DeFi’s Lack of Safety Nets Exposed: Platform Supposed to Protect Traders Gets Hacked

https://thedefiant.substack.com/p/defis-lack-of-safety-nets-exposed

Hello Defiers! Here’s what’s going on in decentralized finance:

  • Decentralized options platform Opyn got hacked

  • Set Protocol wants to make yield farming cheaper

  • dYdX releases ETH-USD perpetual futures contract

and more 🙂

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Opyn Got Exploited and Lost More Than $350K

By Sebastian Aldasoro

Opyn, the first decentralized options market on Ethereum which allows investors to protect against market volatility and smart contract vulnerabilities, suffered an attack on Tuesday. The attacker exploited a system vulnerability and ran with $371K.

Opyn’s team was able to successfully recover more than $550K via a white hat attack and has temporarily eliminated the ability to buy ETH puts from its website, and removed liquidity from its  ETH put pools on Uniswap.

The attack raises the question: if the platform made to protect DeFi traders gets its funds stolen, can DeFi investors ever be sure their funds are safe? 

How did the attack happen?

Opyn’s tokens allow investors to add collateral to mint options contracts in the form of ERC20 tokens that can be sold in the open market. Options give traders the ability to buy (call) or sell (put) an asset at a pre-determined price on a future date.

In this case, the attacker was able to double exercise ETH put oTokens and steal $371K of the collateral that had been allocated by sellers of these puts. Since Opyn’s protocol is fully trustless, the team cannot shut off access to their system and had to take a different approach to mitigate the attack.

White Hats

Opyn performed a white-hat attack with support from Samczsun to drain the remaining collateral from outstanding vaults, which allowed them to liquidate the put contracts and safeguard the remaining funds. The team also removed liquidity from their ETH put pools on Uniswap to prevent users from buying them and temporarily canceled this offering on their website. 

Opyn offered ETH put holders to buy their positions at 20% above market price on Deribit exchange and said that, in the coming days, they would provide more details on full reimbursement for ETH Put sellers.

Alternative

Another alternative for DeFi investors to protect their funds is Nexus Mutual, which works as insurance against smart contract failure. There’s currently $17.8M of cover purchased on the platform, of which only $80K was for protection against Opyn failure. 

Opyn exploit raises a couple of questions. First, why didn’t Opyn’s audits cover all of its smart contracts? Even though Zeppelin was an auditor, Opyn clarified that the exploited vulnerability had been found outside of their scope.  Second, should DeFi protocols be fully trustless from the ground up, or should different levels of decentralization progressively be achieved as projects mature?


dYdX Launches ETH-USD Perpetual Futures

By Cooper Turley

dYdX delivered ETH-USD, its second perpetual contract, yesterday with a 50% discount on trading fees for the first week.

Offering 10x leverage on ETH with no expiry, the latest non-custodial future attracted $50k in volume in the first few hours after launch.

ETH Settled

As an inverse perpetual contract, ETH-USD is quoted and margined in USD but settled in ETH, unlike dYdX’s margin products in which stablecoins like USDC and DAI are used to open and settle shorts. This means traders can enter, settle, and exit the new perp only using ETH.

The new contracts feature -0.025% Maker and 0.075% Taker fees along with $200 minimum orders sizes and a 10% initial margin requirement. 

With funding rates —or the costs counterparties pay one another to establish a market value— adjusting in real-time, dYdX’s novel non-custodial contracts have seen strong demand from DeFi traders with its first BTC-USD perp averaging just over $1M in 24 volume.

Now, ETH bulls outside of dYdX’s US geoblock are likely to race to the newest contract to try and take advantage of the DeFi bull market.


Set Protocol Wants to Make Yield Farming Cheaper

By Cooper Turley

Set Protocol plans to introduce yield farming as part of the automated trading strategies offered in its TokenSets platform. 

Set will deploy yield farming strategies designed by Set Labs team and by the community. Yield farming has taken DeFi by storm with traders pouring over hundreds of millions of dollars worth of digital assets into these platforms in exchange for token rewards. But these strategies can take many steps to execute and skyrocketing Ethereum gas costs make it prohibitively expensive for those investing smaller amounts. 

While TokenSets had previously supported Compound’s interest-earning cTokens in V1, users can now benefit from yield farming by earning and distributing governance tokens like COMP, BAL, CRV and more from various strategies which use underlying DeFi protocols.

Lower Cost, Fewer Steps

Users will only need to pay for Ethereum gas fees when entering or exiting a strategy, which is bound to reduce skyrocketing gas costs. The platform also aims to reduce the complexity of these trades, which often require interacting with multiple protocols. 

Set Protocol has grown to $24M in assets locked in its smart contracts from $500k in just over a year, according to a blog post published Tuesday by the team. 

More V2 Upgrades

The move is part of a wider upgrade. Set Protocol’s V2 will also include support for a larger array of ERC20 tokens. Only ETH, WBTC, LINK and a couple stablecoins were supported in V1. Set is also pledging to “significantly” reduce gas costs. To provide some context, V1 averaged anywhere from $15-50 to buy and sell a Set in the current gas climate.

V2 also aims to increase flexibility for Set managers to create portfolios, and includes more sophisticated investment features like margin trading, limit orders and DEX trading. Set Protocol will also be integrating popular primitives and assets offered by Aave, Balancer, Curve, and Synthetix on top of their underlying liquidity mining opportunities.

In the midst of the yield farming craziness, demand for Set’s “Set it and forget it” asset management platform has slightly slumped. These upgrades may help give the platform a boost. 


DeFi Drives Ethereum Transaction Volume to Record High

Transaction volume on the Ethereum network climbed to an all-time high $12B in July, with DeFi accounting for around 95% of the total value created on the chain, according to a DappRadar report. Compound, Aave, and Curve in July generated 48%, 14%, and 14% of transaction volumes, respectively.

Image source: DappRadar

But increasing activity has helped push gas prices higher, which is in turn, driving some users away. Daily active wallets fell to 15,200 in July, a 6% decline from the previous month. The biggest drop was in the DEX category, followed by games and market places, which took a 19% and 8% hit, respectively.

DeFi’s active wallets increased by 36%, mainly due to Synthetix, 1inch, and Aave, while MarkerDao is recovering their leadership position, according to the report.


DEX Volumes Made Up Almost 4% of Centralized Exchange Volumes in July: The Block

Decentralized exchanges experienced a record-breaking July for volume, surpassing $4 billion to hit a new all-time high. But July also saw the DEX space hit another benchmark: an increase in the ratio of DEX-to-centralized exchange volume. The Block Research found that this ratio reached nearly 3.95%, a jump from June’s 2.1%. Prior to June, the ratio had never surpassed 1%.

Image source: The Block


The Defiant is a daily newsletter focusing on decentralized finance, a new financial system that’s being built on top of open blockchains. The space is evolving at breakneck speed and revolutionizing tech and money. Sign up to learn more and keep up on the latest, most interesting developments. Subscribers get full access at $10/month or $100/year, while free signups get only part of the content.

About the founder: I’m Camila Russo, author of The Infinite Machine, the first book on the history of Ethereum. I was previously at Bloomberg News in New York, Madrid and Buenos Aires covering markets. I’ve extensively covered crypto and finance, and now I’m diving into DeFi, the intersection of the two.

Breaking $300: Now +70% of ETH Holders Are in The Green

https://thedefiant.substack.com/p/breaking-300-now-70-of-eth-holders

Hello Defiers! Here’s what’s happening in decentralized finance,

  • Most ETH holders are making money after rally

  • Balancer Labs blaclisted YFII tokens from user interface

  • Coinbase launches Dai rewards

and more: )

📺 The Defiant’s YouTube Channel Launched! Subscribe!

🎙Listen to the interview in this week’s podcast episode here:

The open economy is taking over the old one. Subscribe to keep up with this revolution. Click here to pay with DAI (for 70 Dai/yr vs $100/yr).

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On-Chain Markets Update by IntoTheBlock

There Are Now More ETH Addresses Making Money Than Total Addresses Holding BTC

A lot has happened in the Ethereum blockchain since the last time ETH was above $300. Boosted by demand for DeFi protocols and their tokens, Ethereum’s network use has increased, causing gas prices to rise. While for a few weeks people were starting to doubt if the growth in DeFi tokens will accrue to ETH, this debate may be settled following ETH’s recent 30% appreciation. 

Through all the developments that have happened in the last twelve months — from a pandemic to a Cambrian explosion in yield farming initiatives — the Ethereum blockchain has managed to accelerate its growth and usage. Leveraging IntoTheBlock indicators we can dive deeper into key metrics assessing the current state of the Ethereum blockchain versus a year ago. Spoiler alert: Ethereum’s network is in a much stronger position.

1. Number of ETH Addresses Profiting Double than a Year Ago

ETH holders took advantage of the opportunity to buy under $300. 

IntoTheBlock’s Historical In/Out of the Money (HIOM) indicator analyzes investors’ on-chain positions based on addresses’ average cost for a token, in this case ETH. Based on this, the HIOM calculates the percentage and the total number of addresses that are “in the money”, or profiting on their positions on paper. By comparing variations in the HIOM over time, we can determine buying/selling activity based on the number of addresses profiting at a specific price level. 

The last time ETH prices were above $300, 13.5 million addresses (less than 50% of all holders) were in the money. Comparing these numbers to the ones observed as ETH surpassed the $300 barrier a few days ago,we see that the number of ETH holders profiting at a price of $310 has more than doubled. 

This massive increase signals that millions of new addresses bought ETH below $300. Additionally, since the growth in addresses profiting is greater than the increase in the total number of ETH addresses with a balance, we can establish that approximately 1 million previous ETH holders opted to bring their average cost down.

At the time of writing, 73.24% Ether addresses are making money in their position (on paper at least) at a price of $321. This means that the number of Ether addresses profiting (31.86 million) has now surpassed the total number of Bitcoin addresses with a balance (30.83 million). In other words, more addresses are making money in Ethereum than the total number of addresses holding Bitcoin.

2. ETH Transactions Reach Highest Level Since January 2018

Following the increased growth in dapps built on top of Ethereum, the number of daily transactions on the Ethereum blockchain is now within reach of its all-time high of 1.34 million. 

As can be seen in the graph above, the number of transactions has been on a consistent uptrend throughout 2020, despite slowing down in the second half of 2019. While the price of ETH is still lower than the high reached in the summer of 2019, the peak in the number of daily transactions is approximately 25% higher now than what we saw last year. 

This growth in transactions highlights the increased demand to use the Ethereum blockchain, pointing to ETH’s utility value as infrastructure for a decentralized economy being significantly stronger than a year ago. 

3. Number of ETH ‘Hodlers’ Up 80%

While the number of transactions occurring in the Ethereum blockchain has outpaced the demand to use Bitcoin’s blockchain, most would argue that Bitcoin is priced at a premium vs Ether because many see it as a store of value.

Despite being difficult to determine the specific metrics to classify whether an asset is a store of value or not, a key characteristic of stores of value is that people believe they will retain their worth. In Bitcoin, the trend to ‘hodl’ propagates store of value properties as long-term investing removes short-term downward price pressures from trading instead. 

At IntoTheBlock, we classify an address with a holding time of over one year as a hodler. As can be seen in the graph below the number of ETH hodlers has increased by over 10 million within the last twelve months. 

Overall, these on-chain metrics suggest that Ethereum is currently undervalued, at least in relation to its valuation a year ago. As new addresses have taken the opportunity to buy ETH below $300, existing holders have opted to hodl and in many cases lower their average costs. Finally, Ethereum’s outstanding transactions growth evidence the high demand to use ETH and the thriving DeFi ecosystem built on top of it. 


Blacklisted YFI Copycat Spurs DeFi Soul Searching

By Cooper Turley

Censorship is the talk of DeFi this morning as automated asset management protocol Balancer blacklisted the fork of yEarn’s governance token, YFII.

YFII has been the recipient of vast community contention, with critics citing unaudited smart contracts, centralized control and safety risks as reasons why yield farmers should avoid the project.

But YFII continues to move forward, recently burning their owner key to mitigate the risk of infinite inflation. While the project appeared to be making strides towards safety, key DeFi players Balancer and MetaMask saw otherwise.

This morning, Balancer blacklisted $20M worth of YFII pools on their UI in an attempt to protect its users. The move spurred some backlash as community members said Balancer should have used its BAL-based governance system to make the decision, while others took the opposite side saying Balancer has the right to decide what projects are listed in its interface. 

YFII responded by forking Balancer, only to be met with a blatant scam warning by MetaMask.

YFII’s forked Balancer pool is still live, and Balancer has since relisted the original pool on their front end to allow LPs to remove liquidity. 

If nothing else, this case of “is it a scam is it not” won’t be the last one in DeFi, and raises questions about the perceived permissionless nature of key protocols and whether everything should be decentralized.


Coinbase Users Will Now Earn 2% on Dai Deposits

Coinbase is introducing Dai Rewards, with 2% APY for customers in the US, UK, Netherlands, Spain, France, and Australia. Eligible customers with at least $1 of Dai in their accounts will begin earning interest automatically. Initial rewards will be distributed within five business days, then every day and customers can use or withdraw their rewards as soon as they receive them.

“With yields on savings accounts and government bonds at record lows, earning rewards on stablecoins like Dai and USDC stands out as an alternative way to passively generate income using crypto held on Coinbase,” Coinbase wrote in a press release.”

Coinbase has been leading the charge in DeFi among centralized exchanges. Last year, it began offering stablecoin rewards for USDC deposits to US customers, and launched Coinbase Earn, where customers could earn Dai by watching educational videos about crypto and taking quizzes. 

Bitcoin Wallet Ledger’s Database Hacked for 1 Million Emails: Decrypt

Bitcoin hardware wallet maker Ledger revealed today that its e-commerce database was hacked last month, leaking 1 million emails and some personal documents, Decrypto reported. Ledger said the attack targeted only its marketing and e-commerce database. All financial information—such as payment information, passwords, and funds—was unaffected. The breach was unrelated to Ledger’s hardware wallets or its Ledger Live security product, the company added.


The Defiant is a daily newsletter focusing on decentralized finance, a new financial system that’s being built on top of open blockchains. The space is evolving at breakneck speed and revolutionizing tech and money. Sign up to learn more and keep up on the latest, most interesting developments. Subscribers get full access at $10/month or $100/year, while free signups get only part of the content.

Subscribe now

Click here to pay with DAI. There’s a limited amount of OG Memberships at 70 Dai per annual subscription ($100/yr normal price).

About the founder: I’m Camila Russo, author of The Infinite Machine, the first book on the history of Ethereum. I was previously at Bloomberg News in New York, Madrid and Buenos Aires covering markets. I’ve extensively covered crypto and finance, and now I’m diving into DeFi, the intersection of the two.

Recap: DeFi Week of July 6 🦄

https://thedefiant.substack.com/p/recap-defi-week-of-july-6-

Hello Defiers, hope you’re having a great weekend 🙂

Summing up last week: Yield farming is producing unintended consequences as demand for Dai as a way to access governance tokens, is causing it to trade above $1, while Compound Finance users are borrowing from their own supply. But that’s not stopping DeFi platforms any time soon and mStable and bZx announced their token distributions, while users flooded Kyber network to get their hands on KNC. Binance listed SNX was more evidence of demand for DeFi tokens, and CENTRE blacklisting an Ethereum address holding $100k of USDC proved decentralization purists right. Anonymous DeFi builder Molly Wintermute said she’s pushing ahead with Hegic after releasing a first version of the platform with a bug in the code. OMG Network’s Vansa Chatikavanij talked Ethereum scaling and why value transfer is a basic human need.

That was just one week. Subscribe to get the latest DeFi news and analysis straight to your inbox and you don’t miss a thing. Free-signups get partial content, paid subscribers (only $10/month, $100/year) get everything. Click here to pay with DAI ($70/year).

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🌈🌈: Also: We’re Only 3 Days Away From The Infinite Machine launch!

Pre-Order my book on the history of Ethereum and I’ll send you a personalized Proof of Pre-Order NFT. Click here for how to get a POP.

Join the virtual event hosted by The Strand bookstore, where I’ll be discussing the book with Chris Burniske this Wed. July 15 at 7pm EST.


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Interview

“Basic Financial Services is a 21st-Century Fundamental Human Need:” OMG Network’s Vansa Chatikavanij

This week’s interview is with Vansa Chatikavanij , the CEO of OMG Network. The Bangkok-based project formerly known as OmiseGo has spearheaded research and work on a scaling technology for Ethereum called Plasma. Scaling solutions will be key for Ethereum and therefore DeFi,  to continue growing. The network is already at capacity, and gas prices are getting prohibitively high, especially for complex DeFi transactions. 

🎙Listen to the interview in this week’s podcast episode here:


Molly Wintermute: “I’m Paying a High Price for the Mainnet-First Approach to Building”

Molly Wintermute is an anonymous DeFi builder who released a decentralized options trading platform on April 23, only to discover a bug in the code hours later. Nearly $48k of users’ funds are now forever locked in the project’s smart contracts, which Wintermute has refunded thanks to support from early contributors. Wintermute launched a new version of Hegic in early May, and did so without an audit. The audit did come though, a month later, and the platform has so far been running unscathed, though value locked at almost $40k is still below pre-hack days (or pre-hack hours, rather).

Thursday

Dives

  • Blocked USDC Proves Decentralization Purists Right: This is exactly what decentralization advocates warn about: CENTRE, the issuer of USDC, has blacklisted an Ethereum address holding $100k of the tokens.

  • DeFi Traders Flood Kyber Network After Revamp: Almost $20M worth of $KNC has flooded into Kyber Network after the decentralized exchange’s revamp, signaling demand for DeFi tokens is still surging.

Bytes

Tuesday

Dives

  • Unintended Consequences of Yield Farming: What started out as a way to drive users to DeFi platforms, has quickly turned into a race that’s focused on snapping up tokens. This is causing parts of DeFi to crack.

Bytes

  • Aave Brings Undercollateralized Loans to DeFi: Aave, the third-largest lending protocol behind Compound and Maker, will allow liquidity providers to delegate their borrowing power to other users.

  • bZx to Distribute its BZRX Token Next Week: DeFi lending protocol bZx is set to distribute its BZRX token on July 13th at 10am EST as a part of a wider re-launch. 

  • For-Profit DAO Makes Second Investment: VentureDAO, a product of the MetaCartel group, announced its second investment is into Zapper, an interface that makes DeFi easy and simple to use.

  • Arweave’s Announces $100,000 Incubator: Data storage blockchain protocol Arweave las week announced its Open Web Incubator is live.


💜Community Love💜

Thanking all the amazing Defiers for the support and love this week (and always)!

Eric Juta @ericjuta

@0mllwntrmt3 I want those $CHADHEGIC tokens

This @HegicOptions interview’s dope

Also read medium.com/@molly.winterm…

The Defiant @DefiantNews

Molly Wintermute found a bug in @HegicOptions hours after launch but she has been pushing forward since.

Here’s her views on audits
$HEGIC plans
Vol so far
& DeFi

“We will build our own way, without any one’s permission.”
@0mllwntrmt3

https://t.co/KAs6tOozfM


The Defiant is a daily newsletter focusing on decentralized finance, a new financial system that’s being built on top of open blockchains. The space is evolving at breakneck speed and revolutionizing tech and money. Sign up to learn more and keep up on the latest, most interesting developments. Subscribers get full access at $10/month or $100/year, while free signups get only part of the content.

Subscribe now

Click here to pay with DAI. There’s a limited amount of OG Memberships at 70 Dai per annual subscription ($100/yr normal price).

About the founder: I’m Camila Russo, a financial journalist writing a book on Ethereum with Harper Collins. (Pre-order The Infinite Machine here). I was previously at Bloomberg News in New York, Madrid and Buenos Aires covering markets. I’ve extensively covered crypto and finance, and now I’m diving into DeFi, the intersection of the two.

Blocked USDC in Ethereum Address Proves Decentralization Purists Right

https://thedefiant.substack.com/p/blocked-usdc-in-ethereum-address

Hello Defiers! Here’s what’s going on in decentralized finance:

  • Centre blacklists Ethereum address holding $100k of USDC

  • DeFi traders flood into Kyber after upgrade

  • MTA tokens launch next week

  • Binance lists SNX

and more.

