructure doesn’t remove the inherent risks of trading or portfolio strategies, but it does neutralize an entire class of execution-layer threats, exploits, hacks, and malicious transactions. By quarantining harmful activity in real time, SLS ensures that protocols can experiment and scale with greater confidence.
This creates room for more ambitious automated trading and portfolio rebalancing systems: builders can integrate multiple protocols or deploy advanced strategies knowing that external attack vectors are minimized. While strategy risks remain, SLS acts as a protective layer that keeps the flywheel spinning without compromise from hostile actors.
Protocols on Zircuit demonstrate potential for powerful combined flywheels. Let’s take ZeroLend to demonstrate that:
ZeroLend LRT Integration Flywheel allows users to deposit Kelp rsETH as collateral, earning base restaking rewards (3.5-4%) while borrowing. They can then deploy borrowed capital in Zuit to earn trading fee rewards and compound those rewards. Users deposit LRTs as collateral and earn enhanced yields while borrowing, then deploy borrowed capital with Zircuit's "pennies in gas fees" enabling frequent optimization not possible on Ethereum mainnet.
The most successful flywheels combine proven DeFi primitives with unique infrastructure advantages. Below are some concrete applications that leverage the mechanics we've explored, from GMX's real yield to Aave's recursive lending, while taking advantage of Zircuit's security features to create sustainable growth engines.
Security-First Perpetuals Hub: Combine GMX-style real yield distribution with automated risk management. Cross-protocol yield sharing creates compound flywheel effects where better execution attracts more traders, generating fees that attract more liquidity providers.
LRT-Collateralized Perpetuals: Users deposit LRTs, earning base yields while providing collateral. Perpetual fees shared with LRT holders attract more deposits, creating deeper liquidity and better execution that attracts more traders.
Automated Multi-Protocol Yield Optimizer: Aggressive rebalancing across protocols with performance-based fee distribution. Better performance attracts more capital, generating more fees for token holders in a self-reinforcing cycle.
Cross-Protocol Insurance Pool: Protocols pay premiums, pool earns fees. Successful payouts build reputation, attracting more protocols. Larger coverage capacity enables lower premiums, strengthening the flywheel.
Creating an effective flywheel in the ecosystem requires prioritizing real value over artificial incentives. Remember that a flywheel is a self-reinforcing system where each user action generates benefits that attract more participants, creating a virtuous cycle of organic growth. Start with real value creation, not token incentives. The most sustainable flywheels capture and redistribute real value instead of relying on token inflation. Identify your core loop, what action do users repeat, and how does this benefit other users? Design for composability from day one and create protocols as building blocks that others can easily integrate.
To maximize the success of your grant proposal, you will need to organize strategically around three fundamental pillars: technical documentation, market strategy, and awareness of the most common mistakes.
The most powerful flywheels are not accidents, they are carefully designed systems that leverage human incentives and economic principles.
With 1,100+ Build to Earn applications, 300,000+ ZRC token holders, and 100,000+ active users demonstrating real utility, Zircuit offers an established foundation for new flywheels. The current combination of available funding, existing protocols, security infrastructure, and development resources presents a compelling environment for implementing proven flywheel mechanics.
To get started: prepare your GitHub repository following the provided template, join the Discord community, and submit your application via build.zircuit.com
Build where security meets composability. Build where proven flywheels meet advanced infrastructure.
See you next time,
The Zircuit Team 💚
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