Funds locked in DeFi surge $1B as analyst tips post-election bull run

https://cointelegraph.com/news/funds-locked-in-defi-surge-1b-as-analyst-tips-post-election-bull-run

Crypto collateral locked in DeFi protocols has surged to an all-time high over $12 billion.

Following a six week cooling-off period for the majority of decentralized finance protocols, the DeFi bulls are back in action as total value locked surges to new record highs.

The amount of crypto collateral locked across various DeFi protocols has hit a new all-time high of $12.3 billion according to DeFi Pulse.

In just 48 hours, over one billion dollars has been added to the total USD value, although precise figures vary on other analytics platforms such as Coingecko and Coinmarketcap.

TVL on Coingecko’s tracker reports it to be around $11.6 billion. The increase follows Bitcoin reaching a new 2020 high of $13,200 on October 21, which was prompted by the PayPal crypto payments news.

Coingecko reports the total DeFi market capitalization — as distinct from TVL — for all tokens, including the DeFi-adjacent Chainlink, is at $14.3 billion. That’s an increase of $2 billion in the DeFi marketcap over the past 48 hours.

DTC Capital head, Spencer Noon argues that the bull market for decentralized finance will soon enter round two:

Noon commented that many yield farmers have simply moved back to BTC after making months of solid gains and he tipped the election as the catalyst for a second DeFi boom:

“The likely inflection point for DeFi Bull Phase 2 is the election, where there are multiple outcomes that would be favorable for risk assets.”

The PayPal news and general upturn in crypto markets has resulted in numerous DeFi coins making solid gains in the past 24 hours including Airswap, Aave, Synthetix, and Curve.

A factor driving TVL is the increase in the prices of DeFi tokens used for staking, including Ethereum, as many of the liquidity pools are ETH based. Over the past 48 hours, Ethereum prices have increased 12% to reach a six week high of $415.

But according to Messari’s DeFi Returns Index, which measures performance of the top 46 DeFi assets, many DeFi tokens are still down over 40% over the past month. The biggest losers include tokens from Meta, bZx, Augur, SushiSwap, Swerve, and Curve.

StrongBlock launches DeFi protocol but token prices slump 70%

https://cointelegraph.com/news/strongblock-launches-defi-protocol-but-token-prices-slump-70

A new DeFi protocol has been launched rewarding node operators to improve public blockchain performance, but token prices have tanked

Just-launched DeFi protocol StrongBlock has announced the integration of Chainlink oracles — however its native token’s price tumbled 70% today. 

The platform, founded by former members of the original EOS core team, was launched on Sept. 29. StrongBlock says that low quality and insecure blockchain nodes can be unreliable and provide erratic market data, especially if they get out of synch. The protocol’s core concept is to shift the emphasis away from rewarding validators, to rewarding node security, as a way to improve public blockchain performance.

Bitcoin Cash evangelist, Roger Ver, gave the project a shout out:

Mining rewards are in the form of Ethereum and Chainlink tokens and StrongBlock announced Sept. 30 it had integrated Chainlink’s price oracles for LINK/ETH and ETH/USD to determine the prices of its own token called STRONG.

With a total supply of 10 million STRONG, around 4.89 million have been allocated to the shareholders, founders, and team. A third of this allocation was unlocked along with the DeFi protocol launch and it appears some are being dumped. Following an initial surge from $180 to $275, STRONG prices have tanked over 70% today to $66 according to Uniswap.info.

StrongBlock, launched its Blockchain-as-a-Service platform in February 2020, and selected the Ethereum network due to the network effects of the blockchain hosting the majority of DeFi platforms. The move has raised eyebrows however, as it was founded by members of the original EOS core team and Block.one company executives.

CEO and co-founder of StrongBlock, David Moss, acknowledged that Ethereum is the heart of DeFi at the moment, and that EOS does not have as much support at present. The protocol is looking for existing and new Ethereum full nodes to be listed in order to start earning mining rewards. A guide was published on September 24 to advise on the requirements of getting a node listed on the protocol.

DeFi projects rush towards Layer 2 as Ethereum clogs up

https://cointelegraph.com/news/defi-projects-rush-towards-layer-2-as-ethereum-clogs-up

Leading DeFi protocols are rushing to implement Layer 2 to ease the burden of high gas fees.

Decentralized finance (DeFi) protocols are racing to implement Layer 2 scaling solutions as Ethereum gas fees skyrocket and the network struggles under the demand.

Popular DeFi platforms including Uniswap, Aave, and Synthetix are gettin closer to rolling out the scaling solutions.

Synthetix, an on-chain synthetic assets protocol that tracks the value of real-world assets, is upgrading September 24 to a primitive version of L2 scaling.