If you’re receiving this email, that means you’re a paid subscriber of The Defiant, (thank you!) You’re getting the full content of this new…


Read more

Bitcoin is Buckling Under Ethereum’s Gravitational Pull and It’s Only The First Victim

https://thedefiant.substack.com/p/bitcoin-is-buckling-under-ethereums

Hello Defiers! One of the key trends this year has been the rise of Bitcoin on Ethereum, or linking BTC with ERC20 tokens for holders to access decentralized finance. While BTC is arguably the first non-native Ethereum asset to be ported over in a meaningful way, it could be the first of many financial assets sucked into the network as decentralized applications continue delivering an experience that’s many times better than legacy finance. This issue dives into this trend.

  • Drivers behind the Bitcoin on Ethereum going parabolic, and the winners of the BTC-to ETH race, by Lucas Campbell

  • Key on-chain analytics for BTC on Ethereum, by IntoTheBlock

🎙Listen to this week’s podcast episode with Ampleforth Co-founder:

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Please consider supporting quality DeFi journalism as we continue building the media company the new financial system deserves. Funds raised in this round will be used to continue supporting the amazing contributors writing for The Defiant, and to build a highly-requested data dashboard to track DeFi usage. Magical matching means that even 1 Dai makes a big difference.

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Bitcoin is Buckling Under Ethereum’s Gravitational Pull

By Lucas Campbell

There’s now over $100M in BTC circulating the Ethereum economy. While it’s only a sliver of BTC’s total market cap, it’s undeniable that the trend is growing. At the end of the day, Ethereum acts as a gravity well for global financial assets. And Bitcoin is the first victim

The reason? Decentralized finance. With Compound, Maker, and others now offering permissionless financial services using Bitcoin as collateral, people are electing to migrate their native Bitcoin over to Ethereum to capitalize on any of the range of “money verbs” available on the network. I mean who wants to sit around and hold BTC these days anyways? Boring. 

They do this by depositing BTC and getting Ethereum’s ERC20 tokens in exchange at 1-to-1 so the coins are effectively pegged to Bitcoin. These Ethereum-ized BTC come in many flavors, from the more centralized with WBTC, to the more permissionless with renBTC.  

The largest gravity well in recent weeks for Bitcoin has been Compound. After launching COMP yield farming in mid-June, the lending protocol has increased its BTC locked from ~$90M to over $570M, a 533% rise in less than two weeks. 

MakerDAO Started It

Maker was the initial driver behind the spike of BTC on Ethereum, after it added WBTC as collateral in May. However, WBTC reached its debt ceiling of 10M circulating DAI, resulting in the amount of new BTC locked in Maker to flatline.

But this shouldn’t last for long, as MKR holders will likely vote to double the debt ceiling in the coming days and more Bitcoin will be inhaled by Ethereum and its decentralized reserve bank. 

Another driver behind the recent surge of BTC on Ethereum is Balancer, the liquidity and asset management protocol that launched yield farming earlier this month. Balancer has soaked up 1,660 BTC into its protocol or roughly $15M in value, since June 1st. 

Astronomical Rewards

The final player behind Ethereum’s gravitation of BTC has been Curve, the AMM protocol known for its highly efficient stablecoin trading. The rising AMM recently launched a BTC Pool which comprises three major flavors of BTC including WBTC, RenBTC and sBTC, Synthetix’s version of BTC collateralized by SNX. 

What’s interesting about the Curve BTC pool is the underlying yield farming incentives. In case you missed it, Ren Protocol and Synthetix teamed up to provide one of the most complex multi-asset yield farming plays that the DeFi ecosystem has seen to date. Users who supply BTC liquidity to Curve will not only receive trading fees but also SNX, REN, BAL, and CRV incentives. As a result, the BTC pool has been quick to accumulate just shy of $16M in BTC in a few short weeks of launching. 

The common theme here is yield farming. The incentive to earn native protocol tokens is just too  tempting. People simply can’t resist using their otherwise idle BTC to earn the astronomical rewards that typically range between 30% – 100% APY. 

The Battle for BTC on Ethereum 

WBTC currently dominates the market in terms of tokenized Bitcoin as it’s responsible for ~78% of all BTC on Ethereum. But the introduction of Ren Protocol’s RenVM brought a new fighter into the arena – renBTC. 

After launching in early June, Ren protocol’s trustless cross-chain custodian (the RenVM) has facilitated nearly $10M of new BTC onto Ethereum in the past month alone. As a result, renBTC currently comprises almost 10% of all BTC circulating on Ethereum (and rising). As mentioned, one of the reasons behind this growth was the launch of Curve’s BTC multi-asset yield farming incentives along with the launch of wbtc.cafe – a permissionless portal for wrapping BTC on Ethereum via a normal Bitcoin transaction, powered by Ren. 

That along with Keep Network’s tBTC struggling to hit mainnet, renBTC has overtaken the narrative for trustless BTC on Ethereum. The only thing missing for renBTC is a wide range of integrations across DeFi protocols, something that is largely dominated by WBTC. However, as Ren continues to flex its trustless muscles, more DeFi protocols will likely support renBTC in the future. 

WBTC & RenBTC Crowd Others Out

Outside of WBTC and RenBTC, the other flavors are dwindling in market share. The next two closest competitors are hBTC and imBTC which aggregate for 6.38% and 5.44% of all BTC on Ethereum, respectively.

While imBTC started off as a relatively popular alternative to WBTC, it has lost a significant portion of its market share since the beginning of the year – a decrease from 40.8% down to 5.44%. In addition, hBTC has stagnated as Huobi’s version of wrapped Bitcoin sits idle at 710 BTC in circulation since its launch in late February. 

It’s becoming increasingly apparent that Bitcoin as an asset can’t fight Ethereum’s gravitational pull. The potential for BTC in DeFi protocols is simply too strong. Now, with yield farming offering insanely high passive income opportunities —though sometimes at high risk— BTC doesn’t stand a chance. 

BTC on Ethereum is a thing and the trend is there. That’s undeniable. The question now becomes: How much Bitcoin will end up on Ethereum from the current 0.05%? 1%? 5%? More? 

Could BTC on Ethereum flippen the amount of BTC on Bitcoin? It seems insane to even consider. 

But only time will tell. 

If you’re interested in tracking the day to day of BTC on Ethereum, check out these two awesome resources: 

https://btconethereum.com/

http://www.predictions.exchange/ethbtc/


On-Chain Markets Update by IntoTheBlock

This Week: Key Analytics Behind the Rise of WBTC

“Show me the incentives and I will show you the outcome” – Charlie Munger

While the renown American investor and vice chairman of Berkshire Hathaway was not referring to cryptoassets with this remark, it certainly applies to the industry, especially with recent developments in the DeFi space. As yield farming and staking have boosted rewards for DeFi token-holders, they have also supercharged the demand and prices of protocols’ native tokens. Aside from COMP’s meteoric rise, the so-called ‘Bitcoin on Ethereum’ tokens have also strengthened remarkably as a result of added incentives and functionality.

While there are several tokenized versions of Bitcoin on the Ethereum blockchain, Wrapped Bitcoin (WBTC) — a centralized alternative held by the custodian Bitgo — remains the largest. WBTC uses a proof of reserve mechanism which keeps the peg with BTC at 1:1 through the burning and minting of tokens. renBTC — a trustless ERC-20 pegged to the value of Bitcoin — has managed to capture 10% of the market within less than two months from its inception. 

Added incentives is arguably the main factor that has enabled the growth of Bitcoin on Ethereum. With the approval of WBTC as collateral for DAI on MakerDAO’s oasis platform in May, Bitcoin holders gained the ability to leverage their holdings through DAI loans on the Ethereum blockchain. This was the first major step for Wrapped Bitcoin as shortly after crypto lending platform Nexo minted $4 million in DAI using WBTC as collateral. More recently, on June 18 WBTC was introduced to the crypto-agrarian age through a partnership between Ren, Synthetix and Curve Finance.

Using IntoTheBlock indicators we are able to analyze patterns highlighting the impressive growth WBTC has seen throughout the year. Leveraging blockchain’s public nature, IntoTheBlock’s machine learning algorithms extract key insights that dive deeper into what is happening under the hood in Ethereum and DeFi tokens. This week we dive into three metrics demonstrating just how much Bitcoin on Ethereum, specifically WBTC, has grown in 2020. 

  1. Daily Active Addresses Peak Following Incentives Boost

Added incentives have had a clear impact in the number of users leveraging Bitcoin on Ethereum. Throughout 2019 on-chain activity for WBTC remained relatively stagnant as there was a lack of apparent benefits for holders, averaging only 58 daily active addresses.  

In 2020, though, Wrapped Bitcoin hit a point of inflection as use cases and ways to profit from holding it increased. First, following the approval of WBTC as a collateral for DAI, daily active users surpassed 300 for the first time. Since then the number of daily active addresses remained at a higher average level moving sideways until mid-June. 

As major liquidity mining updates were launched in DeFi throughout June, Wrapped Bitcoin was poised to benefit from this frenzy. This was certainly the case, as daily active addresses jumped by 5x within 5 days following the release of the yield farming partnership between Ren, Curve and Synthetix

Overall, through the integrations with other DeFi protocols WBTC has been able to triple its average of daily active addresses to 169 so far throughout the year. 

  1. Large Transaction Volume Skyrockets with Yield Farming Release

At IntoTheBlock we monitor transactions of over $100,000 of value through our large transactions series of indicators. While data for this indicator for WBTC was close to non-existent throughout 2019 and the first quarter of 2020, it grew remarkably as a result of the integration into other DeFi protocols. 

Similar to the case with daily active addresses, large transaction volume had first reached a high of $28 million following the MakerDAO integration before being propelled by yield farming incentives. The effect of the Ren, Curve, Synthetix initiative  in large transactions was so vast that even zoomed in on the 3 month time frame the increase is quite vertical. 

As can be seen in the graph above, large transaction volume went from near zero to over $300 million in a few days. To be precise, WBTC’s large transaction volume increased by 200x in 6 days following the yield incentives provided to liquidity providers.

  1. New Types of Institutions Leverage Bitcoin on Ethereum

As readers may have guessed, it is not average users that are pumping WBTC’s large transaction volume to $300 million. Asides from the impact in volume, the average balance of a WBTC address also provides an idea of the profile of holders. 

Following the same trend, the average balance of a WBTC holder has increased as a result of the potential to profit from DeFi integrations. Starting the year at $2,350, the average balance of a WBTC address has been on an uptrend surpassing $10,000 in late May. Since the yield farming release, it tripled peaking at $30,800 on June 27 before dropping back to $22,000.

With novel features like yield farming, DeFi has ignited the creation of new types of organizations that benefit from sophisticated use of smart contract functionality. As evidenced by the spikes in large transaction volume and average balance, WBTC has attracted these new institutions and large players, boosting its network activity and market capitalization. 

Through the ‘money lego effect’ WBTC has leveraged DeFi’s composability to incentivize user adoption. With the approval of WBTC as a collateral type in MakerDAO and the yield farming partnership, the case for Bitcoin on Ethereum has solidified as demonstrated through the growth in on-chain activity. While currently only 0.05% of Bitcoin supply is held in Ethereum smart contracts, incentive-boosting mechanisms such as the ones described are likely to continue increasing this percentage as long as there are no major vulnerabilities exploited in the underlying protocols. Ultimately, both Bitcoin and Ethereum stand to benefit if this growth spurts large players and retail users to leverage these functionalities. 


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The Defiant is a daily newsletter focusing on decentralized finance, a new financial system that’s being built on top of open blockchains. The space is evolving at breakneck speed and revolutionizing tech and money. Sign up to learn more and keep up on the latest, most interesting developments. Subscribers get full access at $10/month or $100/year, while free signups get only part of the content.

Subscribe now

Click here to pay with DAI.There’s a limited amount of OG Memberships at 70 Dai per annual subscription ($100/yr normal price).

About the editor: I’m Camila Russo, a financial journalist writing a book on Ethereum with Harper Collins. (Pre-order The Infinite Machine here). I was previously at Bloomberg News in New York, Madrid and Buenos Aires covering markets. I’ve extensively covered crypto and finance, and now I’m diving into DeFi, the intersection of the two.

DeFi Produces $COMP Short Selling & Put Options Overnight

https://thedefiant.substack.com/p/defi-produces-comp-short-selling

Hello Defiers! I usually publish the weekly interview and podcast today, but will send tomorrow and instead pushing out a quick update with all that’s happened in just the last 48hrs, only for paid subscribers.

  • It’s now possible to short $COMP with a synthetic UMA token

  • Opyn launches $COMP put options

  • mStable is latest to join liquidity wars

and more 🙂

If …


Read more

Donation-Based Funding for Public Goods on Ethereum Launches Sixth Round

https://thedefiant.substack.com/p/donation-based-funding-for-public

Hello Defiers, here’s what’s going on in decentralized finance,

  • If Ethereum is a nation, its public goods are funded with voluntary donations
  • MKR holders vote on whether to add KNC and ZRX as new collateral types
  • The LAO announced its first investment will be on privacy solution Tornado.sash
  • PieDAO launches stablecoin portfolio

and more 🙂

🎙Listen to this week’s podcast episode with Aragon’s Luis Cuende:

The open economy is taking over the old one. Subscribe to keep up with this revolution. Click here to pay with DAI (for 70 Dai/yr vs $100/yr).

Subscribe now


🙌 Together with Quantstamp, a leading blockchain security firm keeping your money legos safe, Kyber Network, the on-chain liquidity protocol for the tokenized world, and Keycard, the secure, contactless hardwallet & open source API.


New Round of Gitcoin Grants Program Starts This Week

By Cooper Turley

The sixth version of Ethereum’s public goods funding initiative launched Monday. 

The Ethereum community has been rallying to support projects in the open-source economy every quarter for the past 16 months. The Gitcoin-led Grants CLR program has helped aggregate ~$639k in donations plus an additional $625k in matching.

This time $175k in matching is up for grabs, down from $250k in the previous round. The system used to calculate how much crypto is matched, called quadratic funding, favors smaller donations from a higher number of donors. This means that even 1 Dai can yield more than 100 times in matched funds.

MORE: Ethereans are Disrupting Donations in a Literally Radical Way

Gitcoin is a marketplace where developers and projects can find each other; those in need of talent set up a specific job and developers complete it in exchange for pay, or a so-called “bounty.” The goal is to end up with a jobs mesh for the open source ecosystem. But grants have started to outpace bounties after Gitcoin implemented quadratic funding.

In Round 6, the matching pool is broken down as follows:

  • $100,000 to Ethereum tech like ETH 2.0 and DeFi.
  • $50,000 to community initiatives including media and marketing projects (like The Defiant!)
  • $25,000 to support initiatives regarding Black Lives Matter with campaigns around education, policy change, and funding against systemic racism and for continued growth in African American communities.

The new round also comes with a suite of new (and the removal of old) features including:

  • Bulk checkouts to save on tx costs
  • Re-contribution flows to donate to past projects again
  • Matching boosts for identity verification to fight collusion
  • Removal of the negative voting feature

Gitcoin’s introduction of SMS verification was contentious as some community members raised concerns regarding security, anonymity and opsec. Gitcoin responded by offering extra matching weight to those who undergo KYC without making it mandatory to participate.

As our frequent readers are aware, The Defiant fielded its first Gitcoin Grant last round. These funds have helped bring on new contributors (like the author of the post you’re reading right now), and we’d like to expand this effort in Round 6.

The Defiant’s new grant request will be used to create a highly requested data dashboard to track usage across the wider DeFi ecosystem. If you’ve got an idea for a metric you’d like to see added, please leave a comment on your donation. Until then, we’ll be keeping a close eye on Gitcoin Grants and reporting on all the top projects.

Maker Polls to Add KNC and ZRX as Collateral

By Cooper Turley

MKR holders are voting on whether to add Kyber Network’s KNC and 0x Protocol’s ZRX as new collateral types. 

So far 92% of 5,150 MKR put towards the KNC vote has voted to add the token, while 100% of the 5,143 MKR has voted in favor of adding ZRX. The votes end on Thursday, June 18th at noon EST and the executive decision will be made shortly thereafter. 

ZRX and KNC are sitting at third and fourth place on the DeFiMarketCap leaderboards, respectively. Both collateral types will feature a 5 Million Dai debt ceiling with a 4% Risk Premium and 175% Liquidation Ratios.

While WBTC quickly hit its 10M Dai debt ceiling and the supply of Dai continues to reach all-time highs, there’s been meager demand to lock up the other two collateral types, BAT and USDC. BAT in the protocol is only backing over 500k of Dai  (16% of its ceiling), while USDC is backing just 1.7M Dai (9% of its ceiling).

Dai’s market cap of $117M has a long way to go relative to USDT’s $9.5B and USDC’s $771M. MakerDAO will seek to continue adding collateral types to make sure there’s enough liquidity to back the decentralized stablecoin and allow it to grow. 

The LAO’s First Investment is in Tornado.Cash

The LAO, one of the first for-profit DAOs since The DAO, announced its first investment will be on privacy solution Tornado.Cash. The LAO, which has raised $900k (3.8k ETH), in funding since its April 28 launch, didn’t disclose terms of the investment. The fund plans to raise up to 12k ETH. While The LAO is a Delaware limited liability company, its legal paperwork also lives in smart contracts powered by the OpenLaw system, and members hold tokens which allow them to vote on investment decisions.

MORE: Third Time’s the Charm? First Came ICOs, Then Came The DAO, and Today It’s The LAO

PieDAO Introduces USD++

By Cooper Turley

PieDAO, a DAO for decentralized market-weighted portfolio allocations, launched USD++, its second tokenized portfolio, or “Pie.” USDC++ is made up of four different Ethereum stablecoins weights – USDC (47.22%), TUSD (28.58%), DAI (20.42%), and sUSD (3.78%). The USD++ Pie diversifies cash positions to mitigate the risk of any one particular stablecoin failing. Additionally, USD++ can adjust its weights and supported assets to meet changing metrics and trends.

PieDAO @PieDAO_DeFi

🤑 $USD++ is live on Mainnet 🤑

Stablecoin index for medium long/term holding.

Greater the peg > Greater the weight.
Greater the market > Greater the weight.
Greater the trust minimization > Greater the weight.

👇Go mint and mine ~22.76% $BAL rewards👇
usd.piedao.org/#/liquidity

Structured as a Balancer Pool, USD++ provides contributors with a return in trading fees and in BAL liquidity mining. The USD++ Pie is estimated to be one of the more profitable BAL farming Pools with an estimated 22.76% ROI. Paired with the BTC++ Pool, PieDAO is creating a strong foundation for investors looking to hedge risk against niche currencies through vetted portfolios.

No-Loss Lottery PoolTogether Now Takes Apple Pay

PoolTogether users can now buy lottery tickets with Apple Pay and debit cards, making the no-loss lottery application more accessible for those who don’t own crypto. Tickets sold are still pooled together and lent as Dai on Compound Finance to earn interest, which the lottery winner earns after the lockup period ends.

PoolTogether @PoolTogether_

🚨 BIG NEWS 🚨

You can now use Apple Pay or debit card to join the pool! 🎉

It’s never been easier to get started: app.pooltogether.com

Ethereum App To Let Employees Prove They’ve Been Vaccinated Available on Apple And Google Stores: Forbes

Civic Technologies, a San Francisco-based startup that raised $43 million in a 2017 ICO, has formed a partnership with Circle Medical, an affiliate of UCSF Health, a San Francisco hospital, that will let employees prove to their employers the results of their most recent Covid-19 tests, and when a vaccine is developed, whether or not they’ve received it. Civic’s own token is available today on both Apple’s App Store and Google Play. With more than 100,000 people signed up on the waiting list, the app, which quietly went live Monday has already been downloaded more than 12,000 times.

Sender of $5M Ethereum Txs Fees Has Revealed Itself: The Block

A little-known South Korean peer-to-peer crypto exchange Good Cycle is behind the last week’s high-fee Ethereum transactions, the Block reported citing blockchain analytics and security firm PeckShield.

