Ethereum (ETH) Locked By DeFi dApps Moves Past $1 B Mark

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Compound, Ethereum ETH

The amount of ETH locked by open finance, DeFi, dApps now exceeds the $1 billion mark according to streams from DeFi Pulse, a site that tracks the performance of financial dApps. A milestone for the emerging trustless finance sub-sector and most importantly Ethereum, from where most DeFi dapps are launched from.

DeFi and ETH Price: The Relationship

Lending rates in DeFi dapps remain high. Part of this is because ETH, which is the collateral required for borrowing loans, is an asset whose prices fluctuate.

When prices rise, instead of simply holding, investors can use the asset to earn above market rates. This could explain the swelling of the total amount of ETH locked in DeFi.

Interestingly, the spot price of ETH is positively correlated and syncs with the amount of coins locked by these apps.

It peaked in February 2020 when the price of ETH rose to over $280 (and amount locked in DeFi soaring to $1.2 billion) before dropping and halving to around $550 million in March 2020.

DeFi Pulse The DeFi Stats
DeFi Pulse The DeFi Stats

At this time, ETH prices were changing hands below the $120 mark triggering a wave of forced liquidations at MakerDAO.

Not only did borrowers lose their collateral but a resulting network congestion led to an $8 million loss because of a collateral auction hitch.

ETH 2.0 is Vital For Ethereum

Predictably, as ETH prices appreciate ahead of ETH 2.0 Beacon Chain mainnet, it is highly likely that the amount of ETH locked by DeFi dApps will continue to swell and even print new highs.

The success of the Beacon Chain mainnet, the foundation of ETH 2.0, is vital for the network and ETH prices since most apps prefer the network despite its scalability challenges.

Is Defi Disrupting Traditional Finance?

DeFi apps seek to disrupt the traditional finance system punctuated by centralized entities known for reaping big profits by charging exorbitant rates for borrowers.

As the tables turn and blockchain becomes mainstream, holders of digital assets like ETH or Tron, for instance, would lend their assets and even borrow funds for stablecoins pegged to the USD or any other reserve currency without the participation of the middleman.

The absence of the middleman gives DeFi dApps an edge and an advantage over traditional setups. Notably, that smart contracts drive processes and eliminate errors could be one factor that contribute to the expansion of the interesting financial application.

 

Over $7.3 Billion Worth of Stablecoins Being Secured by Ethereum (ETH), True Adoption?

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Ethereum Finality Gadget

Two months to the launch of ETH 2.0, statistics reveal that the Ethereum network, slow as it is, now secures over $7 billion worth of stablecoins.

Stablecoins are digital currencies tailored to minimize the effect of price volatility since digital assets are well known for their fluctuations. Technically, stablecoins act as a unit of account and most importantly, a reliable refuge as a store of value.

List of Stablecoins

The most common stablecoins include Tether (USDT), Gemini Dollar (GUSD), Paxos Standard (PAX), USD Coin (USDC), Binance USD (BUSD), DAI which is issued by the MakerDAO protocol, and Huobi USD (HUSD).

Most of these tokens are issued from the Ethereum blockchain. There are some which are based on the Tron blockchain, and the Omni Network.

Stablecoins-value-in-USD
USD Secured in Ethereum

Ethereum is Dominant

The smart contracting capability enabled by Ethereum has made it possible for several stablecoins including Tether, the world’s most capitalized, to proliferate. And backing this up has been a stellar 2019 where the benefits of DeFi were highlighted.

By Q1 2020, the total value of Ethereum (ETH) measured in USD terms held at DeFi dapps had exceeded $1 billion in February.

Because the Ethereum ecosystem is free from fiat influence as loans and interests are paid out in digital currencies and specifically the issuance of loans is in DAI, a stablecoin, the success of DeFi therefore means the wide adoption of stablecoins.

Tether (USDT) Flips Bitcoin Cash, USDT Market Cap to Pump

Stablecoins continue to be a key feature.

To measure its role, the world’s most valuable stablecoin, USDT recently flipped Bitcoin Cash (BCH). At the time of press, USDT had a market cap of $4.4 billion, exceeding BCH’s by $200 million.