According to a blog post by founder Kain Warwick the ‘Fomalhaut’ upgrade is the first phase of L2 migration to Optimistic Ethereum. It’s an incentivized testnet aimed at alleviating gas costs for small SNX stakers who have faced fees in the hundreds of dollars to collect weekly rewards.

A second upgrade called ‘Deneb’ is due on September 29 which also includes measures to reduce gas fees. Warwick added said:

“Both of these releases are direct responses to increased gas costs due to Ethereum congestion. Some of the changes are stop-gaps while we transition to Optimistic Ethereum but included in these two releases is the first step towards L2 Synthetix.”

The hybrid approach to L2 will likely take Synthetix through to the end of the year, he concluded. Optimstic rollups is a Layer 2 solution that scales Ethereum smart contracts and dApps up to 2000 transactions per second.

The world’s leading DeFi DEX, Uniswap is also working on a major upgrade with Uniswap V3. When asked earlier this year, Uniswap founder, Hayden Adams, said that V3 would ‘fix everything’ implying that L2 may be a big part of the upgrade.

There is already a basic demo of the L2 version of the token swap protocol running at unipig.exchange. Unipig was launched in October 2019 in collaboration with Optimistic rollups.

London based lending protocol Aave, which is the second most popular DeFi protocol in terms of total value locked, is preparing the launch of version two of the platform which will streamline operations in order to reduce transaction fees.

In a blog post last month, Aave stated that its ‘aTokens’, which are minted to represent crypto collateral assets on the platform, will integrate EIP 2612 for gasless approvals. The Ethereum Improvement Proposal (EIP) enables transactions involving ERC-20 operations to be paid using the tokens themselves rather than gas accruing ETH.

“The short term objective is to push on the aToken adoption, and Aave is actively researching on bringing them to L2.”

The post did not give further details on which L2 solutions it would be adopting or a time frame for the launch of Aave v2.

Ethereum Traders Dumping But DeFi Farmers Hungry For ETH Yields

https://coingape.com/ethereum-traders-dumping-defi-farmers-hungry-eth-yields/

Ethereum

Ethereum prices have dumped almost 15% over the past 24 hours as traders hit the sell button, but liquidity in high yield ETH vaults has increased over 44% in the roughly same period.

Ethereum prices have retreated almost $100, or 20%, since their 2020 and two year high on Tuesday, September 1. At the time of writing, prices had settled at just over $385 where August support levels were holding.

The market dump has been largely induced by big brother Bitcoin which slumped below five figures recently after failing to break the $12k resistance barrier again.

As day traders take profits and the correction continues, the opposite appears to be happening to Ethereum yield farmers who are flocking to Yearn Finance’s recently launch yETH vaults.

yETH Vaults Survive The Slump

Dealing in DeFi is not without risk and the highest risk on Yearn’s yETH vaults is liquidation should the collateralization ratio on the MakerDAO contract that uses the ETH deposits drop below 150% following an Ethereum price slump.

Well, Ethereum prices have certainly slumped over the past day and the vault has survived due to rebalancing and the ability to pay down the debt.

Digital asset trader Andrew Kang gave a big thumbs up to the innovative strategy as a number of rebalances resulted in 2.7 million Dai being used to pay back the collateralized debt position.

Yearn Finance posted that it had paused deposits after 70 million Dai had been minted.

“Deposits to yETH have been paused. ~70m DAI minted. Withdrawals unaffected. We will allow deposits again in the future. For now this is a high enough cap to balance between best profits and best risk adjustment.”

As reported by CoinGape yesterday, liquidity in the yETH vault reached $100 million, or 230,000 ETH on the first day. A day later that liquidity has surged by 62% in terms of Ethereum and is now at 374,000 ETH according to Yearn stats. In terms of USD value, it is up 44%, and that is taking into account the price drop over the past 24 hours.

Cronje Clears up The Confusion

Yearn Finance founder Andre Cronje has recently posted an article explaining how the yETH vault mechanism works in order to clear up some of the confusion surrounding the protocol.

In it, he explains how the yield is accrued, and associated risks such as the debts that normal vaults do not have. Despite these risks, it appears that Ethereum yield farming is growing in popularity regardless of what day traders are doing with the asset.

DeFi meme coin Hotdog dumps 99.9% in hours after launch

https://cointelegraph.com/news/defi-meme-coin-hotdog-dumps-99-9-in-hours-after-launch

Food themed DeFi project Hotdog dumps from $4,000 to $1 in five minutes.

The latest high-yield, food-flavored DeFi meme project, Hotdog, appears to have crashed and burned just hours after it was launched.