The Death (And Rebirth) of Privacy: Daniel Veenstra

We all know that our privacy os being violated, but GridPlus data engineer Daniel Veenstra makes an especially compelling case for the need to end with surveillance capitalism, and how Web3 can help. “End-to-end encryption can make it technically impossible for service providers or governments to access your private data in any way (…) The future of technology is bound to be one where people are empowered, not productized, as the nascent Web 3.0 movement picks up steam.”

On-Chain Markets Update by IntoTheBlock

This Week: The DeFi Rally

It’s been a volatile year even by crypto’s standards, mirroring the price swings seen in traditional markets. Despite the volatility, there are noticeable signs of increasing risk-appetite in certain sectors of both crypto and traditional markets. One sector within the crypto space that has benefited disproportionately from this is DeFi as evidenced by protocols’ tokens. While large cap tokens have remained below their February highs, DeFi tokens have led the way reaching new yearly highs after the drop incurred during Black Thursday. 

While total value locked in DeFi protocols has struggled to surpass the $1 billion mark, the valuations of their tokens have managed to keep increasing in recent months. Part of this growth could be attributed to recent and upcoming protocol upgrades that boost token holders’ incentives.

This proved to be the case with Compound’s release of its governance token, COMP, which incentivized users to lock tokens in the protocol in order to earn COMP tokens granting them voting rights. Within 24 hours of the COMP token launch, total value locked in the protocol increased by 45% according to DeFi Pulse and at one point reached a market cap of over $1 billion. Asides from governance rights, upcoming protocol upgrades from other notable DeFi projects such as Kyber and Aave will be compensating users through staking rewards similar to how Synthetix currently does. 

While there has been a wave of enthusiasm regarding such upgrades, another factor that may have led DeFi tokens’ appreciation is the listing (or potential listing) of many of them in Coinbase, known as the “Coinbase effect”. This has certainly also played a role in the excitement and increased speculation surrounding DeFi tokens as evidenced by their price increases. Furthermore, by analyzing key on-chain indicators from IntoTheBlock we can better grasp the behavior of users surrounding the DeFi Rally seen since the March bottom. Before diving into the blockchain metrics though, let’s compare how DeFi tokens have been performing since bottoming on March 13. 

1. DeFi Tokens are Outperforming the Market

As seen in the chart above, prices of DeFi tokens in the top 100 tokens have increased significantly more than the market in the past three months. While the price of Bitcoin, Ether and other large caps have remained sideways or moved slightly lower throughout June, DeFi tokens have appreciated an average of 31% month-to-date. 

Leveraging IntoTheBlock’s on-chain indicators we can observe how the DeFi rally has affected indicators of usage and adoption. 

2. Daily Active Addresses at Multi-Year Highs

As DeFi tokens have grown in price through the past quarter, so have their number of users. Out of the list of DeFi tokens in the top 100, all but Augur’s REP have reached multi-year highs in daily active addresses following Black Thursday. The graph below shows this trend for the Kyber Network Crystal (KNC): 

Tokens such as KNC, LEND, OMG, LRC and NMR reached numbers of daily active addresses not seen since 2018. MakerDAO’s MKR token also recently hit an all-time high for this metric following the Coinbase listing. While daily active addresses show a strong correlation with price as shown in the graph above, this growth is seen as positive development in the ecosystem of these tokens as they draw in an increasing amount of interest that leads to a next wave of innovation as highlighted in a16z’s price-innovation cycle.

Moreover, by taking a deeper dive into other on-chain indicators we can get a better idea of the extent to which these addresses are driven by short-term speculation or longer-term investment or support of these protocols. 

3. Holders of DeFi Protocols are at All-Time Highs

The number of addresses with a balance of DeFi tokens is also on the rise. The number of holders for DeFi tokens is currently at an all-time high, with Aave’s LEND being the only exception within those listed in the top 100 by market cap. Furthermore, the rate of growth in holders has accelerated in many of these tokens throughout the second quarter of 2020 as can be seen in the example below for REN: 

With optimism towards protocol upgrades and an increasing risk-appetite, DeFi protocols’ tokens have outperformed the market since the March bottom. Analyzing IntoTheBlock’s on-chain indicators we can see overall growth in adoption and usage of tokens in the decentralized finance space. While it is uncertain how long The DeFi Rally will last, the wave of enthusiasm and development in the industry is likely to persist.


The Defiant is a daily newsletter focusing on decentralized finance, a new financial system that’s being built on top of open blockchains. The space is evolving at breakneck speed and revolutionizing tech and money. Sign up to learn more and keep up on the latest, most interesting developments. Subscribers get full access at $10/month or $100/year, while free signups get only part of the content.

Subscribe now

Click here to pay with DAI.There’s a limited amount of OG Memberships at 70 Dai per annual subscription ($100/yr normal price).

About the founder: I’m Camila Russo, a financial journalist writing a book on Ethereum with Harper Collins. (Pre-order The Infinite Machine here). I was previously at Bloomberg News in New York, Madrid and Buenos Aires covering markets. I’ve extensively covered crypto and finance, and now I’m diving into DeFi, the intersection of the two.

$COMP Becomes DeFi Unicorn in Market Frenzy, Spreads Magic to Rest of DeFi

https://thedefiant.substack.com/p/comp-becomes-defi-unicorn-in-market

Hello Defiers! Exciting times in DeFi,

  • $COMP becomes largest DeFI token by market cap after 1 day of trading

  • $ALEX holders can now vote on Alex Masmej’s life decisions

  • Ren and Curve Finance partner to make BTC-WBTC swaps easier

  • ConsenSys Codefi launches staking-as-a-service platform

and more 🙂

🎙Listen to this week’s podcast episode with Aragon’s Luis Cuende:

The open economy is taking over the old one. Subscribe to keep up with this revolution. Click here to pay with DAI (for 70 Dai/yr vs $100/yr).

Subscribe now


🙌 Together with Quantstamp, a leading blockchain security firm keeping your money legos safe, Kyber Network, the on-chain liquidity protocol for the tokenized world, and Keycard, the secure, contactless hardwallet & open source API.


COMP Soars to Become DeFi’s First Unicorn

By Sebastian Aldasoro

Compound Finance’s COMP became the most valuable token in decentralized finance on its first day of trading. Not only did it become a market cap “unicorn;” it also worked its magic in applications across the space. 

Compound Finance, the second-largest DeFi lending platform after MakerDAO, began distributing 4.3M of the total 10M tokens to users of the protocol Monday, in the final step on its road to decentralized governance. Holders with at least 1% of total token supply can submit protocol upgrades, and all holders will be able to vote on these changes. The San Francisco-based company on June 1 abdicated the guardian functionality, which could have allowed it to disable governance.

Image source: Uniswap.info

$1B Markte Cap

But beyond access to governance, yesterday’s frenzy signals traders view COMP as a way to gain exposure to one of DeFi’s most successful protocols. Speculation driving demand: Token holders may eventually decide for COMP to receive a share of Compound’s earnings, and/or Coinbase may list COMP, causing it to shoot up further.

COMP’s price doubled in its first day of trading, briefly crossing $100 and now trading at $98.6, which puts its market cap at almost $1B. This makes COMP the largest DeFi token by fully diluted market cap, surpassing MakerDAO’s MKR at ~$530M. COMP’s market cap is at 7 times its total value locked, compared with an almost even ratio for Maker, which may signal the rally went too far.

Image source: Defimarketcap.com

TVL Spiked

The token launch pushed the total value locked on Compound to spike by more than 40% to $143M, the highest since March, according to DeFi Pulse. It’s the second time in one month that a token has caused liquidity on a DeFi protocol to jump. Balancer Labs’s BAL caused volume to surge to more than $1M from $129k in a few weeks.

Image source: DeFiPulse.com

Rocket Fuel

Compound’s token listing was rocket fuel for other DeFi platforms. The COMP-ETH pair pushed Uniswap V2 to surpass Uniswap V1 on liquidity for the first time. COMP-ETH’s liquidity ballooned to over $2M, or the fourth largest trading pool on Uniswap. The token also ranked fourth in terms of volume, with over $1.6M trading hands. 

Arbitrage opportunities that opened up with COMP distribution caused volume on stablecoin-focused Curve Finance to soar to over $20M, to become the DEX with the highest volume, according to DeBank.

Arbitrage

In one arbitrage trade, users are taking DAI collateral to borrow USDT and allocating that USDT to its corresponding market on Compound, which is receiving the most significant amount of COMP.

Out of the remaining 5.7M tokens, 24% go to shareholders of Compound Labs, with a16z owning 3.45% of tokens, while Polychain Capital owns 3.26%. Compound’s founders and team get 22.25% of tokens, with 4-year vesting. The rest will be reserved for new team members and future governance participation incentives.

YOLO

With COMP and BAL, we may be witnessing the start of a new Ethereum-token bull market. Unlike 2017 though, when so many teams sold coins in ICOs for platforms that never shipped, this time not only are platforms live, but tokens are meant to incentivize use and participation. It’s a healthier model, but one that inspires FOMO and YOLO trading nonetheless. 


$ALEX Holders Can Now Have Say in Alex’s Life

By DeFi_Dad

Alex Masmej, the first person to tokenize themselves on Ethereum, launched a simple tool for voting on his life choices, appropriately named: Control My Life.

The voting tool was built by beloved Ethereum hacker and founder of the Burner Wallet, Austin Griffith. Anyone holding the $ALEX token can now connect their MetaMask (or WalletConnect compatible wallet) to vote on choices that will impact Alex’s life.

Alex pioneered the personal token offering in April. He raised $20k by selling $ALEX to fund his goal of moving to San Francisco and building a crypto startup. In exchange 30 investors will get a share of any money he makes in the next three years, with the total payout capped at $100k, and will now get to have a say on Alex’s life decisions.

Alex shared his first public vote on-chain as “Choose My Daily Habit in July.” You can watch a short video tutorial below by DeFi Dad on how to vote without paying any gas and simply signing a transaction.

ConsenSys Codefi Launches Eth Staking Service

ConsenSys Codefi is launching a staking-as-a-service platform for exchanges, custodians, wallets, and other institutions to offer their customers the ability to easily stake ETH on Ethereum 2.0.

Binance, Huobi Wallet, Matrixport, Crypto.com, DARMA Capital, and Trustology are the first to participate in Codefi Staking’s Pilot Program. The companies will provide feedback for the Codefi Staking API ahead of the Ethereum 2.0 launch.

“The mission is to provide a white-label institutional grade API, with easy and efficient access to the Ethereum 2.0 network to enable enterprises to safely and profitably engage with the next phase of Ethereum’s evolution,” ConsenSys Codefi wrote in a press release.

Proof-of-Stake

Ethereum developers are building the network’s biggest upgrade so far, as they plan to transition into an entirely new chain, which uses the proof-of-stake consensus mechanism to validate transactions, instead of proof-of-work. Those who stake at least 32 ETH earn ETH as a reward for participating in securing the network.

But staking can be complex, wrote Tim Lowe, Codefi Staking product lead. “Some of the risks associated with running your own validator include theft or loss of withdrawal keys, incorrect transfer of funds to the Eth 2 deposit contract, and not to mention hardware or internet connectivity failures which result in a loss of validator rewards.” The platform aims to simply this process.

Ren and Curve Finance Simplify BTC to WBTC Swap

By Cooper Turley

Ren partnered with Curve Finance and WBTC to launch WBTC Cafe – a one-stop-shop for converting BTC to WBTC without intermediaries or going through KYC.

The platform allows users to swap BTC to WBTC, an Ethereum token pegged at 1-to-1 with BTC. It will also help DeFi applications abstract the integration of Bitcoin into their products. Applications can prompt users to deposit native Bitcoin and seamlessly connect to lending, borrowing and margin trading, all with the click of a button. RenVM has ported over $1M in BTC to Ethereum since its launch on May 27.

Onboarding

Under the hood, native BTC is wrapped as renBTC and instantly converted to WBTC using Curve Finance’s low-slippage liquidity pool. As an end-user, you never see this step and simply receive the most popular Ethereum-based wrapper of Bitcoin (WBTC) to use anywhere in the wider DeFi landscape.

This product marks a big step for the WBTC onboarding flow as there is no longer KYC or third-parties required to tap into the dozens of platforms like Maker, Compound and Aave, which support WBTC. Previously, only approved merchants could swap BTC for wBTC via BitGo, or they’d have to go through KYC on CoinList. wBTC still relies on BitGo for custody.

Placeholder Ventures cofounder Chris Burniske has some bullish pice predictions.

Stablecoins blast through $10 billion market cap, Mati Greenspan tweeted.


The Defiant is a daily newsletter focusing on decentralized finance, a new financial system that’s being built on top of open blockchains. The space is evolving at breakneck speed and revolutionizing tech and money. Sign up to learn more and keep up on the latest, most interesting developments. Subscribers get full access at $10/month or $100/year, while free signups get only part of the content.

Subscribe now

Click here to pay with DAI.There’s a limited amount of OG Memberships at 70 Dai per annual subscription ($100/yr normal price).

About the founder: I’m Camila Russo, a financial journalist writing a book on Ethereum with Harper Collins. (Pre-order The Infinite Machine here). I was previously at Bloomberg News in New York, Madrid and Buenos Aires covering markets. I’ve extensively covered crypto and finance, and now I’m diving into DeFi, the intersection of the two.

Ethereum Addresses Cross 100M. That’s ~10x More Than Internet Users in 1995

https://thedefiant.substack.com/p/ethereum-addresses-cross-100m-thats

Hello Defiers! Here’s what’s going on in DeFi:

  • Ethereum addresses cross 100M
  • Whale causing Dai rollercoaster in lending protocols
  • Opium launches options market for unlisted governance tokens
  • Loopring’s payments solution

and more..

🎙Listen to this week’s podcast episode here:

The open economy is taking over the old one. Subscribe to keep up with this revolution. Click here to pay with DAI (for 70 Dai/yr vs $100/yr).

Subscribe now


🙌 Together with Status, a secure messaging app, crypto wallet, and Web3 browser, & Quantstamp, a leading blockchain security firm keeping your money legos safe.


Ethereum Addresses Crossed 100 Million

Total Ethereum addresses just crossed 100 million. Even when slicing that number up to account for actual activity, all metrics point to accelerating growth and adoption that’s beating even early internet use.

This is relevant for DeFi, because what’s the use of rebuilding the financial system if no-one is there to use it? Since most of DeFi is built on Ethereum, the number of people using the Ethereum network is a key metric to gauge how big open finance can actually get.

There are different ways to measure Ethereum use —total addresses, transactions per day, new addresses per day, etc. The most recent milestone was in in total cumulative unique Ethereum addresses crossing 100 million.

Image source: Etherscan

But it needs to be taken with a grain of salt, as one person can have multiple addresses, some of them long forgotten, and in other cases, they could have been created automatically by trading bots.

Total Ethereum addresses with non-zero balance is a good metric to add context, as it signals actual use, and this number is approaching 40 million. The daily growth of this metric is accelerating, with new Ethereum addresses holding ETH just crossing 100k, according to Glassnode, the highest since March 2018 using a 30-day average.

Image source: Glassnode

Daily active addresses are also climbing. They spiked near 400k last week, while the 14-day average is at more than 340k, the highest since August 2018. Glassnode counts this metric as addresses which either sent or received funds, successfully.

Still, this shows the number of addresses merely holding ETH (40 million) is more than 100 times larger than addresses actually doing something with that ETH.

With a rising number of active addresses, it makes sense that there’s also a rising number of daily transactions. The Ethereum network is just shy of reaching 1 million transactions per day, the highest in almost a year, according to CoinMetrics. For reference, Bitcoin handles about 300k daily transactions.

Image source: CoinMetrics

Smoothing out sharp spikes with the 7-day moving average, the only two times transactions have climbed to these levels were in June 2019 and at the peak of the latest crypto bubble, when they touched a high of 1.2 million in January 2018.

Summarizing, here’s a glimpse of DeFi’s addressable market on the Ethereum network:

  • 100 million total Ethereum addresses
  • 40 million total addresses holding ETH (growing at 100k/day)
  • 400k daily active Ethereum addresses

So what chunk of that is DeFi currently taking? Richard Chen of 1confirmation added cumulative users for major DeFi platforms using Dune Analytics data, and he arrived at almost 200k total DeFi users over time.

Image source: Richard Chen & Dune Analytics

The numbers show there’s still ample room for decentralized finance to grow just within its natural playground of Ethereum users. In other words, Ethereum adoption isn’t limiting DeFi adoption yet as it’s only attracted a sliver of that market.

Ethereum adoption itself has a lot of room to grow. Its 40 million addresses holding ETH compare with more than 60 million Bank of America accounts. And that’s just one US bank, while Ethereum wants to become a global settlement platform.

But the network is off to a great start. Ethereum users have already surpassed total early internet users, with 100 million addresses six years since its launch in 2015. There were 16 million total internet users in 1995, six years after the World Wide Web was founded in 1989, according to Internet World Stats. Even taking the more conservative metric of 40 million addresses holding ETH, Ethereum is beating early internet adoption.

It’s only been six years and we have a budding, emerging, innovative financial system. Imagine what the next six years will look like.


Whale Causes Dai in Aave to Temporarily 2x Overnight

By Cooper Turley

There’s a whale lurking in DeFi waters and its latest move caused Dai locked in decentralized lending protocol Aave to more than double overnight — and then lose it all, highlighting the ecosystem reliance on large traders.

Image source: DeFi Pulse

The anonymous investor pushed Dai locked in the the lending protocol to 4M on Monday, up from 2M a day earlier, and then back to 2M this morning. Aave sits at 4 on the DeFi Pulse leaderboard. The protocol holds ~$79M in total deposits, which are mostly made up of ETH. 

Making Waves at Compound

The Dai spike was driven by the same account responsible for adding 10M in DAI to Compound last week, which it has also withdrawn. Many presumed the trader is “COMP farming” – or adding liquidity to be eligible for Compound’s governance token distribution in early July.

Aave Rates

As for the Aave deposit, the platform’s CEO Stani Kulechov told The Defiant higher rates are driving savers.  “Aave has become battletested and the rates have been competitive enough to drive more depositors as we have seen with the recent spike on Dai deposits,” he said.

Aave’s current aDAI rate of 1.35% APY (backed by a 2.91% 30 Day-average) has consistently outperformed Compound’s cDAI rate of 0.39%.

Maker Vault

Building on the notion of composability, the liquidity for these DAI deposits stems from Maker Vault #9431 – the second-largest Vault on the market, according to data firm Nansen, with 130,000ETH locked (~$31.5M) at the time of writing.

Unlike other Vault owners using newly minted Dai as leverage to purchase more ETH, this trader temporarily leveraged ETH to gain interest on their Dai and to access Compound’s COMP governance token. The former is a safer bet than buying more volatile tokens, while the latter is arguably the riskier long-term bet on governance tokens, as COMP currently holds no economic value.

The recent surge shows that despite a 0% Dai Savings Rate, the DeFi stablecoin market is booming, and the addition of new collateral will likely continue driving supply of the sector-preferred stablecoin to new highs in coming months.

DeFi Traders Can Now Access Tokens Before They list

By Cooper Turley

Opium.exchange launched options markets for users to assign a value to governance tokens like Balancer’s BAL and Compound’s COMP before they start trading in secondary markets. The contracts are European style, which means that can’t be redeemed prior to maturity.

Opium.Team @Opium_Network

We are very excited to announce PRE-MARKET for $BAL tokens of @BalancerLabs
First time in #DeFi
Opium.Exchange introduces ZEPO:
a fabulous instrument that used historically as a smart way to create a secondary market or avoid investment obstacles
Introducing first ZEPO: pre-market for $BAL token is live!Pre-trade on any market with ZEPO via Opium Exchangemedium.com

By using ZEPOs, Opium can offer tokens which mimic the price of an underlying asset as a call option with a strike price of zero. In the case of BAL, one ZEPO equals 10 BAL, meaning each trade entitles the buyer to 10 BAL worth of stablecoins (likely DAI or USDC) upon settlement on July 1st. ZEPO is cash-settled, which means delivery is made in stablecoins, rather than in BAL. While the market is still illiquid, it will be a useful tool to gauge how traders are pricing Balancer’s tokens and others in the future.