Tether-USDT-Bitcoin-Cash
Tether (USDT) Flips Bitcoin Cash

Despite crypto asset prices stabilizing in the last few days, it is highly likely that USDT market cap and therefore liquidity will likely edge higher in days ahead.

The more BTC and ETH pump, the higher net-worth individuals shielding their privacy through Tether Limited will continue to pour into cryptocurrency through their preferred coin, USDT.

This means not only will USDT market cap rise but the issuer will remain dominant even as other stablecoins which are regularly audited and available on different ramps threaten to clip market share.

USDT has a market share exceeding 77 percent while year-to-date growth has been impressive at over 110 percent.

After Successful Validation of Genesis Block, Ethereum 2.0 “ETH Staking Reward Calculator” Launched

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ethereum

Barely a week after the genesis block of ETH 2.0 was successfully validated, the ball seems to be rolling following the launch of the network’s reward staking calculator.

There are several parameters that will be considered when calculating the annual yield but what’s important at this stage is to note that this calculator is based on ConsenSys Codefi’s ETH2 spreadsheet.

Also, variables and assumptions can be found on the Telegram channel @eth2calculator.

The Race For Scalability

Ethereum is the first smart contracting platform and with its inception, several projects have successfully launched to clip the platform’s market share without success. In the race to remain dominant and to stand out, competitors boast of a high throughput, a scalable platform with a different consensus algorithm that is energy efficient but still deemed to be centralized.

The delegated Proof-of-Stake consensus algorithm adopted by Tron and EOS, for instance, introduces the concept of Super Nodes called Super representatives and Block Producers, respectively.

This, critics say, is the ante-thesis of blockchain, a tech that is anchored on diffusing control and elements of centralization.

Ethereum 2.0 Will Be Scalable And Energy-Efficient

Still, Ethereum plans to shift away and will introduce a solution for scaling through Sharding and even layer-2 options. However, powering this network will be a Proof-of-Stake consensus algorithm, the same algorithm that is used by Cardano.

At that ideal stage called Serenity–which is estimated will be ready by 2023 after a thorough testing and a challenging transition, will introduce a scalable and energy efficient network suitable for an array of demanding applications like social media apps and so forth.

Notably, there won’t be any centralization.

To operate a validating node, a user will need to stake 32 ETH. This is roughly $6,000 at spot rates and unlike other models which demand thousands in validator or masternode, the potential of Ethereum as a leader in smart contracting and specifically the evolution of financial dapps within its network will be attractive for shrewd investors.

With 32 ETH for staking, the annual yield—assuming a node up-time of 99%, will be 14 percent.

ETH 2.0 Staking Calculator
ETH 2.0 Staking Calculator

21,958 Validators Sign Up for Topaz TestNet

Therefore, considering the above combination, it came as no surprise that there are 21,958 active validators 10 days after the launch of the Ethereum 2.0 Topaz TestNet.

ETH 2.0 Validators
ETH 2.0 Validators

This was launched on April 16 by Prysmatic Labs and replaces the Sapphire test network.

The aim of Topaz, at this stage, is to thoroughly test Phase 0—of the six stages, Proof-of-Stake protocol which will underpin Serenity. Instead of investing on expensive gear, the Proof-of-Stake model requires staking and earning annual rewards for transaction verification.

Scam Alert: This is How $300k in ETH Was Stolen From Uniswap, a DeFi DApp

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UniSwap-DeFi-Ethereum-ETH

An exploit on a liquidity pool in Uniswap, a DeFi, resulted in the loss of slightly over $300,000 in Ethereum (ETH).

The loss of $300,000 in ETH, an appreciating asset, is a big dent—and in the face of sophisticated hackers who understand the ins and outs of the protocol, more work needs to be done on the leaky DeFi roof.

What is Uniswap?

Uniswap is a decentralized protocol built on the Ethereum blockchain that facilitates the exchange of Ethereum and tokens via liquidity pools.

Instead of an order book, of which there have been claims of manipulation, the protocol leverages liquidity pool where participants earn money for supplying any amount of funds for liquidity.