The latest high-yield promising food-flavored DeFi meme project, Hotdog, appears to have crashed and burned just hours after it was launched.

The newly cloned DeFi protocol called Hotdog promised insane returns up to one million percent APY in order to lure liquidity providers. It is yet another doppelganger of the popular token swap and liquidity platform Uniswap, and follows in the footsteps of the recently launched Sushi and Kimchi platforms.

HotdogSwap was launched on September 2, and provided a largely illiquid token which surged in price to over $5,000 according to the Uniswap analytics dashboard, Uniswap.info. According to the HotdogSwap dashboard, that token is now worth $0.0332 at the time of writing.

Image: hotdogswap.org

Image: Uniswap.info

A Reddit post shows how the token crashed from $4,000 to $1 in just five minutes. Twitter users such as ‘lowstrife’, and ‘Ivan on Tech’ posted about the huge dump.

Trader Edward Morra likened the crash to Bitconnect, posting examples of other spurious DeFi tokens that have taken a dive over the past 24 hours.

Similar to Sushi, Hotdog allowed liquidity providers to deposit Uniswap liquidity pool tokens to earn HOTDOG tokens which would entitle users to continue to earn a portion of the protocol’s fee, accumulated in the token, even if liquidity provision was withdrawn.

This cloned yield farming frenzy was instigated by Yam Finance, a clone of YFI which was the first to offer liquidity pools rewarding providers with the notion of 100% community-owned tokens. This opened the floodgates for other copycats of existing DeFi protocols such as Uniswap, to start their own websites, and generate their own often food-themed meme tokens to be offered as rewards.

Anyone can list a token on Uniswap so the market is created there by providing the new token and some ETH to give it initial liquidity. In her latest Defiant newsletter, industry expert Camila Russo adds;

“By controlling the supply of ETH relative to the token, they’re also able to set an inflated price for a highly illiquid token.”

DeFi traders that flock to these new insanely high yield offering projects are known as degenerate farmers or ‘degens’. They drive token prices up initially which also pushes up the yields. Cashing out quickly, as appears to have been the case with Hotdog, nets a big profit for a few while the rest get burnt. Many compare the projects to ponzi schemes, or pump and dumps.

How can DeFi projects avoid getting cloned and dying?

https://cointelegraph.com/news/how-can-defi-projects-avoid-getting-cloned-and-dying

Was the Uniswap fork that created SushiSwap a good thing for the DeFi sector?

Crypto startup investor and IDEO Managing Director Ian Lee has revealed how DeFi protocols can avoid being cloned and drained of liquidity by improving upon their design and governance from the start. 

When SushiSwap forked from Uniswap on Friday, August 28, it suggested the beginning of a wave of similarly cloned DeFi protocols due to their open-source natures. Projects that take years of research and development, undergo several security audits, and attract millions in seed funding can simply be cloned with little or no recourse.

In a blog on Substack, Lee said that by improving tokenomics and governance design, the protocol becomes more valuable. He also said that integrating into existing DeFi platforms and pre-planning upgrades to introduce better rewards and functionality and then rolling them straight out when a fork appears could also make existing protocols more resilient going forward.

He said today’s yield farmers want better rewards, a native token that increases in value over time, and protocol improvements that keeps the platform ahead of the competition. Give them that, and you can help ensure the longevity of your project.

It’s timely advice given that SushiSwap has managed to leach over a billion dollars in crypto collateral from Uniswap in just five days. It has done this by offering better rewards to yield farmers, in this case protocol ownership through SUSHI governance tokens which have also surged in price.

Uniswap was vulnerable because it does not have its own governance token yet and only offers a share of the 0.3% trading fee to its liquidity providers. According to the Sushiboard analytics platform, over 73% of Uniswap’s TVL (total value locked) has now moved over to SushiSwap.

Another primary difference is that Uniswap raised a significant amount of capital from VCs in a funding round whereas SushiSwap offers the rewards to its community owners. The venture capital funding model may need to be revised for future DeFi protocols.

But if you’re on the core team of a DeFi protocol and see someone trying to take over your patch, how should you respond? Framework Ventures co-founder, Vance Spencer, ran a Twitter poll giving three choices in the event of a forked protocol.

The majority of responses, over 70% at the time of writing, said they would embrace it rather than fight it or complain about it. Compound Finance CEO, Robert Leshner, agreed with the sentiment adding;

“Try to help them do it safely. Nobody wants a $100M+ DeFi disaster, and they’re forking the old stuff anyway.”

As DeFi evolves, forked protocols are going to be more commonplace so grudging acceptance could be the only answer.