Loopring Launches Fast and Instant Payments

There’s a new, free and fast payments system on Ethereum. Loopring Protocol on Friday added zkRollups-based payments functionality to the Loopring.io frontend, so users can send payments to each other instantly and for free — no fees or gas.

Solutions like these are especially useful at time when gas prices on Ethereum as climbing due to increased use. Other wallets and apps will able to use Loopring protocol or APIs to enable Ethereum-based payments.

zkRollup is a Layer 2 solution which enables fast processing times by taking transactions off the main Ethereum chain, while allowing users to retain custody of their funds.

Loopring recently launched a decentralized exchange based on the same scaling technology, which the team says increased throughput by 1000x while lowering costs. The DEX has settled over 1 million trades in its first 3 months.

Brave’s browser has been autocompleting websites with referral codes: The Block

Privacy-focused browser Brave was found to autocomplete several websites and keywords in its address bar with an affiliate code. Brave CEO and co-founder Brendan Eich addressed the incident and called it “a mistake we’re correcting.”

Glassnode says Ethereum network fees surpassed Bitcoin’s

glassnode @glassnode

Daily #Ethereum network fees surpassed #Bitcoin fees yesterday.

Ethereum fees: $498k
Bitcoin fees: $308k

So far, this has only happened on 141 days (8%).

Compare here: studio.glassnode.com/compare?a=BTC&…


The Defiant is a daily newsletter focusing on decentralized finance, a new financial system that’s being built on top of open blockchains. The space is evolving at breakneck speed and revolutionizing tech and money. Sign up to learn more and keep up on the latest, most interesting developments. Subscribers get full access at $10/month or $100/year, while free signups get only part of the content.

Subscribe now

Click here to pay with DAI.There’s a limited amount of OG Memberships at 70 Dai per annual subscription ($100/yr normal price).

About the founder: I’m Camila Russo, a financial journalist writing a book on Ethereum with Harper Collins. (Pre-order The Infinite Machine here). I was previously at Bloomberg News in New York, Madrid and Buenos Aires covering markets. I’ve extensively covered crypto and finance, and now I’m diving into DeFi, the intersection of the two.

The State of Ethereum Dexes: Open and Trustless Wins the Race

https://thedefiant.substack.com/p/the-state-of-ethereum-dexes-open

Hello Defiers! Decentralized exchanges are the driving force behind DeFi and Ethereum itself, powering the most basic building block, the starting point needed for all other more complicated actions: facilitating the buying and selling of tokens. Dexes have made the cypherpunk dream of a censorless, parallel financial network, actually possible, by enabling people, all over the world, to exchange value, instantly, with minimum fees, across borders. All thats’ needed is a blockchain address and internet connection. In the past two years, Ethereum Dexes have had explosive growth, as innovations such as liquidity pools and simplified interfaces have made them more accessible and easier to use than most centralized exchanges.

Still, Defiant contributor Lucas Campbell, shows there’s a long road ahead for Dexes overtake Cexes, but he makes the case for why that’s bound to happen. The numbers he has crunched on climbing earnings and volume point to a bright future, and will give you a detailed overview on the state of the most important sector in Ethereum.

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Open and Trustless Wins the Exchange Race

By Lucas Campbell

Dexes are taking on more and more volume and quickly gaining ground versus centralized counterparts. This means earnings are rising too, and while the numbers are small compared to Cexes, in the decentralized world, anyone can benefit. 

It may be a slow, long battle to supersede our centralized overlords. But in the end, it will be a no-brainer for people to trust an open, decentralized protocol over a closed, centralized bank. Since January 2019, Ethereum’s liquidity protocols and applications have increased their market share relative to CEX volumes by 5x, up to 0.6% from 0.12%, according to The Block’s Larry Cermack. 

With rising volumes, come rising earnings. Annualized revenues for major DEXs are on track to reach new highs this year as forecasted sector earnings approach $12M, according to Token Terminal data. Because of their permissionless nature, many protocols allow anyone with an Ethereum address to become a liquidity provider and earn a piece of the fees. 

DEX Volume Surges 

Ethereum’s DEXs have traded over $3B in total volume in the first six months of 2020, compared to the $2.4B in all of 2019. Moreover, DEX volumes have seen a massive spike upwards since the beginning of the year. In January, cumulative weekly volumes averaged around $61M across major DEXs. Only three months later, average volumes increased by 213% to reach ~$193M in March. The biggest increase came from Black Thursday – a day where crypto asset prices were cut in half in response to the COVID19 pandemic – as major DEXs aggregated over $400M in trading volume that week alone. Since then, trading activity has remained steady as Ethereum DEXs average around $184M in weekly volume as of May 2020. 

(Above) 2020 DEX weekly volumes by project 

Uniswap is the dominant force in the DEX sector. Since the beginning of the year, the liquidity protocol has seen nearly $755M in trading volume, beating out the rest of the field. Kyber and dYdX took second and third as they experienced similar volumes of $562M and $538M, respectively. The other major player includes 0x, which launched its v3 upgrade in late 2019, as the protocol facilitated over $400M in cumulative volume this year. The two lowest in cumulative volumes in 2020 include AirSwap, which was acquired last week by ConsenSys, and Bancor – the tokenized liquidity protocol which raised $153M in the midst of the 2017 ICO Bubble, one of the largest sales at the time. Kyber, IDEX and 0x also did multi-million ––though sub $100M–– ICOs between 2018 and 2017.

While Ethereum’s DEXs are growing, they aren’t even close to competing with its centralized counterparts. According to Messari’s ‘Real Volume’, major centralized exchanges trade for a total of $5.83B. In a single day. Yes, that’s correct. Centralized exchanges facilitate nearly 2x more trading volume in a single day than Ethereum’s DEXs have done all year. We’re not even close to adoption yet, even when limiting our perspective to just the crypto space. 

(Above) Total DEX volumes in 2020 

The positive sign is that the DEX landscape has evolved drastically since 2019. The space is becoming more diverse, as a greater number of players capture bigger slices of the volume pie. 

According to Dune Analytics, IDEX dominated the sector in 2019 as it aggregated over $853M in annualized volume last year. The next closest competitor was Maker’s Oasis which reached just shy of $500M in total volume. Ranks three, four, and five went to Kyber, Uniswap, and 0x, respectively, as the liquidity protocols generated $200-$400M each in total volume over the course of last year. 

In terms of market share, Uniswap is king in 2020. Despite only bootstrapping the protocol with a $100K grant from the Ethereum Foundation in 2018, Uniswap is responsible for nearly 25% of all DEX volumes year-to-date, though the next closest player, Kyber Network, has been gaining ground, with 18.5% of the market. dYdX follows with 17.76% The only other liquidity protocol with a double-digit market share is 0x with ~13.8%. 

The remaining liquidity protocols and DEXs – Airswap, Bancor, Curve, DDEX, Oasis, and OpenSea – combine for the remaining ~25% of the DEX market share as they culminate for over $750M in volumes this year alone. 

(Above) Volume market share by project in 2020

Earnings Near Record

Projected annualized earnings for major DEXs tracked by Token Terminal ––Bancor, IDEX, Uniswap, dYdX, 0x, and Kyber–– are on track to touch a new high this year at $12M. For DEXs, earnings are primarily driven by trading volumes, as the platform will usually take all or part of the fees paid by traders. The previous high was almost $12.5 million in March, when volumes spiked due to Black Thursday and uncertainty in financial markets. 

Earnings snapshot 05/31 via Token Terminal

Looking at specifics, Kyber is punching above its weight. While it’s second in cumulative volume in 2020, the platform is leading with $2.5M in estimated earnings. dYdX is second with $1.9M, and Uniswap is third, averaging $1.5M in annualized revenues to liquidity providers. 0x is also on the board with seven-figure average revenues of $1.3M. The two remaining DEXs – Bancor and IDEX – are on track to accumulate roughly $415K and $182K in earnings based on the data so far.

Still, if you took a snapshot today, Uniswap is the highest projected earner as the protocol is forecasted to generate $4.5M in revenue, according to Token Terminal.

(Above) 30-day average annualized earnings for major Ethereum DEXs 

In terms of market share for DEX earnings, Kyber is leading the field as it represents 32% of all liquidity protocol revenues in 2020. This is followed by dYdX holding a 24.4% share. Uniswap and 0x have similar rates as they account for 19.29% and 16.66% of revenues, respectively. That said, Uniswap has made a major move in recent weeks as the liquidity protocol’s average weekly volumes surged to ~$61M, up from ~$14M at the beginning of the year. 

When it comes to earnings, the comparison with CEXs is also bleak. Binance alone burned over $52M last quarter – nearly 5x higher than what DEXs are projected to earn in the entire year – and that’s allegedly only a fraction of Binance’s total earnings. 

(Above) Market share for 30 day average earnings by project.

Bright Long Road

While DEXs have slimmer earnings than CEXs, they also have a secret weapon: Open, permissionless, transparent operations. Anyone in the world with an internet connection can access Uniswap or Kyber as a trader or a liquidity provider. No KYC required either. The cherry on-top is that everyone can know what the protocol is earning (updated every ~15 seconds) and look at what’s going on under the hood. At this point, it’s nearly impossible to know what Binance is earning as they’ve changed the literature in their documentation over the years. 

Uniswap’s forecasted earnings? $4.98M. Kyber’s? $2.28M.

That’s the benefit of open, permissionless liquidity protocols. Anyone knows what’s happening and anyone can easily opt-out. In the long run, we may even see the Protocol Sink Thesis take into effect as CEXs elect to adopt permissionless liquidity protocols to facilitate their trading and minimize overhead. 

While we’re only at the tip of the iceberg for DEX adoption and DeFi at large, there’s a bright (but long) road ahead. 


The Defiant is a daily newsletter focusing on decentralized finance, a new financial system that’s being built on top of open blockchains. The space is evolving at breakneck speed and revolutionizing tech and money. Sign up to learn more and keep up on the latest, most interesting developments. Subscribers get full access at $10/month or $100/year, while free signups get only part of the content.

Subscribe now

Click here to pay with DAI.There’s a limited amount of OG Memberships at 70 Dai per annual subscription ($100/yr normal price).

About the founder: I’m Camila Russo, a financial journalist writing a book on Ethereum with Harper Collins. (Pre-order The Infinite Machine here). I was previously at Bloomberg News in New York, Madrid and Buenos Aires covering markets. I’ve extensively covered crypto and finance, and now I’m diving into DeFi, the intersection of the two.

DeFi Hackathon Might Produce Next Top Money Lego; Here’s Five Great Projects

https://thedefiant.substack.com/p/defi-hackathon-might-produce-next

Hello Defiers! Here’s what’s going on in decentralized finance:

  • ETHGlobal’s DeFi-focused hackathon wrapped up over the weekend yielding over a 100 projects

  • RenVM launches Bitcoi-to-Ethereum bridge

  • Centrifuge wants to bring trillions of dollars in real world assets to DeFi

and more 🙂

The open economy is taking over the old one. Subscribe to keep up with this revolution. Click here to pay with DAI (for 70 Dai/yr vs $100/yr).

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Developers Built More than 100 DeFi Apps in Past Month

by Cooper Turley

There was probably more innovation in DeFi this month than in traditional finance this decade.

Developers built more than 100 projects in ETHGlobal’s DeFi-focused hackathon in the past 30-days. From stablecoins, to automated investments, and fractional digital ownership, Ethereum builders pushed the envelope on what’s possible in open finance even further.

This is the first event of its kind for ETHGlobal, which has held over a dozen weekend-long, in-person hackathons for the past three years, but had never organized a month-long, virtual event, under a common theme. The goal is for developers to build an entirely new project within the span of the event, with the best projects winning prizes offered by sponsors. For HackMoney, there were $30k in prizes offered across leading projects like Compound, Uniswap and Aave.

We’ll touch on a few of submissions along with these projects’ wider implications on the DeFi landscape.

DeFiDollar

While Dai has taken the lead as DeFi’s defacto stablecoin, it should come as no surprise that it frequently varies from its peg. To this end, we’ve seen a number of solutions aiming to create the “perfect stablecoin” – i.e. one which is both stable and trustless with manageable collateralization ratios. 

DeFiDollar – a basket-backed stablecoin project – aims to do just that. By leveraging Aave’s interest earning aTokens and Balancer’s liquidity tools, DeFiDollar accepts existing stablecoins like Dai and sUSD to mint new Dtokens. To mint tokens, users lock collateral via Aave. The interest earned on the tokens are directed to an earnings pool which is used to supplement and stabilize the peg in the event DUSD collateral falls below their $1 pegs.

Zapper Pool Pipes

Zapper, a DeFi asset management dashboard that resulted from the merger of DeFiZap and DeFiSnap, unveiled Pool Pipes – a way for users to seamlessly transfer liquidity between various capital pools in the click of a button.

Pool Pipes are geared at solving liquidity fragmentation, ultimately creating channels to bridge capital between leading projects like Uniswap, Curve and Balancer. Best exemplified by Synthetix and their recent SNX incentive adjustments, Pool Pipes helps people migrate sETH Uniswap liquidity to sUSD Curve liquidity all in one transaction for a fraction of the cost.

What the Frac

Building off NFTs playing an ever-growing role in the Ethereum landscape comes a hack called What The Frac. As the name suggests, users can leverage the platform to create fractional claims on a given NFT – all of which are backed by DAI using a Balancer pool.

Auction creators commit to locking their NFTs in exchange for the right to create fractional shares. What The Frac allows creators to issue a fixed amount of “Fracs” which are claimable by those who contribute to the Balancer Pool. At the end of an auction, the winning bidder deposits Dai to the Balancer pool to unlock the NFT.

YieldHero

With the core premise of allowing users to redirect interest to open-source developers, YieldHero created a novel solution for users to swap to and from different Aave aTokens using an iEarn-like interface. By leveraging an Aave-specific Balancer pool, users can contribute and manage liquidity in a permissionless fashion, with top donors being signalled via a leaderboard for their Yield philanthropy.

While the idea of redirected interest is something we’ve seen before, the practice of using that interest to empower open-source development in a Gitcoin Grant-like fashion has some great implications. Plus, an easier tool to swap aTokens is a sure win for Aave!

Umbra

As a privacy preserving tool for stealth payments on Ethereum, Umbra allows any two parties to transact with one another without revealing their identity to the wider Ethereum network. Built with a simple password-based login system, users can generate ENS names to receive payments from a sender to a newly deployed stealth address.

The receiver then withdraws the payment from the stealth address, leveraging the Gas Station Network to use part of that withdrawal as the funds to cover the transaction fee. This means someone can get started and withdraw payment without having any ETH in their wallet, and withdraw across dozens of newly created stealth addresses all from one common end-point.

Wider Trends

Across all the HackMoney submissions, it seemed like Balancer pools were being used quite frequently for their ability to customize and compose different asset pools to meet specific liquidity needs. Redirecting interest was also a common theme, along with the general trend to capture arbitrage opportunities using flash loans and pool bridging.

Overall, it will be interesting to see if any new building blocks come out of HackMoney and it was pretty evident that giving teams 30 days to build resulted in far better products and submissions than what generally came out of the 48 hour sessions.

To learn more about HackMoney and the winning submissions, be sure to tune into the live stream which will showcase all submissions with a 3-minute Q&A session.


RenVM Launches as Bitcoin on Ethereum Surges

RenVM, which aims to allow interoperability between blockchains, launched on mainnet today. It’s the latest in a long list of projects which users hope will be able to trustlessly bridge Bitcoin and Ethereum.

There were almost 28 BTC deposited on RenVM after launch, according to btconethereum.com, in exchange for which Ethereum ERC20 tokens were issued. About 23 of those came from the Ren team to bootstrap liquidity. Ren’s launch is fueling a red-hot trend, as Bitcoin on Ethereum more than doubled in just the past two weeks.

Image source: btconethereum.com

“Anyone can now use real Bitcoin (BTC), Bitcoin Cash (BCH), and Zcash (ZEC) in your favorite DeFi application. This allows you to trade, lend, and leverage these assets as you would with any other ERC20,” Ren CEO Taiyang Zhang wrote in a Medium post.

A Trustless Alternative

There are now almost 5.2k BTC on Ethereum (~$47m), according to btconethereum.com, most of which are coming from wBTC, which relies on trusted third parties including BitGo. DeFi users have been hoping for a more decentralized alternative. Keep Network’s tBTC was one, but the project was paused after finding a bug. RenVM has been heralded as another viable, more trustless alternative.

RenVM can hold tokens from one blockchain and mint tokens of another chain in exchange. For example, Bitcoin holders who want to use Ethereum’s DeFi apps can deposit their BTC and get renBTC, an Ethereum token, in exchange at a 1:1 ratio. This ensures renBTC is always backed by the same amount of BTC. RenVM also supports Bitcoin Cash and Zcash.

A network of nodes, called Darknodes make up RenVM. Anyone with 100K REN can run a node, thought some technical skill is needed. Darknodes earn fees (in BTC, BCH, and ZEC) for powering RenVM. There were 44 Darknodes online after launch.

READ The Defiant’s Interview with Ren CTO Loong Wang


Centrifuge Wants to Bridge Real-World Assets to DeFi

Centrifuge launched Tuesday with the aim to feed DeFi with real-world assets such as invoices and mortgages, and to allow holders of these assets to borrow against them on the Ethereum network.

The system enables users to tokenize real-world assets in the form of non-fungible tokens (NFTs), which they can then use as collateral to take out loans. Meanwhile, investors can buy tokens representing this collateral and expect returns that are less correlated with cryptocurrencies than most or all other assets in DeFi.

Here’s how it works: NFTs representing real-world assets are pooled together. Next, two sets of ERC20 tokens are issued against them, TIN and DROP. TIN takes the risk of default first but also receives higher returns. DROP is protected against defaults by the TIN token and receives stable and usually lower returns. Investors can purchase TIN and DROP tokens with Dai or USDC. The user who put up the collateral takes the stablecoins used to buy TIN and DROP as a loan. TIN and DROP holders receive interest asset holders pay for their loan. 

Image source: centrifuge.io

Centrifuge has two parts: Centrifuge Chain and Tinlake. Centrifuge Chain is a proof-of-stake blockchain built with Parity Technologies’ Substrate framework, which is where assets are tokenized. It had 10 validators at launch. Tinlake is an open source Ethereum app which enables the creation of asset pools for users to borrow against and invest in. 

MakerDAO Collateral

Centrifuge submitted two MIP6 applications for MakerDAO to include asset pools as collateral for Dai. MakerDAO opened up Dai to different types of collateral to make sure there’s enough liquidity to back the stablecoin. It has already included trusted assets like USDC and wBCT as collateral, and tokenized real-world could very well come next. Factoring alone is expected to grow to a market of more than $2.8T by 2022, Business Wire data shows

Beyond adding liquidity to DeFi, tokenizing real-world assets could also be an opportunity for businesses, particularly small businesses or companies in developing nations with little access to credit. This system would allow them to access investors from all over the world, while give those DeFi investors exposure to real-world assets.

Post with assistance from Sebastian Aldasoro

Why Bitcoin might not survive a Bitcoin Standard: Hasu

“There is an implicit assumption in Bitcoin that users will pay more to use the base layer or its trustless extensions like the Lightning network. In practice, Bitcoin doesn’t just compete with fiat money or even other cryptocurrencies, but also with custodial Bitcoin banks,” researcher who goes by the name of Hasu writes in Deribit.

Ethereum Network Activity Reaches All Time High As Price Stalls: Ethereumprice

“Ethereum’s daily gas used; a metric that signifies demand for the Ethereum blockchain and one that hit a new all time high on May 23rd (…) This growth in gas used follows the issuance of stablecoins on Ethereum (to the tune of ~$4 billion) and the continued growth of decentralized financial applications that are seeing tens of thousands of transactions each day,” Ethereum Price’s Nick Cannon writes.

Data-packed thread by Spencer Noon on why he’s bullish on ETH.