Anyone can create a liquidity pool, which is a market, by providing an equal amount of ETH and ERC-20 token, and providing his ideal exchange rate.

Uniswap
Total Value Locked in USD

The imBTC Pool exploited

However, today’s exploit was different. Hackers targeted imBTC, a wrapped version of Bitcoin created by imtoken in partnership with Tokelon, a decentralized exchange, available at UniSwap.

The DEX acknowledged the attacked and notified the community that the funds on the imBTC liquidity pool was drained after the hacker utilized an attack vector on tokens derived from the ERC-777 standard on UniSwap.

Good news is that BTC held in custody wasn’t affected but imBTC transfers have been temporarily paused as the DEX evaluates the situation.

What is the ERC 77 Standard?

Like ERC 20, the ERC 777 is a standard.

Both co-exist in the Ethereum blockchain but the tokens bear different feature serving different needs. The standard is advanced by Jordi Baylina, Jacques Dafflon, and Thomas Shababi.

It seeks to improve some inefficiencies of the ERC-20 standard, popular because of its simplicity but underperforms because of its underpowered.

Still, it is backward compatible with ERC 20 tokens and adds “hooks” which are payable functions for tokens.

There are no payable functions in ERC-20 tokens meaning if one wants to exchange ETH for DAI, for instance, one must initiate a transaction to approve an infinite amount of DAI and another transaction to swap it for ETH.

This is because in the ERC-20 standard, code will only execute when they receive ETH, and not tokens.

Attackers took advantage of Hooks and stole $300,000 in ETH

Because of “hooks” enabled in the ERC 777 standard, there is no need of double transactions easing the free flow of funds between different dapps.

But it exposes dapps to re-entry attacks. Re-Entry attacks are not new as it was an exploit the DAO attacker used. This time round, the same exploit is possible with ERC 777 tokens.

And the attacker used it to steal $300,000 worth of ETH because before this attack, Uniswap V1 didn’t support but after the last upgrade to V2, it introduced ERC 777 support. It just didn’t take time for the attack to figure out the vulnerability and take advantage of it.

Ethereum Daily Active Addresses Jump Up to a 9-Month Highs after Black Thursday

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Ethereum ETH Dapp Activity

The number of Ethereum Daily Active Addresses (DAA) is at a 9-month high, bringing to light the resilience of the network and its users who continue to shuffle tokens even as the world’s economy hangs by a thread.

Notably, the rapid ascend is just a few days after the crypto and stock markets plunged. DAA is a metric that shows the level of network interaction.

“There has been an impressive rise over the past week and a half with a large increase in transactions taking place on the ETH network, and daily active addresses skyrocketed to approximately 395,000 DAA on Saturday, March 21st. This was a 9-month high, with a daily level last exceeding this mark in late June 2019 (when prices reached an annual high of around $336).”

Daily Active Addresses Soar in Ethereum

Each address is unique and the more there is shuffling, the more there is activity, a net positive considering ETH’s demand is directly proportional to how active its dapps are. Transaction fees are paid in ETH regardless of the ERC-20 token value.

Before the steep losses of Mar 12, the number of active addresses stood at 250,000 per day but rose to 395,000 by Mar 21, 2020.

Interestingly, this exceeds those registered on in late June 2019 when prices peaked before falling throughout the second half of 2019 to spot rates.

Recovery after losing $17 billion

ETH, the native token of the Ethereum network, lost $17 billion when prices dropped from $277 to lows of $112.

Ethereum ETH Market Cap Loss
Ethereum ETH Market Cap Loss

There were concerns that investors losing confidence and the rapidity of the free fall will trigger another wave of selloff that could push prices back to $70 or Dec 2018 lows. However, from price charts, ETH has found support, and the recovery has been swift.

Ethereum is one of the leading dapp platforms. As the pioneer, it continues to strive despite new iterations that are faster and scalable.

The Vitalik-led smart contracting platform, for instance, is a top choice for DeFi dapps and new users, according to a report, continue to flock to the network even in the face of scalability issues and worries of more chaos when the network finally transits from Ethereum 1.0 to Serenity.

At that stage, Ethereum will be more scalable and robust, enabling dapps to launch and compete with their centralized apps.