DeFi Token Serum Surges 1500% in 12 Hours After Listing

https://cointelegraph.com/news/defi-token-serum-surges-1500-in-12-hours-after-listing

The DeFi boom continues with a new decentralized derivatives exchange token mooning hours after it was launched.

The latest DeFi token to moon is for the decentralized derivatives exchange Serum ,which surged by four figures following its launch and exchange listings.

The Serum Project is a new, non-custodial DEX that launched on August 11 and its native SRM token has since surged 1500%. The Serum Project is a collaboration between centralized derivatives trading platform FTX, and Solana, a low-fee, high-speed, interoperable smart contract blockchain. 

Launched less than 12 hours ago at the time of writing, the token has skyrocketed from the launch price of $0.11 to more than $1.80 according to tradingview.com.

DeFi token

listing on Binance also boosted token prices as four pairs were made available upon token launch. Trading volume for SRM has already surpassed $350 million in the first twelve hours, according to data from Coingecko. Fully diluted market capitalization for the latest DeFi darling is currently at $300 million.

In addition to Binance, SRM has now been listed on a number of other exchanges and DeFi protocols, including Uniswap, BitMax, HBTC, Balancer, TomoDEX, 1Inch, and its partner FTX.

Nuggets News CEO, Alex Saunders, congratulated the team on the successful launch, adding “I said it would pump from the hype alone but that makes it top 10 on day 1,”

A derivatives DEX

The newly launched Serum DEX will be powered by the SRM governance token which will be burnt each week to enable discounts on the platform. A maximum supply of 10 billion SRM has been allocated according to the official website, with the current circulation at about 160 million according to Etherscan.

The DEX will also feature SerumBTC and a SerumUSD stablecoin that will make it possible to offer physically settled cross-chain contracts. Staking is also available, with the amount needed to operate a staking node currently set at a million SRM, which has been denominated as 1 MSRM.

The epic surge in SRM prices immediately following its launch demonstrates that traders, investors, and speculators are still hungry for anything DeFi related.

DeFi markets have continued to hit new all-time highs in terms of total value locked, with the latest peak of $4.75 billion being reached on August 11 according to Defipulse.com.

Santiment Reveals Top DeFi Platforms by Development Activity

https://cointelegraph.com/news/santiment-reveals-top-defi-platforms-by-development-activity

Maker, Synthetic, Band Protocol, and Augur are the top DeFi platforms in terms of developer activity.

Santiment research has revealed that the top DeFi platforms in July in terms of development activity include Maker, Synthetix, Band Protocol, and Augur.

But it also revealed that some of the platforms that saw the biggest gains in price or locked collateral recently did not have much developer activity comparatively including Compound, Aave, Balancer, and Yearn Finance.

The report delved into the top ERC-20 projects (not exclusively DeFi projects) with the highest-recorded developer action using its own ranking system called Sanbase. It defines development activity as a demonstration of “month-to-month commitment in creating a working product, continuously polishing and upgrading features, and staying true to the long-term roadmap.” The top three ERC-20 projects were Gnosis, Status and Aragon.

Maker tops DeFi projects

Maker was the top DeFi platform for the month (at No.4) with several governance proposals being passed as the voting portal was upgraded, and new tokens and oracle feeds onboarded.

Synthetix came in second with several development milestones being achieved in July as it continually improves the platform in preparation for the launch of a branding refresh. There has also been a roadmap update which slated several improvements for the second half of the year and Synthetix is moving to decentralised governance.

Band proctol making progress

Cross chain oracle platform Band Protocol, which this week had its BAND token approved for listing on Coinbase Pro, came in third in terms of DeFi projects. The protocol has improved incentive systems and upgraded its oracle scripts which have helped it with a number of key partnerships recently.

Augur launched its v2 smart contracts and platform upgrade in late July which keeps it in the top ten according to the research. The final DeFi project in the list was the Keep Protocol which secures blockchain data for interoperability across the industry.

Messari: DeFi is Smaller Than Some Worthless Cryptos

https://cryptopotato.com/messari-defi-is-smaller-than-some-worthless-cryptos/

Messari crypto researcher, Ryan Watkins, has recently delved into the market values of the decentralized finance sector, comparing it to some of the other players in the crypto industry. He concluded that DeFi is still a minnow despite its massive growth in popularity this year.

The total value locked across all DeFi platforms is close to its all-time high of $3.71 billion, according to Defi Pulse. That epic feat has been achieved in less than two months, and this year alone, TVL has grown by 440%.

DeFi is Still Tiny

Comparatively, the total crypto market capitalization has only managed to gain 68% over the same period. As a percentage of the overall market cap for crypto, which currently stands at $324 billion, collateral locked into DeFi smart contracts represents just 1.13%.

