This Week In DeFi – August 12
This week, the US Treasury sanctions Tornado Cash, Ethereum PoW futures go live on BitMEX and the Curve Finance front-end gets exploited.
This week, the US Treasury has sanctioned decentralized mixing service Tornado Cash. The move accompanies claims that North Korea’s Lazarus group laundered almost half a billion dollars’ worth of crypto using the protocol.
Crypto infrastructure platforms Infura and Alchemy have also blocked users from accessing Tornado Cash, making it difficult for Metamask users to access the app’s default user interface. More recently, “decentralized” derivatives exchange dYdX has blocked addresses connected to Tornado Cash, calling into question the true degree of dYdX’s decentralization.
Ethereum’s potential Proof-of-Work fork chain has garnered enough attention to warrant a futures contract on derivatives-focused exchange, BitMEX. The exchange’s listing of ETHPOW futures for December 2022 will likely provide a good estimate of how much the possible fork’s tokens will be worth on the open market, should it attract enough attention.
The Merge is just over a month away according to tentative dates set by the Ethereum Core development team, who project a September 15 launch for the network’s Paris upgrade.
Unsuspecting Curve Finance users lost over half a million in funds, following an exploit of the protocol’s official website. The project’s DNS records were compromised by hackers, who redirected traffic to a copycat website. The imitation site then tricked users into signing malicious transactions, resulting in their wallets being drained.
DeFi blockchain Injective has raised $40 million from Jump Crypto, BH Digital and others, as it seeks to improve the adoption and utility of its native INJ token. Injective also seeks to build liquidity for existing DApps on the chain, as well as support new ones being built.
The chain is native to the Cosmos IBC network and already has backing from Pantera, Hashed and Mark Cuban.
Stablecoins continue to serve up drama in crypto land, this time surrounding USD Coin (USDC) issuer, Circle. The company has frozen user tokens associated with addresses on the US Treasury’s sanctions list – leaving users concerned about the vulnerability of their USDC tokens.
The most crucial response has come from the MakerDAO community, due to the Dai stablecoin’s partial backing by USDC tokens. The MakerDAO community has gone as far as considering eliminating its USDC exposure completely, in a potential return to its roots as a completely decentralized stablecoin, free from centralized risk.
The US Treasury’s move itself presents a much larger threat to the DeFi ecosystem, for the first time placing sanctions on a protocol rather than an individual or an entity. The precedent being set is a scary one, which could put any other protocol or platform at risk if it comes into contact with illicit funds. Given the permissionless nature of most of DeFi, this could involve almost any cog in ecosystem.
As anonymous pranksters begin to send ETH from Tornado Cash into celebrity wallets to tarnish them, we have a real mess on our hands, from a compliance perspective. Do these sanctions even make any sense? How will we filter out true illegal actors from innocent bystanders?
Regulation vs. crypto is getting tricky – and how it will turn out is anyone’s guess.
Highest Yields: Nexo Lend at 10% APY, BlockFi at 6.75% APY
DAI Savings Rate: 0.01%
Base Fee: 0.00%
ETH Stability Fee: 0.50%
USDC Stability Fee: 1.00%
WBTC Stability Fee: 0.75%
Highest Yields: Nexo Lend at 10% APY, BlockFi at 7.50% APY
Ethereum’s Third and Final Testnet Merge Goes Live on Goerli
Ban Banks From Holding Crypto, UN Development Body Says
Reddit's Community Points are migrating to Arbitrum Nova
Ethereum Layer 2s Could Take Revenue From the Blockchain as They Become More Competitive: Coinbase
Total Value Locked: $44.33B (up 10% since last week)
DeFi Market Cap: $53.30B (up 9.7%)
DEX Weekly Volume: $12B (no change)
DAI Supply: 6.94B (down 0.57%)
[Savannah Fortis – Cointelegraph] – Chainlink ditches Ethereum PoW forks for PoS after The Merge
[Jamie Crawley – CoinDesk] – Unstoppable Finance Raises $12.8M to Build DeFi Wallet
[Frederick Munawa – CoinDesk] – Polkadot Now Has a Decentralized Version of 'Wrapped' Bitcoin
[Osato Avan-Nomayo – The Block] – MakerDAO founder says it's 'almost inevitable' DAI will abandon USD peg