The Defiant is a daily newsletter focusing on decentralized finance, a new financial system that’s being built on top of open blockchains. The space is evolving at breakneck speed and revolutionizing tech and money. Sign up to learn more and keep up on the latest, most interesting developments. Subscribers get full access at $10/month or $100/year, while free signups get only part of the content.

Subscribe now

Click here to pay with DAI.There’s a limited amount of OG Memberships at 70 Dai per annual subscription ($100/yr normal price).

About the author: I’m Camila Russo, a financial journalist writing a book on Ethereum with Harper Collins. (Pre-order The Infinite Machine here). I was previously at Bloomberg News in New York, Madrid and Buenos Aires covering markets. I’ve extensively covered crypto and finance, and now I’m diving into DeFi, the intersection of the two.

Ethereum Has a Popularity Problem: Fees Are Spiraling Higher

https://thedefiant.substack.com/p/ethereum-has-a-popularity-problem

Hello Defiers and happy Friday! Here’s what’s going on in DeFi:

  • Transaction fees are surging on Ethereum
  • Bitcoin in DeFi surged by 5x in one day
  • Over half of ZRX holders are making money after rally
  • “Hand of God” comes to Ethereum

and more 🙂

The open economy is taking over the old one. Subscribe to keep up with this revolution.

Subscribe now

🎙Listen to this week’s podcast: Interview with the Winklevoss twins


🙌 Together with Eidoo, a cryptocurrency-powered debit card and platform for easy access to decentralized finance.


Ethereum’s Popularity Problem: Fees are Surging

By Andy Boyan

There’s a common gripe among Ethereum users these days —gas is too damn high. Transaction fees are surging as Tether continues to move to the second-largest blockchain network.

Fees paid on the Ethereum network have surpassed 500 ETH every day since April 15, according to Etherscan. That’s the longest stretch since three months at the height of the latest crypto bubble, between December 2017 and March 2018. What’s more, total daily fees paid have breached 2,000 ETH three times in May, a level that’s been crossed a few dozen times in all of Ethereum’s five-year history. The average for the past week was at 1,700 ETH.

Image source: Etherscan

Tether (USDT) is the main culprit. Users have paid almost $1.4M in the past 30 days for using the stablecoin, according ETH Gas Station. Much of that activity is coming from exchange-to-exchange transfers, which signals arbitrage trading. There are also several ponzi scams that make up the top seven spots including noted pyramid scam MMM, which continues its long program of ponzi scheming.

Financial Layer

While frustrating for end-users, higher fees are a sign the network is getting used as a financial settlement layer. Dexes and stablecoins account for about half of the top 25 projects.

Another positive: high fees are a sign Ethereum’s transition to proof-of-stake will be sustainable. Fees are higher than expected rewards for PoS validators, Vitalik Buterin said earlier this week. Building an attractive staking yield is critical to maintaining decentralized and robust network security, according to a March report by Delphi Digital.

CryptoKitties Risk

Fees may be desirable for network security, but there’s the risk the network can become clogged and unusable, a key complaint in 2017 with CryptoKitties and ICOs. Many “ETH-killers” grew out of this poor user experience and are now attempting to gain market share with live mainnets and significant warchests. If Ethereum fees become significant barriers to entry for new DeFi users, other chains could see growth as traders look for the balance between fast, cheap transactions, and enough liquidity to make financial instruments worthwhile.

But there’s hope. Layer 2 scaling solutions, which take some of the computation and storage off chain, can help lower fees and transaction times. Loopring’s DEX is already using one of these solutions. With zk-rollups, users pay Ethereum network gas fees to enter into the ecosystem, but can then transact at lower costs off-chain.  

Even Worse on Bitcoin

That said, compared to Bitcoin transaction fees, Ethereum fees are on average more than 10X less. So maybe there is even room to grow and maintain a strong user base. Or maybe the chains are starting to show real differences in use cases: Bitcoin as a store of value, and Ethereum as a place to put that value to work.


Bitcoin in DeFi Surges by 5X in One Day

By Sebastian Aldasoro

It looks like bitcoin “hodlers” are getting tired of just holding. They’re increasingly locking up their coins in exchange for Ethereum tokens which can be used in DeFi.

The amount of bitcoin locked in decentralized finance shot to 4.8K BTC (~$42M) on Thursday from just under 1K the day before, DeFi Pulse data show. Over 70% of all bitcoin on Ethereum comes from wBTC, an Ethereum token backed at 1-to-1 with BTC, according to btconethereum.com.

Image source: DeFi Pulse

Almost three fourths of that wBTC was added as collateral in MakerDAO. Almost 9.5 million Dai have been minted from wBTC, according to daistats.com, about half of which were issued in a single transaction. MakerDAO included wBTC as collateral in its system three weeks ago. While wBTC didn’t show signs of traction in the first weeks after launch, it’s now becoming clear there’s interest in borrowing against BTC.

Maker Cheers On

MakerDAO cofounder Rune Christensen is celebrating the wBTC flood. Maker dominance, measured as the share of its assets held versus the rest of DeFi, is down 10 percentage points since February. Adding more collateral options is part of an effort to increase locked dollars. Their strategy includes running tests with real-world assets, such as mortgages, in addition to crypto.

The increase of bitcoin on Ethereum helps consolidate three trends: increased liquidity for Ethereum applications, increased utility for BTC holders, and MakerDAO expanding its basket of collaterals to capture more market share in the increasingly competitive stablecoin space.

Custodial Vs. Trustless

Several custodial versions of wrapped BTC tokens have emerged, including imBTC, HBTC, and wBTC. The latter has a clear lead and currently accounts for approximately 4% of all value locked on DeFi. Others are working on linking the most liquid crypto asset with Ethereum’s network effects by providing trustless or non-custodial solutions. tBTC was the first one to launch but was paused just two days after its mainnet release due to a bug. With others such as Ren Project in the works, it remains to be seen whether a fully trustless representation of BTC on the Ethereum blockchain will overtake the more centralized options.


On-Chain Markets Update by IntoTheBlock

This Week: 0x (ZRX) Price Surge from an On-Chain Perspective

0x (ZRX) has gained about 70% in the past three weeks. The price surge comes after the project approves weekly staking payouts, and Vitalik Buterin’s fortuitous endorsement at the Ethereal Summit, when he said it was one of the projects he wanted to try.

0x is an open protocol for decentralized exchanges on the Ethereum blockchain, meant to serve as a building block that may be combined with other protocols to drive increasingly sophisticated dApps.

According to the 0x team, the most important role of its native token is to future-proof the protocol, while transferring value to “Relayers” through transactions fees, updating the protocols’ decentralized governance system on a continuous manner, and to partner with dApps to provide an incentive for adoption. Let’s dive into ZRX from an on-chain perspective.

1. ZRX Price Surged 143% in One Day

May 8 was a great day for the ZRX token. Price surged 70% after the community voted to shorten the length of staking epochs (epochs serve as the basis for all other timeframes within the system, which provides a more stable and consistent scheduling metric than blocks or block timestamps), and Vitalik gave the project a stamp of approval during a virtual conference. YTD, ZRX is up 97%, reaching a yearly high of $0.43 on May 8.

2. On-Chain Transactions Went Through the Roof

In line with the price rally of May 8, on-chain transactions increased by 610% compared to the previous day. There were almost 10.9K transactions with a total volume of 110.44 ZRX tokens, the highest number since October 2018.

3. Over Half of ZRX Holders Are Making Money After Rally

IntoTheBlock’s machine learning algorithm identifies the average cost at which each address purchased a token. The In/Out of The Money chart compares current price of a cryptoasset to the average purchasing costs to determine what percentage of holders are making money, breaking even and losing money on their positions.

May has been a particularly good month for ZRX. 50.87% of all holders acquired ZRX at a price higher than $0.3597. Therefore, if all ZRX holders would sell today, over 50% would make a profit. This also means that about 46% of ZRX owners are breaking even. This current number of addresses In the Money is 34% higher than the Year-To-Date average of only 16.28%

The “Hand of God” Comes to Ethereum

Sorare inked a licensing partnership with Argentine soccer club Gimnasia La Plata, giving the fantasy football game the rights to issue digital cards tied to the teams’ players, according to a press release. Diego Maradona will be the first coach card issued on Sorare. Players and coaches are represented by limited-edition digital cards linked to Ethereum tokens under the ERC721 standard, which guarantee the authenticity, traceability, and digital scarcity. Some Sorare cards have been sold for more than $2K and Maradona’s first card is heating up, with more than 20 bidders pricing it at over 3 ETH.

Tokensoft Distributes $4M to Investors Using Ethereum: Coindesk

Tokensoft, a digital securities platform for enterprises and financial institutions, has used blockchain tech to distribute equity to investors in a $4 million funding round, Coindesk reported. Investors receive a digital representation of their investments on the Ethereum blockchain using the ERC-1404 tokens to ensure the SAFE agreements will be enforced on-chain.

How to make DeFinancial products work for you: TokenBrice

TokenBrice of Monolith writes a blog post walking readers through “6 base strategies and their variants that harness the most relevant DeFinancial services.” He starts with “the “set and forget” strategies and progressively move down the stack towards the more complex but also lucrative ones,” including stablecoins yield, tokenized real estate with RealT, automated trading strategies with TokenSets, and staking on Synthetix.


The Defiant is a daily newsletter focusing on decentralized finance, a new financial system that’s being built on top of open blockchains. The space is evolving at breakneck speed and revolutionizing tech and money. Sign up to learn more and keep up on the latest, most interesting developments. Subscribers get full access at $10/month or $100/year, while free signups get only part of the content.

Subscribe now

Click here to pay with DAI.There’s a limited amount of OG Memberships at 70 Dai per annual subscription ($100/yr normal price).

About the founder: I’m Camila Russo, a financial journalist writing a book on Ethereum with Harper Collins. (Pre-order The Infinite Machine here). I was previously at Bloomberg News in New York, Madrid and Buenos Aires covering markets. I’ve extensively covered crypto and finance, and now I’m diving into DeFi, the intersection of the two.

Reddit About to Beat Facebook, Telegram, and Most ICOs With Actually Useful Token

https://thedefiant.substack.com/p/reddit-about-to-beat-facebook-telegram

Hello Defiers! Big news in Ethereum land,

  • Reddit is introducing an Ethereum token to more than 2 million users
  • Tornado.cash is steps away from becoming trustless
  • dYdX launches perpetual futures contracts

The open economy is taking over the old one. Subscribe to keep up with this revolution.

Subscribe now


🙌 Together with Eidoo, a cryptocurrency-powered debit card and platform for easy access to decentralized finance.


Reddit Instantly Introduced Crypto to Two Million People

Reddit is introducing cryptocurrency to reward engagement in two of its communities, which together have more than 2 million members.

So-called Community Points will be distributed in Reddit’s r/CryptoCurrency and r/FortNiteBR communities, also known as subreddits, which have about 1 million members each. Tokens are earned by contributing to these communities with quality posts and comments. So far, gamer have been more enthusiastic about the feature than cryptocurrency fans, as 3.8k addresses have been created for the Fortnite subreddit token, compared with 1k for the crypto one, according to Etherscan.

Community Points are Ethereum-based ERC20 tokens, and users store them in their own Ethereum address, which Reddit calls “Vaults.” Each user has control of their private keys, which means they have full ownership of the tokens they earn, and not even Reddit can take them away. Tokens will be used to redeem items within Reddit (badges, GIFs, emojis, etc.), and can be sent and transferred to any Ethereum address, even if the wallet owner isn’t on Reddit — they’re just like any other Ethereum token.

Image source: reddit.com/r/CryptoCurrency

Reddit, which has over 400 million users, is on its way to become the first major social network to successfully introduce cryptocurrency tokens —the project is on Ethereum’s Rinkeby testnet and not actually on the mainnet yet. For context, Ethereum has a total of almost 10 million unique addresses.

Telegram scrapped its plan to distribute tokens among its 400 million users, after selling the coins for $1.7 billion in 2018. Facebook has delayed and watered down plans for Libra. Both efforts buckled under regulatory pressure.

Difference With TON or Libra

The difference here is that Reddit is giving instant use to its tokens, and isn’t selling them in exchange for money or crypto —which should ease regulators’ concern. Points are also specific to their different communities (the crypto subreddit’s tokens are called MOON, while the Fortnite ones are called BRICKS), and their value will move following activity in each group. This is different from Libra, a stablecoin, which when used by Facebook’s over 2 billion users for payments, regulators fear could threaten national currencies.

The other difference with Libra is that Reddit’s Community Points are tokens on the public Ethereum network, which US agencies have already deemed decentralized enough for ether to be considered a commodity. This compares with Facebook’s permissioned network, which regulators worried could be abused by the tech giant to collect even more data about its users.

Reddit also proved that a non-blockchain company can be more effective than most so-called Web3 apps in delivering the same message: the internet has been co-opted by large corporations which extract every bit of data and attention they can get from us in exchange for ad dollars. We’ve let them “spy, manipulate and censor” us. It’s time to create a free, interconnected, global community, where each user is in control. Its presentation is a lot clearer than pitches by most dapps, and doesn’t mention crypto once.

Image source: reddit.com/community-points/

Why is Reddit Doing This

Reddit may be hoping to increase user engagement and to position itself as the forward thinking social network. It also stands to economically benefit from this tokenized model.

Initially, 50 million Points will be distributed based on so-called “karma,” or reputation, earned in the subreddit to date. Points will then be distributed every four weeks based on how much karma each user earned in that period. And here’s how Reddit benefits: it gets 20% of the tokens distributed each cycle.

The amount distributed will continue to decrease so that the total number of Points will approach a maximum cap of 250 million. Points are also burned every time they get used to redeem for items within Reddit. A portion of burned tokens are re-distributed when the cap is reached. This cap and “burning” mechanism should help push the token value up.

Image source: reddit.com/r/CryptoCurrency

While dapps and blockchain-based projects have been experimenting with token-based business models for years, Reddit, with its millions of active users, may help prove whether the platform-specific, utility-token model works.

As for DeFi, developers will be able to incorporate Reddit’s tokens to their dapps as soon as they’re on the mainnet. Soon we’ll see Points being used as collateral for loans, added to a tokenized investment portfolio, and traded on Uniswap.


Tornado is Steps Away From becoming Fully Trustless

By Sebastian Aldasoro

Tornado.cash, a privacy solution for Ethereum transactions, is about to become fully trustless.

Tornado.cash works as a transaction mixer in which users’ deposits go into a capital pool and are mixed with other users’ deposits. When users withdraw their funds, these cannot be traced to the initial address from where the deposits were made. To achieve this the product uses zk-SNARK technology, which requires a procedure —the so-called “Trusted Ceremony”— where prover and verifier keys are generated to guarantee full anonymity. Tornado.cash completed this procedure Tuesday.

Tornado’s public Trusted Ceremony had 1114 contributors, which the project says was a record and compares with less than 200 participants in other similar setup procedures.

While the team still has control of the code behind the application, it plans to modify the operator address in the next “few days” so that it’s not owned by anyone.

Ethereum’s privacy issue

Ethereum and other blockchains have a privacy issue. Transactions are associated with wallet addresses that at a simple view appear to be anonymous, but one data point connecting an individual to an address can be used to trace private information such as received payments, recurring expenses, and total owned assets. Imagine what all of this information could be used if it fell into the wrong hands? That’s especially scary taking under consideration a context in which governments around the world are increasingly starting to monitor citizens due to the COVID-19 crisis

The Russian team of white hat hackers at Peppersec, behind Tornado.cash, are aiming to fix this by anonymizing transactions on Ethereum’s blockchain. The team’s goal is to make this solution become fully non-custodial, autonomous, free, and censorship-resistant. Also key in its success will be an intuitive interface, as clunky design has often plagued these types of projects.

Tornado.cash is not the only product that has been designed to provide full transaction privacy on Ethereum. According to the State of the mixers: summer 2019 report, there are other mixers in the works such as Miximus, Hopper, and Semaphore mixer. All of them, just as Tornado.cash does, rely on zkSNARKs proofs.

Still, the only one that has achieved significant traction is Tornado. More than $8M worth of ETH in deposits into has been made into Tornado as of today.

Legal implications

There have been previous cases were teams running transaction mixers have had legal liabilities. One of the most well-known cases is Larry Harmon, who created the Helix mixer. Helix was a custodial mixer who charged fees and didn’t run on Ethereum. The full decentralization of Tornado.cash that will happen in the next days could provide some protection.

Tornado.cash has positioned itself as the only transaction mixer with traction and, although it began with just plain ETH transactions and focused entirely on the Ethereum ecosystem, they quickly added ERC-20 support. At the moment it runs with ETH, DAI, USDC, and USDT but others such as WBTC could also follow, which could open the gate to expand its reach to other blockchains, too. At the end of the day, privacy concerns are not blockchain specific, but industry-specific, and products like this could prove to be useful for the industry as a whole.

dYdX Perpetual Contracts Are Live

dYdX’s perpetual bitcoin futures contract are now live and open to the public after running a private test version for the past three weeks, the decentralized exchange said in a post yesterday. Almost $5M has been traded since going into the so-called Alpha, with $3M of that coming since Sunday, dYdX said.

Perpetual contracts are the most widely traded product in crypto and dYdX is enabling users to trade them in a decentralized, non-custodial platform. Perpetual bitcoin contracts will be rolled out first, while ether and Dai contracts will come next. The contract’s price is tethered to BTC, which opens the door to other synthetic, non-Ethereum assets to be traded on the platform.

Traders have flocked to perpetual crypto contracts to access the price movement of the underlying asset, with the added benefit of being able to take on leverage to maximize their profits (if the market moves their way). Not having to worry about expiry dates makes the process easier.

Trouble among neighbors in decentralized, virtual world Cryptovoxels is much like trouble with your real-life neighbors.

Steve Klebanoff @steveklbnf

Today in @cryptovoxels drama: this person blocked their neighbors view & are asking 0.1 ETH/day to remove the wall 😂


The Defiant is a daily newsletter focusing on decentralized finance, a new financial system that’s being built on top of open blockchains. The space is evolving at breakneck speed and revolutionizing tech and money. Sign up to learn more and keep up on the latest, most interesting developments. Subscribers get full access at $10/month or $100/year, while free signups get only part of the content.

Subscribe now

Click here to pay with DAI.There’s a limited amount of OG Memberships at 70 Dai per annual subscription ($100/yr normal price).

About the founder: I’m Camila Russo, a financial journalist writing a book on Ethereum with Harper Collins. (Pre-order The Infinite Machine here). I was previously at Bloomberg News in New York, Madrid and Buenos Aires covering markets. I’ve extensively covered crypto and finance, and now I’m diving into DeFi, the intersection of the two.

Institutions are Coming to Ether as DeFi Works to Make Them Irrelevant

https://thedefiant.substack.com/p/institutions-are-coming-to-ether

Hello Defiers! Here’s what’s happening in decentralized finance,

  • Institutions can now access regulated ether markets
  • A tokenized cassette tape is selling for $500+
  • The first for-profit DAO since The DAO makes its first investment
  • Aave’s plan to increase DeFi derivatives utility

If you’re receiving this email, that means you’re a paid subscriber of The Defian…


Read more

Recap: DeFi Week of May 4 by @DefiantNews

https://thedefiant.substack.com/p/recap-defi-week-of-may-4-

Hello Defiers, hope you’re having a good weekend!

Summing up the past week: Some of DeFi and Ethereum’s biggest names, including Vitalik Buterin and Joe Lubin, spoke at the Ethereal Summit. MakerDAO introduced WBTC as collateral. Near launched the first phase of its mainnet into a crowded “Ethereum Killers” space. Synthetix and Optimism partnered up to create a decentralized exchange to demo Layer 2 scaling. The personal token space is heating up. DeFiZap and DeFiSnap merge to launch a portfolio manager with increased functionality.

That was just one week. Subscribe to get the latest DeFi news and analysis straight to your inbox and you don’t miss a thing. Free-signups get partial content, paid subscribers (only $10/month, $100/year) get everything. Click here to pay with DAI ($70/year).

Subscribe now

🐦Reminder to follow @DefiantNews on Twitter if you haven’t!