Watkins compared the size of the DeFi platforms in terms of market cap and stated that combined. They’re worth less than Bitcoin Cash, which currently has a $5.3 billion capitalization. He added that it is an order of magnitude smaller than all of the Layer 1 blockchain projects, aside from BTC and ETH, combined, which are collectively worth $45.7 billion.

Worthless altcoins

Pretty much labeling the majority of altcoins worthless, Watkins added:

“The top 30 cryptoassets outside BTC and ETH is full of useless first-gen cryptocurrencies, ghost town “ETH killers”, and dead projects.”

Comparing individual DeFi platforms, he observed that even the meme coin, Dogecoin, was worth more than all of them with the exception of Maker. Doge currently has a market cap of $408 million, whereas Maker is only three places above it with $463 million, according to Coingecko.

Other DeFi protocol tokens from platforms such as Aave, Compound, Synthetix, Kyber, and 0x are smaller than the ‘useless’ Shiba Inu based token. The researcher went on to lambaste other cryptocurrencies labeling Litecoin as ‘dead,’ and IOTA as ‘unworkable.’ It is true that in terms of market performance at least, several high cap cryptocurrencies such as XRP, BCH, Litecoin, and EOS have managed very little this year.

Watkins concluded that DeFi doesn’t need new money flowing into crypto to continue its rise, adding that all it needs is a reallocation of capital.

The post Messari: DeFi is Smaller Than Some Worthless Cryptos appeared first on CryptoPotato.

DeFi’s Fairness Questioned as ‘Super Users’ Dominate

https://cointelegraph.com/news/defis-fairness-questioned-as-super-users-dominate

Super users on DeFi platforms soared 20% in Q2, while bot usage has also increased.

Massive growth in decentralized finance over the past three months has been accompanied by  a big increase in the number of ‘super users’ who dominate the sector.

Along with the prevalence of trading bots, it has raised questions over the fairness and openness of the DeFi ecosystem. Messari researcher, Mason Nystrom tweeted earlier today about the big jump in super users:

“DeFi super users (users with over 100 transactions) have grown nearly 20% in just three months. Uniswap alone grew 50% in Q2 and has 1625 super users.”

Citing the just-released ConsenSys quarterly DeFi report, the researcher noted that after Uniswap, Kyber had the next-largest user base with 916, and Compound ranked third with 367 super users. Those with less than 300 super users included Maker, Augur and Bancor. All up, there were 1,884 super users in Q2, up 18.8% from Q1..

The report defines super users as individuals who use DeFi platforms to a ‘more consistent and robust degree’. They may use advanced trading software, such as bots, to generate faster and more consistent profits (although this was not directly specified). Super users are likely to be those with more money to invest and those seeking quick returns on arbitrage opportunities or flash loans.

Regular Joes sidelined

Regular users by contrast make just a few transactions and usually leave their crypto locked up as collateral to take advantage of the interest and token distribution incentives. Skyrocketing Ethereum network fees recently may also put off regular users from making transactions as fees cut into a greater share of their profits.

The findings suggest that super users are using platforms such as Uniswap, to make multiple transactions for arbitrage purposes. The largest overlap in shared users is between Uniswap and Kyber with 15,099 overlapping users, an increase from 37% in Q1. Compound and Uniswap had 4,678 overlapping users for the period.

Is DeFi really fair and open?

The dominance of super users in DeFi raises questions of fairness. Synthetix founder, Kain Warwick touched on this issue in a series of Tweets yesterday suggesting that a fair and efficient market could lead to ‘unfair’ seeming results.

“Something that comes up fairly regularly in the Synthetix discord is the concept of efficiency + openness vs fairness. If a system is designed such that it is totally open, then players (e.g. liquidation bots) with a preexisting advantage will dominate, is that fair?”

Ultimately Warwick concluded that fair and efficient markets inevitably saw the big guys amass all the capita. “Many people associate fairness with equal outcomes, but efficient systems actually have a tendency to increase inequality,” he noted. “They favour the dominant players.”

Exploiting the system

In the latest edition of the Defiant, Camila Russo observed that the BZRX listing on Uniswap also appeared to be manipulated by those running bots. 

“Less than 60 seconds after the Uniswap liquidity pool was seeded, BZRX price jumped 12x … the main ‘winners’ were those running scripts to purchase BZRX in the same block it became available.”

It has also been suggested that the Ethereum network may have been ‘spammed’ to prevent others executing their transactions. DeFi is still in its infancy but with these trends already emerging it may not be the utopia for financial freedom that some are hoping for.