🧢And to get your Defiant swag!


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Interview

“There’s a Role for Ethereum as a Permissionless Platform for Central Bank Digital Currencies:” Vitalik Buterin

Vitalik Buterin, the creator of Ethereum, talked about the possibility of ether becoming the global reserve currency in a world which has lost trust in national currencies and Ethereum becomes the “glue” between nations, in an interview at the Ethereal Summit. He also talked about DeFi apps he uses and those he wishes there were more of. He said talking about tokens primarily as governance vehicles is “wrong-headed,” and that it’s inevitable that Etheruem dapps will lose some composability when communicating between shards in Eth2.  He also said we’re only a few months away from the launch of Eth2’s phase 0.

📺 Watch my interview with Vitalik on Ethereal’s YouTube channel.


Thursday

Dives

NEAR Protocol Joins Crowded Ethereum Killers Party: The Ethereum killer space is getting crowded. The latest one to join is NEAR protocol, which launched its mainnet this week. 

Bytes

Loopring Paused Exchange After Finding Bug: Loopring temporarily paused trading after finding a critical frontend bug.

SNX Link making it Easier to Use Synthetix Platform: DeFi project SNX Link, which built an interface to use the Synthetix exchange, launched a feature which automatically adjusts users’ collateral ratios.

Wednesday

Dives

Synthetix Demo is Latest Step To a Scalable Ethereum: Derivatives protocol Synthetix and research group Optimism have teamed up to test the cutting edge technology that “optimists” say will help Ethereum scale.

Markets

Synthetix On-Chain Markets Update by IntoTheBlock: The SNX token is used as the collateral powering the Synthetix network in the Ethereum blockchain. Its transactions have grown significantly over the past month.

Sums

Personal Tokens Space Heats Up With $KERMAN: Kerman Kohli is using the Roll platform to sell tokens, with the goal to raise $30,000 with 15% of the total token supply.

PayPal Axes RealT But Crypto Saves the Day: PayPal blocked payments to tokenized real estate platform RealT without warning showing exactly why a censorless financial system matters.

Bytes

Strike Promises to Launch Perpetual Swaps for All Assets

MakerDAO Fundamental Analysis: AlfaBlok

Monday

Dives

MakerDAO Adds WBTC As Collateral for Dai: MakerDAO on Sunday started accepting WBTC as collateral against Dai loans as it seeks to increase liquidity and diversification in the assets backing the stablecoin.

Sums

DeFi10 Update: Portfolio is Up 10% Since January: The DeFi10 portfolio recovered from its March slump and is now up 10%, beating its benchmark, the MakerDAO’s deposit rate. It’s also beating US stocks and junk bonds, which are both down, but is underperforming ETH.

DeFiZap and DeFiSnap Merged to Create Zapper: DeFiZap and DeFiSnap merged to create asset management platform Zapper. The merger of the two aims to provide a portfolio tracker with added functionality.


💜Community Love💜

Thanking all the amazing Defiers for the support and love this week (and always)!

Decrypt (Bitcoin Halving D-2) @decryptmedia

Synthetix Demo is latest step to a scalable #Ethereum
decrypt.co/27915/syntheti…

Andy Boyan @andyboyan

@_kinjalbshah highly recommend @CamiRusso‘s The Defiant. Taking #defi by storm

Sid Kalla @sidkal

66/ Subscribe to Defi’s most amazing newsletter from @CamiRusso at @DefiantNews

Bradley Miles @Bradley_Miles_

Excited to finally start jamming with the @UnlockProtocol team.

Julien’s always thinking through ways to bring more economics to digital communities.

Have some $CAMI? You can use it to unlock content across the web! Same goes for any #socialmoney

https://t.co/cEPCSylpN2 https://t.co/5rwyOr3DV3

dlab: blockchain accelerator & venture studio @dlabvc

The Defiant’s @CamiRusso chats with dlab PM @psaintdonat on her transition from traditional financial media to crypto, the current state of DeFi, interesting projects in the space and more

youtube.com/watch?v=5_0c98…

👇Pre-order Camila’s book on Ethereum👇
amazon.com/dp/B07X8HS2WC/…

SNX Link @SnxLink

Proud to be in the today Defiant.
Stay tuned! New features coming 🔥

Spartan Builders ⚔️

@CamiRusso https://t.co/nybFybMupb

The Defiant @DefiantNews

In today’s Defiant:

🎙️@VitalikButerin talks ETH in times of crisis, DeFi and Eth2 at @EtherealSummit

🎉@NEARProtocol launches first phase of mainnet into crowded Eth competitor space
✌️@SnxLink making it easier to use @synthetix_io

+more👇
https://t.co/ZnOyAiDHKm

Ricardo VG @RicardOruka

Que buena entrevista @CamiRusso, gracias por compartir. Ya le echaron un ojo @cristpereirag @morocotacoin @cyberthompson ?

#DeFi #Blockchain #InternetOfFinance #InternetDeLasFinanzas

The Defiant @DefiantNews

☄️”Blockchains are an extinction-level event,” says
@el33th4xor
.

🦕”They’re an asteroid in the sky and there are a bunch of dinosaurs on the ground with names like Charles Schwab and Swiss Re.”

Interview👇
https://t.co/pSY2kGnUQd


The Defiant is a daily newsletter focusing on decentralized finance, a new financial system that’s being built on top of open blockchains. The space is evolving at breakneck speed and revolutionizing tech and money. Sign up to learn more and keep up on the latest, most interesting developments. Subscribers get full access at $10/month or $100/year, while free signups get only part of the content.

Subscribe now

Click here to pay with DAI.There’s a limited amount of OG Memberships at 70 Dai per annual subscription ($100/yr normal price).

About the author: I’m Camila Russo, a financial journalist writing a book on Ethereum with Harper Collins. (Pre-order The Infinite Machine here). I was previously at Bloomberg News in New York, Madrid and Buenos Aires covering markets. I’ve extensively covered crypto and finance, and now I’m diving into DeFi, the intersection of the two.

There’s a Role for Ethereum as a Permissionless Platform for Central Bank Digital Currencies- Vitalik Buterin

https://thedefiant.substack.com/p/theres-a-role-for-ethereum-as-a-permissionless

Hello Defiers! Here’s what’s going on:

  • Vitalik Buterin interview at Ethereal Sumit

  • NEAR blockchain launch

  • Loopring bug

Also, don’t forget to listen to last week’s podcast:

🎙Last Week’s Podcast: Emin Gun Sirer on AVA competing with ETH

Subscribe now


🙌 Together with Eidoo, a cryptocurrency-powered debit card and platform for easy access to decentralized finance.


“There’s a Role for Ethereum as a Permissionless Platform for Central Bank Digital Currencies:” Vitalik Buterin

Earlier today I interviewed Vitalik Buterin, the creator of Ethereum, at the Ethereal Summit. He talked about the possibility of ether becoming the global reserve currency in a world which has lost trust in national currencies and Ethereum becomes the “glue,” about DeFi apps he uses and those he wishes there were more of. He said talking about tokens primarily as governance vehicles is “wrong-headed,” and that it’s inevitable that Etheruem dapps will lose some composability when communicating between shards in Eth2.  He also said we’re only a few months away from the launch of Eth2’s phase 0.

Also, I’ll be interviewing Compound Finance founder Robert Leshner and moderating the ETH is Money panel later today. Tune in here.

Ethereal Summit @EtherealSummit

“Ethereum as it exists today (eth1) will be it’s own separate shard on the eth2 network” – @VitalikButerin

#EtherealVirtual

Fireside chat with Vitalik and @CamiRusso happening now!

etherealsummit.com

Here are some of his best quotes (thanks to Ethereal, ConsenSys Codefi and Decrypt for compiling):

Crisis

“I definitely think that there is a role for Ethereum to play as this neutral, global, permissionless platform for all of these new central bank digital currencies and more”

“Ether as an asset would be the best neutral asset to use if Ethereum ends up becoming the glue between these nation states”

DeFi

“DEXs are well on their way to competing with centralized exchanges.”

“Marketing in DeFi should not be about performance (and competing between interest rates and collateral rates offered) as the reality is that the chance of any of these systems breaking is higher than the interest rate that they’re paying.”

“I think advertising governance as the primary characteristic of newly emerging utility tokens is a little wrong-headed (…) If people really do value tokens solely due to its governance component then distribution will end up centralized.” 

“I have a bit of money in a Uniswap Exchange pool as a liquidity provider, I’ve tried out Loopring’s zk-rollup DEX and Synthetix’s Layer 2 DEX with Optimism, and I’ve used ETH to pay for things from time to time.”

“I’d like to see more governance minimized stablecoins on Ethereum (…) synthetic assets. More governance experimentation.”

ETH2

“Ethereum as it exists today will be its own separate shard on the Eth2 network.”

“Applications on different shards will be able to communicate with each other, they will be able to do so asynchronously (…) many dapps and primitives transact this way and don’t require instant syncing.” 

“The biggest risk is running into technical roadblocks but I’m less concerned about the community and political risks.”

“I’m very confident about the transition from Eth 1 to Eth 2 (…) We’re already at the point where Eth 1 was a few months before launch.”

NEAR Protocol Joins Crowded Ethereum Killers Party

By Sebastian Aldaroso

The Ethereum killer space is getting crowded. The latest one to join is NEAR protocol, which launched its mainnet this week. Like the dozens of smart contracts platforms competing with Ethereum, they have funding and a rockstar team, but so far that hasn’t been enough to secure network effects. 

The first wave of Ethereum killers

At least eight Ethereum killers have launched in the past two years. First, there was the initial wave with projects including EOS, Tron, Tezos, Blockstack, Waves, and Lisk. Many of them raised enough capital to still be running their ecosystem funds or grants programs that seek to stimulate the development of their ecosystem similarly to ConsenSys and the Ethereum Foundation’s role in Ethereum. 

But none of them have succeeded in coming close to Ethereum in terms of new decentralized applications, active users and volume, which has massively increased on Ethereum with the explosive growth of stablecoins.

Image source: https://dapp.review/article/251

Get in Line

The space is already saturated with relatively empty smart contracts platforms, and many more are waiting to launch. At least 10 additional projects have raised capital and are getting to launch between this year and next.

Image source: Messari

Even though many have marketed their projects to give the impression that they could easily dethrone Ethereum, some of them have found the need to build bridges to access Ethereum infrastructure. NEAR already has a decentralized bridge, Polkadot is also working on it, there’s the EOS bridge (actually being run by the Kyber Network), while Cosmos, and AVA are also making sure their networks can easily connect with Ethereum. This is how they can access the billions of dollars locked on DeFi protocols, liquidity pools and network effects already in place on the second biggest cryptocurrency.

Community Efforts

Real traction can only come from a large, active developer community. Near is using the funds raised to run a support program for teams that want to build on their infrastructure and do everything from assigning mentors to allocating NEAR tokens to fund developers. You can check out more about it here.

There already are a handful of projects building on NEAR: 

  • TessaB, a second-hand mobile phone marketplace with traceability solutions built on its own Tessa blockchain.

  • 1inch, a DEX aggregator built at ETH New York in 2019.

  • Stardust, a revenue-sharing secondary marketplace, and game explorer for gamers

Image source: @nearprotocol twitter feed.

To further spur development, NEAR is running a Github hosted online hackathon in the context of the Ready Layer One conference, with more than 130 participants signed up, similar to Ethereum’s latest hackathon, ETHLondon. 

Proof of Stake

NEAR protocol is a Layer 1, sharded proof of stake open blockchain that claims to solve the scalability problems that other blockchains like Ethereum face. They also claim to be more developer-friendly (you can check their tools here). The first phase of their protocol is powered by a Proof-of-Authority algorithm (hence the name of its chain, MainNet: POA) and is administered by the NEAR Foundation and the 40 or so validators who purchased tokens. 

The MainNet: POA is running on just 3 foundation nodes instead of the 4 stated on their announcement post for this phase, compared with Ethereum and Bitcoin’s thousands of nodes. This is the first of three phases before NEARN is fully permissionless and functional. The second phase, which will include whitelisted validators and apps deployed through the Foundation Developer Program, is expected to launch between June and August, while the release date of the final phase, where anyone can join the network and deploy dapps, is still TBD.

Source:https://explorer.mainnet.near.org/

a16z and Microsoft

Similar to other Layer 1 blockchain projects, NEAR has a star-studded team, with engineers from Microsoft and Google. They also have big-name investors, with a16z leading their latest $21.6 million token sale round.

But the blockchain space is now saturated with well-funded, world-class teams, and technical solutions that claim to solve scalability issues. Still, it’s become clear that even for projects that have all of these boxes checked, bandwagon effects are hard to achieve and today the only general-purpose blockchain that shows signs of this type of effect is Ethereum. It remains to be seen whether tech, hackathons and bridges can change that.

Loopring Paused Exchange After Finding Bug

“A critical frontend bug has been identified, we will stop our relayer service and and put Loopring Exchange into maintaince mode. Stay tuned for more update,” the project said in a tweet.

SNX Link making it Easier to Use Synthetix Platform

DeFi project SNX Link, which built an interface to use the Synthetix exchange, launched a feature which automatically adjusts users’ collateral ratios, while before users had to do so manually. If the collateral ratio is below the threshold, a smart contract will burn enough synthetic USD tokens, or sUSD, to adjust it and claim the rewards on your behalf.


The Defiant is a daily newsletter focusing on decentralized finance, a new financial system that’s being built on top of open blockchains. The space is evolving at breakneck speed and revolutionizing tech and money. Sign up to learn more and keep up on the latest, most interesting developments. Subscribers get full access at $10/month or $100/year, while free signups get only part of the content.

Subscribe now

Click here to pay with DAI.There’s a limited amount of OG Memberships at 70 Dai per annual subscription ($100/yr normal price).

About the author: I’m Camila Russo, a financial journalist writing a book on Ethereum with Harper Collins. (Pre-order The Infinite Machine here). I was previously at Bloomberg News in New York, Madrid and Buenos Aires covering markets. I’ve extensively covered crypto and finance, and now I’m diving into DeFi, the intersection of the two.

Let’s be Optimistic: Synthetix Exchange Demo Showcases Scalable Ethereum Future

https://thedefiant.substack.com/p/lets-be-optimistic-synthetix-exchange

Hello Defiers! Here’s what’s going on in decentralized finance:

  • Synthetix and Optimism launch demo exchange in latest step towards a scalable Ethereum

  • Synthetix on-chain analysis by IntoTheBlock

  • Personal token space gains steam with KERMAN offering

  • PayPal Axes RealT

  • Another perpetual swaps platform plans to launch

and more!

🎙Last Week’s Podcast: Emin Gun Sirer on AVA competing with ETH

Subscribe now


🙌 Together with Eidoo, a cryptocurrency-powered debit card and platform for easy access to decentralized finance.


Synthetix Demo is Latest Step To a Scalable Ethereum

By Lucas Campbell

Derivatives protocol Synthetix and research group Optimism have teamed up to test the cutting edge technology that “optimists” say will help Ethereum scale.

The projects are launching a demo of the Synthetix Exchange, a platform to issue and trade synthetic assets, that’s powered by the so-called Optimistic Virtual Machine, a Layer 2 scaling solution based on Optimistic Rollups. 

Image source: l2.synthetix.exchange/

🛠 Those were all mouthfuls so let’s unpack: Layer 2 scaling solutions are technologies that remove some of the computation that’s on-chain (Layer 1) and take it off-chain, so that the network can be faster. Optimistic Rollups is one of these Layer 2 solutions, and the OVM is at the is what implements this system so that it can execute Ethereum smart contracts and act just like the Ethereum chain, at scale.🛠

With Ethereum’s network utilization rate nearly maxing out at 91%, scalability is increasingly important if it wants a shot at becoming a platform for applications that reach mainstream adoption. Optimistic Rollups are a way for DeFi projects to work around this bottleneck and reach a level of performance usually associated with centralized systems.

Image source: Optimism Medium post

Trading Contest

The protocol’s demo will feature a trading competition on L2.synthetix.exchange with over $40,000 worth in SNX prizes. The goal of the trading competition is to get DeFi users to experience the power of the OVM in delivering near-instant, cheap Ethereum transactions. If you’re looking to get more involved with the sX demo and the trading competition, feel free to join the Synthetix Discord to hop into the discussion. 

The test comes after the research group created Unipig.exchange, the first end-to-end implementation of Optimistic Rollup. Unlike with Unipig.exchange, where the team built a custom solution for Uniswap, this time Optimism built a system that’s for Ethereum dapps in general, not just for Synthetix. The goal is for the demo to lead to a Layer 2 protocol that any Ethereum dapp can use.

Ethereum Killers

With so many more products on the roadmap for Synthetix this year, the adoption of Optimistic Rollups may act as a critical piece of infrastructure to launch these at scale.

The growing amount of confidence in Optimistic Rollups on Ethereum may also pose a risk to the dozens of venture-backed “Ethereum Killers” set to launch later this year. Notably, NEAR Protocol closed its $21.6M strategic round from a16z while launching its mainnet earlier this week. 

These scalability solutions could make it even harder to displace Ethereum from its position as the industry-leading smart contract platform.

On-Chain Markets Update by IntoTheBlock

This Week: Synthetix

The SNX token is used as the collateral powering the Synthetix network in the Ethereum blockchain.

Synthetix follows a common DeFi model where overcollateralized debt is used to support a financial service. In this case, the SNX token supports the issuance of synths such as synthetic USD (sUSD). SNX tokens must be overcollateralized by at least 750% in order to assure that the debt in the system is sustainable. For example in order to mint $10 sUSD, the user would have to stake a minimum of $75 (75/10 x 100 = 750%), though this rate may be changed in the future through community governance mechanism

1 SNX Transactions have grown significantly over the last month

Image

As seen in the graph above, transactions have increased with the rising SNX price. The seven-day high of 854 is 1.42x greater than the transaction volume recorded at the beginning of April. The total number of transactions may seem relatively low compared to large protocols. It is important to take into account, though, that once a user of the Synthetix protocol stakes their SNX tokens for sUSD, there is no need to make more SNX transactions to trade one synth for another. The only transaction recorded for passive SNX stakers would be when they claim their rewards, which occurs on a weekly basis.

2 SNX distribution is highly concentrated

Image

As can be seen in the graph above, nine whales (addresses with more than 1% of circulating supply) own 65% of the total SNX tokens. 47.65% of SNX is in an address used for the Synthetix staking escrow and 6.61% for the Synthetix Foundation, according to data from Etherscan. Investors, addresses holding between 0.1% and 1% of circulating supply, hold almost 19% of SNX in circulation, while retail volume consists of only 15% of the current distribution.

3 Most of SNX tokens are locked as collateral

Image

As per DeFi Pulse, Synthetix is now the second largest decentralized finance protocol in terms of collateral locked. The growth in value locked has surpassed the price growth of the underlying SNX token; value locked has surged 20 times to $114.9M from $5.56M a year ago. This has led to over three quarters of the circulating supply of SNX tokens being locked.

Personal Tokens Space Heats Up With $KERMAN

By Lucas Campbell

The DeFi space is allowing for a novel type of fundraising: Something like an Initial Coin Offering, but for individuals. Developer Alex Masmej pioneered the offering one month ago, and yesterday Kerman Kohli said he’s following his steps and doing an Initial $KERMAN Offering. 

Kerman, who is using the Roll platform for the sale, is aiming to raise $30,000 with 15% of the total token supply – valuing the tokens at $200,000 fully diluted. Masmej was successfully able to raise $20,000 in five days. 

While $ALEX token holders will be entitled to Alex’s future income, $KERMAN tokens can be redeemed for a range of services including coverage in Kohli’s newsletter DeFi Weekly, subscriptions, advisory and others. Token holders can signal their thoughts on Kerman’s life decisions such as future employment and DeFi weekly content selections, and anyone who purchases at least 15,000 $KERMAN – valued at $300 – will receive access to a Telegram group and the ability to participate in early rounds of any of Kerman’s startup ventures. 

Kohli plans to use 5% of the revenue earned from his DeFi Weekly newsletter and other services to burn $KERMAN. 

PayPal Axes RealT But Crypto Saves the Day

PayPal blocked payments to tokenized real estate platform RealT without warning. The San Jose-based payments processor, which accounted for 62% of RealT purchases, said in an email RealT’s account had been “permanently limited” and that there will be “no appeals to the decision.” The email cited “excessive risk,” without providing further explanation, according to a RealT blog post.

Luckily for the platform, its customers had no problem switching to Coinbase Commerce, with orders via the crypto exchange’s payments service jumping by 238%. The next step will be an integration with Wyre, a fiat-to-crypto gateway. Centralized institutions making arbitrary decisions about the flow of other people’s money is exactly why a censorless financial system matters.

Strike Promises to Launch Perpetual Swaps for All Assets

DeFi project Strike yesterday published documentation for its decentralized perpetual swaps trading protocol. Perpetual swaps are futures contracts with no expiry date, which allow traders to more easily use derivatives to speculate and hedge. The platform’s planned features include trading perpetual swaps with up to 20x leverage and support for on and off-chain synthetic assets, from BTC to gold.

MakerDAO Fundamental Analysis: AlfaBlok

“The current valuation implies very aggressive growth rates, of over 70%+ Dai circulation increase per year reaching Trilions of Dai in circulation, in order for current valuation to make sense,” the report said.

Don’t forget to get your psychedelic Defiant swag!


The Defiant is a daily newsletter focusing on decentralized finance, a new financial system that’s being built on top of open blockchains. The space is evolving at breakneck speed and revolutionizing tech and money. Sign up to learn more and keep up on the latest, most interesting developments. Subscribers get full access at $10/month or $100/year, while free signups get only part of the content.

Subscribe now

Click here to pay with DAI.There’s a limited amount of OG Memberships at 70 Dai per annual subscription ($100/yr normal price).

About the author: I’m Camila Russo, a financial journalist writing a book on Ethereum with Harper Collins. (Pre-order The Infinite Machine here). I was previously at Bloomberg News in New York, Madrid and Buenos Aires covering markets. I’ve extensively covered crypto and finance, and now I’m diving into DeFi, the intersection of the two.

Money Legos Aren’t Fitting Right (But They Could)

https://thedefiant.substack.com/p/money-legos-arent-fitting-right-but

Hello Defiers! “Money legos” has become one of the most popular memes in decentralized finance, because it describes in just two words one of the reasons why this new financial system has the potential to be so much better than the old one: Protocols are built with open sourced code on top of public and global networks, which means applications can all …


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Hackers Steal $25 Million in Hours and Then Return the Funds: A Breakdown

https://thedefiant.substack.com/p/hackers-steal-25-million-in-hours

Hello Defiers! Last weekend, decentralized finance suffered the biggest attack in its short life. This time, the attack has a happy ending, but that doesn’t take away from the fact DeFi builders need to follow better security procedures.

Emilio Frangella, engineer at lending protocol Aave, will break down the attack and very importantly, how to avoid it, in detail below. But in very rough terms, a hacker was able to drain $25 million from lending protocol Lendf.Me —almost all of the funds it held— in just under four hours, by exploiting vulnerabilities in the imBTC token and in the protocol itself. The hacker used an attack anyone in Ethereum should be painfully aware of: Reentrancy. It’s what the attackers of The DAO used to steal more than $50 million from a smart contract, which resulted in the fork between Ethereum and Ethereum Classic.

Lendf.Me had its share of controversy even before the attack, as Compound Finance, the biggest DeFi lending platform after MakerDAO, accused it of stealing its code, which is under copyright. Changes to Compound’s code added a vulnerability which resulted in Lendf.Me’s loss of funds. While users might have been put off by Compound’s accusations, they also had reason to trust the platform: Just a week ago venture fund Multicoin Capital announced it led a $1.5 million investment round into dForce, the company behind Lendf.Me.

This attack comes just weeks after MakerDAO’s Black Thursday, where traders were able to take about $5 million worth of ether, and just two months after the bZx exploits, where attackers made almost $1 million. It’s becoming increasingly clear there needs to be an ecosystem-wide change in security measures to secure users’ funds. One glaring error made in this case: The potential attack to the standard used by imBTC, ERC-777, had been known since at least July. Read below for the full details, including negotiations between the hacker and Lendf.Me.

Both free and paid subscribers are getting full versions to today’s newsletter. To make sure you always get complete access to the content, archive and Discord chat, subscribe now at $10/month, $100/year, or 70 Dai on this link.

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🙌 Together with Ampleforth, a digital asset protocol for a base money which doesn’t require collateral and is uncorrelated with the rest of crypto.


The Biggest Hack in DeFi Has a Happy Ending

During the weekend a hacker leveraged an exploit surface exposed by the dForce Lendf.me protocol to completely drain the platform and pull off the biggest attack in DeFi yet. Funds were returned today in an unexpected turn of events.

Quick Takes

  • The lending protocol Lendf.me that belongs to the dForce ecosystem was drained of $25 million worth of funds on Sunday, April 19th at around 12-2 AM UTC

  • The hacker leveraged a vulnerability in the LendF.me contracts using imBTC as a trojan horse

  • A similar vulnerability was used one day before to drain the imBTC/ETH liquidity pool on Uniswap

  • The hacker and dForce have negotiated using Ethereum transactions 

  • The hacker has returned the assets stolen today

  • DeFi needs stricter safety procedures in handling malicious events

  • Smart contracts developers need to always account for reentrancy and never trust any external contract interaction

How was the attack performed?

What we have seen is a modern version of The DAO attack, which happened in 2016. The core of the attack is called reentrancy: The possibility for a smart contract function to be executed multiple times concurrently, which might bring state inconsistencies if the function is not implemented properly. 

What is Reentrancy anyway?

Contracts interact. To be able to move your DAI or USDC from Compound to Aave or MakerDAO, for example, the smart contracts of each of these platforms interact with other contracts that define the currencies being used, in this case the DAI contract and the USDC contract. This complex network of interactions allows developers to implement all the beautiful things we see running on Ethereum. Everything works well when the contracts that interact trust each other. But what if we put in the middle of these interactions a malicious actor?

Imagine to have a contract that defines a Bank. You can deposit to the bank and withdraw from it at any time.

The deposit works this way:

  1. The Bank calculates the new balance by adding the amount being deposited to the previous balance

  2. The Bank collects the funds from the user wallet

  3. The Bank updates the new balance of the depositor into its accounting books

The withdraw works this way:

  1. The Bank checks the balance of the depositor and if it’s enough to satisfy the withdrawal request, it calculates the new balance

  2. The Bank sends the funds to the depositor

  3. The Bank updates the new balance of the depositor into its accounting books

A bank that works like this is the perfect candidate for a reentrancy attack. How would that work?

Say Alice wants to deposit 1000 DAI in the Bank, and later withdraw them. If Alice is a non malicious actor, everything works as expected. 

Here you see the interaction between Alice and the Bank. Each interaction follows the sequence of actions provided earlier, and everything is consistent: Alice’s balance after the withdrawal is correctly 0 DAI. 

Now let’s imagine Alice is malicious, and she has a peculiar superpower: She can obtain control of the flow of actions while the Bank is collecting the amount of DAI to deposit from her wallet (note: this is impossible with the actual DAI, but is exactly what happened in the attacks that involved Uniswap and Lendf.Me, where the attacker used a tokenized version of BTC called imBTC: more on this later). If we imagine this possible, this could happen:

First, Alice deposits 1000 DAI. Everything works as expected:

She now has 1000 DAI in the Bank. Here is where the fun begins. Alice deposits 1 more DAI, and activates her ”superpower” of regaining control of the flow while the Bank is collecting the funds to deposit:

The transfer of 1 DAI is on hold, and will be executed at the end. Alice has now the control and can do whatever she wants. So Alice executes a withdrawal, and withdraws all the funds:

So while the deposit action is still in progress and on hold, Alice is able to regain control and execute a withdrawal. Her balance is really 0, but the Bank still has to register the 1001 DAI balance from the deposit action. I think we all know where this is going:

The deposit is completed, it collects 1 DAI and sets Alice’s balance to 1001 DAI. But Alice withdrew already – so she now has 1000 DAI in the wallet, and 1001 DAI in the Bank, even though the actual 1000 DAI are not there – it’s an inconsistency of the balance sheet. The reentrancy attack has been successful. This is one of the simplest ways of performing a reentrancy attack, but there are many with different complexities. Evaluating if a code path can be subjected or not to reentrancy can become quite complex.

How do Ethereum developers protect the contracts from this attack?

There are two ways: one is using a so-called Lock, or Mutex. By putting a lock on the withdraw and deposit actions of the Bank whenever one of the others is executed, we prevent Alice from executing the withdraw, making her superpower useless:

This is the so-called Reentrancy Guard.

Another strategy is to change the way the Bank works, so that external interactions (in this case, collecting funds to deposit or transfer funds to withdraw) are always the last steps being executed. If the deposit action would work this way, instead of the original definition:

  1. The Bank calculates the new balance by adding the amount being deposited to the previous balance

  2. The Bank stores the new balance of the depositor into the Bank accounting books

  3. The Bank collects the funds from the user wallet

There would be no attack surface available to Alice, and her superpower would be useless:

The immediate update of the balance by the Deposit action factually deactivates Alice’s superpower: even if she uses it, the final balance will be correct (1 DAI). This is what smart contract developers call the Checks/Effect/Interactions pattern: A way of writing code which requires that interactions with external actors always happen at the end of each action.

So how did the attack happen?

The attack flow followed what we just described. In this case, Alice’s (the attacker) superpower was given by one of the currencies supported by the Lendf.me contracts, a tokenized version of Bitcoin known as imBTC. ImBTC is a bit different than, say, DAI or USDC: it implements a standard called ERC777 that allows for new functionalities while remaining backward compatible with the more common ERC20 standard.

One of the possibilities offered by the ERC 777 is the ability for each token holder to define an implementer: an entity that  allows token holders and recipients to react to token transfers. Here is Alice’s superpower: by defining a malicious implementer, she can get back in control of the flow while the Bank (in this case, the Lendf.me contracts) tries to collect the funds to deposit.

The caveat here is that the Lendf.me contracts (which are a slightly modified instance of the Compound V1 contracts) do not have any Reentrancy guard in place, and more importantly, they don’t follow the Checks/Effects/Interaction pattern, which makes them particularly vulnerable to attacks executed using the ERC 777 implementers.

Using the strategy described above, the attacker managed to alter the accounting books of the Lendf.Me contracts. At some point, he had so many imBTC registered (but not actually deposited) in the protocol that he was able to borrow against them all the liquidity available. The contracts only check the accounting book and don’t verify if what is written in there matches the actual treasury: the attacker was in this way able to completely drain the contracts, stealing $25 million dollars worth of assets.

Gimme more data

Let’s dig into Etherscan: Apparently the attack started at 12:58 AM UTC, with this initial transaction:

Taking a look at the internal execution of the transaction, we can clearly see the reentrancy being performed on the supply() function of the MoneyMarket contract:

The doTransferIn() is the function executed during the supply() operation of the Lendf.me contracts

The attacker started to leverage the vulnerability using only 0.00021594 imBTC. He iterates the attack multiple times, to increase his imBTC balance and speed up the process.

After 12 minutes, he already had stolen 7 imBTC:

After 24 minutes, he had 290 imBTC, worth around $2 million dollars: he had depleted the imBTC reserve already, and he had inflated his balance to a point where he was able to borrow all the available assets.

After this transaction, the attacker proceeds to drain almost all the available assets in the protocol: 

Almost the whole stablecoin liquidity is depleted (a few hundred thousands were still available to borrow) but the big loot is not taken yet: 55K WETH, worth around $9 million. To be able to borrow it, the attacker keeps abusing the vulnerability. The last deposit of 250 imBTC is at 2:03 AM UTC, 1 hour 5 minutes after the initial attack.

He’s finally able to borrow all the available ETH:

The contract is now completely depleted. A few hundred thousands in stablecoins are still available, and the attacker proceeds to borrow most of them. The last malicious transaction is at 3:30 AM UTC, 3 hours 32 minutes after the initial attack.

The effects of the exploit are immediately visible on DeFi Pulse:

The Total Value Locked plummets to 0 in a matter of hours. The community in the meantime started noticing that something was off:

What was the dForce response to the attack?

The Lendf.me MoneyMarket contract was paused at 4:57:29 AM UTC, one hour after all the funds were drained. 

In the meantime, a big red banner “DO NOT SUPPLY” had appeared on the Lendf.me interface.

The aftermath of the attack accounts for the following stolen assets:

  • imBTC: 291.3471

  • WETH: 55,159.02134

  • WBTC: 9.01152

  • HBTC: 320.27714

  • CHAI: 77,930.93433

  • HUSD: 432,162.90569

  • BUSD: 480,787.88767

  • TUSD: 459,794.38763

  • USDT: 7,180,525.08156

  • PAX: 587,014.60367

  • USDC: 698,916.40348

  • USDx: 510,868.16067

For a total of around $24.6 million.

What happened after the attack?

The attacker proceeded to convert most of the currencies to different assets, including ETH, MKR, LINK, LEND and KNC. The swaps were executed using 1inch.exchange and Paraswap.

Attacker swapping 100K PAX for 528 ETH on 1inch.exchange

Stablecoins were supplied to Compound (USDC, DAI, WBTC) and Aave (USDT, TUSD, BUSD). The attacker borrowed around 1500 ETH on Aave using TUSD as collateral (USDT and BUSD are not enabled as collateral on Aave) but the loan was repaid shortly after. The attacker has currently around 13.5M assets in his wallet, mostly in ETH.

The hacker negotiates?

Interesting to note, 12 hours after the attack (2:12PM of April 19th) the attacker sends the following transaction to the Lendf.me admin wallet, which has the ownership of the dForce protocol:

The encoded data shows the message “0xBetter future”. After that, the attacker sends 126K USD worth of PAX to the Lendf.me admin wallet:

Clearly a sign of peace (PAX means peace in Latin). The dForce answers with an email, “0xcontacts@dforce.network”

The attacker has probably contacted dForce at this point. A few hours later this message:

It shows that there was likely contact between the parties involved. After this message, the attacker returned the HBTC and HUSD stolen, worth ~$2.8 million:

The last message sent by the dForce team doesn’t have the same friendly tone as before however: “Contact us. For your better future.”

The same communication channel has been used by many dForce users who are paying the price for the stolen funds. This is one particularly dramatic example:

The aftermath

After returning the HUSD and HBTC, no further actions have been executed by the hacker. Situation seems to be on hold: is likely going to evolve in the next few days, in one way or the other. 

The end

After returning the HUSD and HBTC, no further actions were performed by the hacker until today, when all the funds were swiftly returned:

We can only guess what happened, there are multiple hypotheses – from the hacker leaking important data about his identity, to the hack being a “gray hack” in the first place (where the hacker breaks some ethical standards but doesn’t have malicious intent). I guess we will never know.

What do we learn from this

There are multiple lessons to be learned from the events that happened during the last weekend. The first lesson for developers is to never, ever underestimate how risky interacting with external, untrusted contract can be. In the Compound V1 contracts developers clearly considered the transferFrom() of the ERC20 standard as sufficiently trustable. Which is true for the vast majority of legit assets in the Ethereum ecosystem, but is unfortunately not true for certain classes of assets that might implement other standards, like imBTC.

Probably part of the problem is related to dForce using the Compound V1 contracts and listing imBTC before doing a comprehensive security assessment. The potential attack surface provided by ERC 777 tokens was disclosed to the public at least since July 2019, when OpenZeppelin provided this proof of concept of the Uniswap attack, which ironically was executed one day before the Lendf.me hack.

Also, Lendf.Me were also paused well after the attack was terminated: my personal opinion is there was margin for better reaction times, but hindsight is always 20/20. What is certain is that the Q1 of 2020 has been a devastating quarter for DeFi: Between the bZx attack, the MakerDAO 0 bid auctions that caused a leakage of collateral worth 8M, the Uniswap attack and this one, there is clear proof that DeFi requires better security standards and procedures. We know that DeFi is still very experimental and there is a wide margin of improvement, but the users need to be conscious that providing liquidity to DeFi is not a 0 risk game. Thankfully, at least this time we have a happy ending.


The Defiant is a daily newsletter focusing on decentralized finance, a new financial system that’s being built on top of open blockchains. The space is evolving at breakneck speed and revolutionizing tech and money. Sign up to learn more and keep up on the latest, most interesting developments. Subscribers get full access at $10/month or $100/year, while free signups get only part of the content.

Subscribe now

Click here to pay with DAI.There’s a limited amount of OG Memberships at 70 Dai per annual subscription ($100/yr normal price).

About the author: I’m Camila Russo, a financial journalist writing a book on Ethereum with Harper Collins. (Pre-order The Infinite Machine here). I was previously at Bloomberg News in New York, Madrid and Buenos Aires covering markets. I’ve extensively covered crypto and finance, and now I’m diving into DeFi, the intersection of the two.

Steps Towards Radical Management: DeFi Giant Compound Hands Over Control to Token Holders

https://thedefiant.substack.com/p/steps-towards-radical-management

Hello Defiers and happy Friday! Here’s what’s going on in DeFi:

  • Compound rolls out decentralized governance

  • Gnosis Protocol and 0x’s Matcha are latest to join the crowded Dex party

  • Atomic Loans Tutorials: How to get a leveraged long position on Bitcoin in a trustless way, and how to lend Dai or USDC to get at least 5% returns

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Rather than Banning Stablecoins, Bankers Should Worry About Strengthening Their Own Currencies

https://thedefiant.substack.com/p/rather-than-banning-stablecoins-bankers

Hello Defiers! Here’s what’s going on in DeFi

  • Podcast with Loopring founder Daniel Wang released!

  • Bankers were just advised to tighten stablecoin regulation

  • DeFi Saver releases update to prevent another MakerDAO Black Thursday

and more:)

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🙌 Together with Ampleforth, a digital asset protocol for a base money which doesn’t require collateral and is uncorrelated with the rest of crypto.


The Defiant Podcast Episode 2: Don’t Trade Decentralized Money on Centralized Exchanges

Ever since Ethereum launched in 2015, there has been one over-arching concern hanging over developers’ heads: scalability. Loopring CEO and Founder Daniel Wang is using scaling solutions to build a protocol for non-custodial exchanges than can compete in throughput and cost with centralized exchanges. Is scaling on Ethereum solved? Listen up to what he has to say about that in The Defiant podcast’s second episode.


Bankers Advised to Tighten Stablecoin Regulations

The Financial Stability Board, which advises the G20 on vulnerabilities to the global financial system, yesterday published a document outlining 10 recommendations on how bankers should regulate stablecoins, which go from anti-money laundering sanctions to outright prohibiting these coins.

Takeways:

  • Stablecoin volume and use has become significant enough to prompt this document in the first place.

  • The best positioned stablecoins will be ones on the furthest end of the “decentralization spectrum”: Those that have gone to great lengths to comply with regulators, like USDC, and those that have minimized their reliance on third parties, like Dai.

  • Bankers should worry about making their local currencies and the global financial system more attractive to use than trying to ban digital assets.

Image source: fsb.org

Bankers are seeing potential in stablecoins

“The use of stablecoins as a means of payment or a store of value might significantly increase in the future, possibly across multiple jurisdictions,” the document said, even if it’s “currently contained.”

The Tether stablecoin is the third-largest cryptocurrency by market capitalization and the digital asset with the most trading volume, surpassing even bitcoin’s. Stablecoins are becoming enough of a threat that bankers are taking enough notice to consider draconian measures.

Stablecoins raise the following risks, according to the FSB:

If stablecoins are used as a store of value, variations in their value “might cause significant fluctuations in users’ wealth. Such wealth effects may be sizeable enough to affect spending decisions and economic activity.”

What about variations in government backed currencies? The reason why people might seek stablecoins in the first place is the erosion of value in their local currencies.

Large-scale flows of funds into or out of global stablecoins “could test the ability of the supporting infrastructure to handle high transaction volumes and the financing conditions of the wider financial system.”

The financial system currently handles trillions of dollars in transaction volume per day. Stablecoins would be just one more FX pair among the hundreds being transacted already.

“Macrofinancial risks may arise particularly if, over time, households and businesses in some economies (e.g. EMDEs) come to hold substantial portions of their wealth in GSCs [global stablecoins], rather than in local currencies. During periods of stress, households in some countries might come to regard GSCs as a safe store of value over existing fiat currencies and exacerbate destabilising capital flows.”

If people are choosing stablecoins as a store of value or means of exchange instead of their own local currencies, that’s probably because: fiat currencies are being devalued with reckless monetary/ fiscal policies, because governments are restricting access to other safe havens such the US dollar or gold, and because the global financial system is outdated, slow, expensive and cumbersome to use.

Currency Controls Don’t Work

Governments in developed nations looking to ban digital stablecoins is equivalent to authorities in emerging countries imposing currency controls when inflation and outflows spin out of control. It’s a patch solution, which historically hasn’t worked. People will find a way to protect their savings.

Wherever there are currency controls, there’s also a black market. The same would happen with stablecoins, except their digital nature makes circumventing regulation even easier.

Instead of looking to restrict or ban stablecoin use, authorities should be thinking about ways to strengthen their currencies or financial systems. But that would be naive to expect.

Decentralization Fixes This

In this context, the more a stablecoin depends on financial institutions to custody fiat currencies backing it and on centralized entities to issue, run and trade it, the easier it is to regulate and censor it. The more decentralized a stablecoin is, the harder it will be for countries to enforce regulatory actions on them. They could very well ban them, but the tools they have to make that ban effective will be reduced.

Authorities dictating what people can and can’t do with their money is exactly why a decentralized and open financial system is being built.

DeFi Saver Updates MakerDAO Collateral Automation

DeFi Saver, which provides an automated mechanism to manage collateral on MakerDAO, updated its system to prevent the events of Black Thursday ever happening again. The new version of the system, called Automation, can better react to MakerDAO price updates and supports “flash loans” to make sure loans maintain the right collateralization ratio.

Zerion Team Launches DeFi Market Cap

The team behind DeFi portfolio tracker and manger Zerion launched DeFi Market Cap, a website ranking the market capitalizations and other metrics specific to tokens of decentralized finance platforms. Total DeFi tokens’ market cap is at $1 billion.


The Defiant is a daily newsletter focusing on decentralized finance, a new financial system that’s being built on top of open blockchains. The space is evolving at breakneck speed and revolutionizing tech and money. Sign up to learn more and keep up on the latest, most interesting developments. Subscribers get full access at $10/month or $100/year, while free signups get only part of the content.

Subscribe now

Click here to pay with DAI.There’s a limited amount of OG Memberships at 70 Dai per annual subscription ($100/yr normal price).

About the author: I’m Camila Russo, a financial journalist writing a book on Ethereum with Harper Collins. (Pre-order The Infinite Machine here). I was previously at Bloomberg News in New York, Madrid and Buenos Aires covering markets. I’ve extensively covered crypto and finance, and now I’m diving into DeFi, the intersection of the two.

The March Market Crash “Was a Test for Maker and DeFi; It’s Fair to Say The Test Was Passed:” Rune Christensen [podcast]

https://thedefiant.substack.com/p/the-march-market-crash-was-a-test

Hello Defiers! This week’s interview is with Rune Christensen, the founder of MakerDAO, the largest lending platform by assets in decentralized finance and the issuer of the Dai stablecoin. Rune has been in crypto since 2011 and is no stranger to volatility and crazy market conditions. Still, last month was the most shocking for him yet. On March 12th, …


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MKR Whale Emerging from Auction Adds Urgency to Delegated Voting

https://thedefiant.substack.com/p/mkr-whale-emerging-from-auction-adds

Hello Defiers and happy Friday! Here’s what’s going on in DeFi:

  • MakerDAO auction concludes successfully, with Paradigm buying up most of the MKR sold

  • DeFi10 portfolio is recovering after market crash, beating Bitcoin YTD and other risk assets

  • EOS partners with Bancor to launch DeFi platform

📢 Help me scale up The Defiant team by donating to my Gitcoin Gran…


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Dai Lost Leading Position Among Non-Tether Stablecoins After Market Meltdown

https://thedefiant.substack.com/p/dai-lost-leading-position-among-non

Hello Defiers! Here’s what’s happening in DeFi:

  • Dai has lost its leading positions among non-Tether stablecoins after last month’s market meltdown, Covalent’s Ganesh Swami writes in the Flippening Series, Part 3

  • MakerDAO founder Rune Christensen just shared details on how the Dai issuer plans to increasingly decentralized governance

  • Keep Protocol raises $…


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“If Anyone Were to Question the Utility of Ethereum – Simply Point Them to This Chart”

https://thedefiant.substack.com/p/if-anyone-were-to-question-the-utility

Hello Defiers! Lots going on in decentralized finance today:

  • The Flippening Series Part 2, with Ganesh Swami of Covalent: Complex Ethereum transactions on track to overtake simple transfers

  • MakerDAO makes radical governance move

  • Uma’s “priceless” token

  • Balancer Labs’ $3 million seed round

  • DeFi Saver’s MakerDAO auctions dashboard

  • Coinbase Wallet integrates De…


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Ren is Just Weeks Away From Bringing Bitcoin to DeFi, Says Loong Wang, the Project’s CTO

https://thedefiant.substack.com/p/ren-is-just-weeks-away-from-bringing

Hello Defiers! This week’s interview is with the CTO of Ren Project, one of the teams at the forefront in the effort to bridge different blockchains, and bring Bitcoin to decentralized finance in a trustless way. Loong Wang says RenVm is only a few weeks away from going live, and once it does, it will strengthen DeFi by adding different types of collate…


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Case for an Open Economy Strengthens as Pandemic Prompts Authorities to Tighten Grasp

https://thedefiant.substack.com/p/case-for-an-open-economy-strengthens

Hello Defiers! hope you’re having a great day. In today’s issue:

  • I explore how crises highlight how much power centralized institutions have over us, strengthening the case for a more decentralized future
  • Uniswap reveals V2 details, including flash swaps and improved price feeds
  • Dharma last week announced P2P payments
  • MakerDAO is close to raising enough Dai to heal bad debt

? Also, help me scale up The Defiant team by donating to my Gitcoin Grant! Just 1 Dai goes a long way 🙂

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Crises Strengthen Case for Decentralized Future

Extreme situations, such as the global pandemic we’re living in, highlight just how much control institutions have over individuals, and how they’ll use it when generalized fear erodes the usual checks and balances.

We’re not speculating about the power of central banks to print infinite amounts of money, they’re actually doing it. We don’t have to theorize about governments limiting personal liberties, they already are. We don’t have to imagine that corporations can censor their users, they’re cracking down.

By seeing these actions unfold, some may want to consider an alternative.

Photo by Robynne Hu on Unsplash

Governments Tighten Grasp

China is the clearest example of how governments will strengthen their grasp on their people in a crisis. Individual liberties, which are already limited in the authoritarian state, have been curtailed further with movement and travel bans, entire cities sealed off, and public transport shutting down. Authorities in the Hubei province, in an effort to identify and quarantine infected citizens, ordered pharmacies to report the name, address, and other personal details of people who bought fever and cough medicine.

But it’s not just China. The US government wants to have the ability to ask chief judges to detain people indefinitely without trial during emergencies, according to Politico. And while everyone’s distracted with the deadly virus, lawmakers are seeking to pass a bill which would ban strong encryption and make tech companies responsible for content users post on their platforms, limiting free speech and privacy.

Central Banks’ Printing Press

Central banks’ response has been drastic too. Bankers from the US, to Europe and Japan have slashed already low interest rates and approved unprecedented stimulus measures, including buyings ETFs and pledging to pour unlimited cash in the economy through bond purchases. This has often been met with government fiscal stimulus and corporate bailouts. Even so, markets have continued to slide because the bottom line is: For stimulus to work, there needs to be something to stimulate, and the global economy is shut down. Without demand to borrow, invest and spend, the cash central banks are pumping in the economy risks inflating prices and devaluing currencies, instead of boosting growth.

Over-Reaching Companies

With markets in free-fall, false information feeding a panicking public, and diverging views on how to best handle the pandemic, corporations and financial institutions have often chosen to restrict personal freedoms too. Banks in Poland limited foreign currency withdrawals, while there were reports that some US and German branches were also restricting how much cash clients could take out. Medium took down a post which argued the public is over-reacting to coronavirus, while Messari founder Ryan Selkis said he has been shadow banned from Twitter and his company’s MailChimp account is experiencing degraded service for his coverage on coronavirus.

In all these cases, power that’s been centralized at the top of a few entities is harming individuals. Cryptocurrencies, Web3 —a blockchain-based and more decentralized version of the internet— and open finance can offer a way out.

Independent Money

As central banks devalue their currencies, cryptocurrencies offer an independent monetary system, which doesn’t depend on bureaucrats in a room deciding to create currency out of thin air. In the case of Bitcoin, there’s a limit to how much coins will ever be created, in the case of Ethereum, monetary policy is the minimum issuance to secure the network. In the case of Dai, the stablecoin is always over-collateralized with other digital assets.

The near-zero and negative rates can be complemented with investment alternatives in decentralized finance, where rates currently are many times those in the developed world. That’s because the system is risker and less liquid, and also because it’s global, matching borrowers and lenders from different economies.

DAOs & Open Source

In the case of over-reaching corporations, decentralized autonomous organizations are able to create more democratic structures, where there are lower barriers to owning a piece of the organization and participating in its governance. DAOs’ rules written in code and can’t be change, unless its owners agree. Blockchain-based apps built on open source protocols will limit censorship, as some information will be stored on-chain, and platforms will be more easily replicated, giving users greater leverage. A great example is what’s happening with the Steemit social media Dapp: a large part of the community split from the project after co-founders sold it to Justin Sun, the founder of the Tron blockchain.

Some are already taking advantage of the immutable and permissionless qualities of blockchain technology to fight censorship from the Chinese government surrounding the virus: pieces of code were uploaded to the Ethereum network in the shape of a monument of Dr. Li Wenliang, the whistleblower of China’s coronavirus outbreak.

Virtual Life

Finally, a lasting effect of being locked up at home for weeks might be a greater propensity to work remotely and live generally more virtual lives. Museums are opening virtual exhibits, comedy clubs are streaming performances, even tour guides are offering virtual strolls through Central Park. This will get people to dip their toes in the water of virtual reality, and it will be just a small step from there to creating an avatar for Cryptovoxels or Decentraland.

Maybe one of the lessons of this crisis will be that some people will start to think it’s not so crazy to want to hold at least part of their savings in a system that’s completely independent from their central bank and government. They’ll understand why decentralized organizations and open source applications can better safeguard their liberties. And if they’re not, why it’s important that it’s easier to leave. Even if most are happy to go back to the way things were, at least some will know, there is an alternative. And even if they’re stuck with repressive governments, they can always go to a freer world, where no one can touch their digital assets, from Bitcoin to CryptoKitties.

Uniswap Unveils V2 With Flash Swaps, Potential Protocol Fees and Better Price Feeds

Uniswap yesterday announced details of its highly anticipated second iteration, or V2, which it expects to launch in the second quarter, pending a successful formal verification. Developers can already start building with Uniswap V2 on different Ethereum testnets. Uniswap V1, a venue for pooled, automated liquidity on Ethereum, will continue to work “for as long as Ethereum exists,” Uniswap co-founder Hayden Adams wrote in a post.

These are the main user-facing features of Uniswap V2:

  1. ERC20/ERC20 pools: In Uniswap V1, all liquidity pools are between ETH and a single ERC20 token, allowing  users to swap any ERC20 for any other ERC20 by routing through ETH, the most liquid Ethereum-based asset.

    The introduction of ERC20 token/ERC20 token pools “can be useful for liquidity providers, who can maintain more diverse ERC20 token denominated positions, without mandatory exposure to ETH,” Hayden wrote.

  2. Improved price feeds: Uniswap V2’s price feeds are harder to manipulate as they accumulate historical data, allowing external smart contracts to create gas-efficient, time-weighted averages of Uniswap prices across any time interval.

    “Despite closely tracking the real-world price most of the time, Uniswap V1 cannot be used safely as a price oracle because the price can move significantly in a short period of time,” the post said.

  3. Flash swaps: Similar to flash loans on other protocols, Uniswap V2’s flash swaps allow users withdraw as much of any ERC20 token as they want without upfront costs. They can then use those tokens for whatever they want provided that by the end of the transaction execution, they pay for or return all the tokens withdrawn. A 0.3% fee for liquidity providers is paid when tokens are returned.

    “Flash swaps are incredibly useful because they remove upfront capital requirements and unnecessary constraints on order-of-operations for multi-step transactions that use Uniswap.

  4. Potential for protocol fees: At launch, the protocol charge will default to 0, and the liquidity provider fee will be 0.30%. If the decentralized governance process deployed after the Uniswap V2 launch decides to turn on the protocol charge, it will become 0.05% and the liquidity provider fee will be 0.25%.

    “This feature, including the exact percentage amounts, is hardcoded into the core contracts which remain decentralized and non-upgradable,” the post said. “Without any additional growth, it will generate more than $5 million in liquidity provider fees this year. If the protocol charge was on, ~$830,000 of this would instead go to a decentralized funding mechanism used to support contributions to Uniswap and its ecosystem.”

Dharma Announced P2P Payments

Blockchain-based lending platform Dharma on Thursday announced users will be able to make peer-to-peer money transfers on its app. Because Dharma uses cryptocurrencies, payments can be between any two people in different parts of the world, unlike other payment apps like Venmo or Lydia. Deposits on Dharma, which can be made via debit card wherever Wyre is available, gain interest from Compound Finance lending pools.

MakerDAO Close to Raising Enough Dai to Heal Bad Debt

MakerDAO has raised 4.3 million Dai at MKR auction, compared with a total 5.6 million of underwater loans the system needs to pay off. About 17k MKR has been sold at declining prices, with the latest highest bids going for ~230 Dai, compared with ~$270 current MKR price, according to Dune Analytics.

Image source: Dune Analytics.


The Defiant is a daily newsletter focusing on decentralized finance, a new financial system that’s being built on top of open blockchains. The space is evolving at breakneck speed and revolutionizing tech and money. Sign up to learn more and keep up on the latest, most interesting developments. Subscribers get full access at $10/month or $100/year, while free signups get only part of the content.

Subscribe now

Click here to pay with DAI.There’s a limited amount of OG Memberships at 70 Dai per annual subscription ($100/yr normal price).

About the author: I’m Camila Russo, a financial journalist writing a book on Ethereum with Harper Collins. (Pre-order The Infinite Machine here). I was previously at Bloomberg News in New York, Madrid and Buenos Aires covering markets. I’ve extensively covered crypto and finance, and now I’m diving into DeFi, the intersection of the two.

Recap: DeFi Week of March 16 ?

https://thedefiant.substack.com/p/recap-defi-week-of-march-16-

Hello Defiers! Hope you’re having a great, self-isolated weekend 🙂

Summing up: The past week was all about the aftermath of ether’s +40% crash on the previous week and MakerDAO’s crisis, which resulted from that. The largest lending platform in DeFi cut borrowing rates to 0.5% and lending rates to 0%, and added USDC as collateral, to increase the Dai stablecoin liquidity. It also started to auction off its governance token MKR to raise enough Dai to cover the its bad debt, which resulted from the ether sell-off as the system to liquidate underwater loans broke down. While a flurry of measures have been taken, vault owners who got their entire position liquidated are wondering whether they’ll get compensated. As a result of the crisis, financial dapps had record activity, according to DappRadar. In non-MakerDAO and ether crash news, Alethio dug into its latest DeFi ecosystem map, which shows exploding growth. Ganesh Swami, co-founder of data firm Covalent, posted his first installment of our Flippening Series, where he’ll dig into the metrics which pulled him back to crypto and Ethereum when he was on his way out. And there’s more!

And this was just one week. Subscribe so you get the latest DeFi news and analysis straight to your inbox and you on’t miss a thing. Free-signups get partial content, paid subscribers (only $10/month, $100/year) get everything.

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Op-Ed Monday

DeFi Web Grows Amid Exploits and Market Turmoil

Alethio, a ConsenSys-backed data analytics firm, has mapped the DeFi ecosystem since it just started to emerge in 2018. Its latest update shows a growing, interconnected web of users in a galaxy that’s lighting up with new platforms. Alethio digs into its findings from the most recent map, and how it found that the ecosystem has grown in three key aspects: scale, diversity and connectivity.

Interview Wednesday

“I Feel Betrayed (…) This is Not the Decentralized Future We’re Hoping For,” Says MakerDAO User

The biggest losers of MakerDAO’s black Thursday are arguably Dai borrowers who got their entire collateral —about $5 million worth of ether— liquidated as ether plunged. While the DeFi community has come together to make sure there’s a buyer of last resort for MKR, somewhat limiting MKR token holders’ losses, there hasn’t been a decision on how and if collateral holders who lost 100% of their funds will be compensated. In this interview, one of the vault owners who got liquidated explains why he’s been put off MakerDAO and possibly all of DeFi.

Thursday

Dives

  • Part I of the Flippening Series with Covalent’s Ganesh Swami: How Climbing Mt. Everest Drove One Disillusioned Entrepreneur Back to Crypto

  • Dai Health Improves After MakerDAO’s Drastic Measures: It’s been two days since MakerDAO slashed rates and welcomed USDC into its system, a controversial move regarded by some purists as going against Dai’s very reason for being. Still, DeFi has kept defying and Dai health is improving.

Sums

  • MKR Climbs Ahead of Today’s Auction: MakerDAO’s governance token MKR is climbing as the system prepares to sell newly minted tokens to refinance bad debt resulting from last week’s ether sell-off.

Wednesday

Sums

  • Developer Builds Tool to Make Aave Liquidations Easy: iEarn Finance founder Andre Cronje built an interface to make it easy to liquidate loans on lending platform Aave.

  • Billionaire Bitcoin Bull Tim Draper Investing in DeFi: Billionaire bitcoin bull Tim Draper’s Draper Goren Holm Ventures is investing in DeFi Money Markets DAO (DMM DAO) in the form of DMG.

Bytes

Tuesday

Dives

  • MakerDAO’s Drastic Times Call for Drastic Measures: MakerDAO, which makes up roughly half of DeFi, has millions in bad debt resulting from ether plunging more than 40% last week, and is scrambling to contain damages with drastic measures.

Sums

  • Ether Plunge, MakerDAO Crisis Spur Record Dapp Activity: It’s not all bad news in Ethereum as ether plunged for than 40% and MakerDAO deals with its liquidity crisis —activity on some decentralized applications is surging to the highest ever.

Bytes

  • Coronavirus Spurs Virtual NY Blockchain Week


💜Community Love💜

Thanking all the amazing Defiers for the support and love this week (and always)!


The Defiant is a daily newsletter focusing on decentralized finance, a new financial system that’s being built on top of open blockchains. The space is evolving at breakneck speed and revolutionizing tech and money. Sign up to learn more and keep up on the latest, most interesting developments. Subscribers get full access at $10/month or $100/year, while free signups get only part of the content.

Subscribe now

Click here to pay with DAI.There’s a limited amount of OG Memberships at 70 Dai per annual subscription ($100/yr normal price).

About the author: I’m Camila Russo, a financial journalist writing a book on Ethereum with Harper Collins. (Pre-order The Infinite Machine here). I was previously at Bloomberg News in New York, Madrid and Buenos Aires covering markets. I’ve extensively covered crypto and finance, and now I’m diving into DeFi, the intersection of the two.

How Climbing Mt. Everest Drove One Disillusioned Entrepreneur Back to Crypto

https://thedefiant.substack.com/p/how-climbing-mt-everest-drove-one

Hello Defiers! I’m excited to announce The Flippening Series with Ganesh Swami, co-founder of Covalent, which provides blockchain data for businesses and investors and created an easy way to track an Ethereum addresses’s P&L. Ganesh is also a deep thinker in the space, and has written about staking yields, the data availability gap, the nuance in the v…


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