This Week In DeFi – July 8
This week, Aave looks to launch a stablecoin, Shiba Inu is expanding its ecosystem and MakerDAO lends to a legacy bank.
To the DeFi community,
This week, Aave Companies has submitted a proposal to the Aave governance forum for the creation of a new stablecoin, called GHO.
The GHO stablecoin would be over-collateralized in a similar fashion to Maker’s Dai, with users being able to mint the token against assets they have supplied to the Aave protocol.
Assets backing GHO would continue to earn yield while being used as collateral. Aave Companies says the vision behind the stablecoin would be to push adoption through Ethereum Layer-2 platforms.
Shiba Inu has detailed several new elements to be launched within its ecosystem, including new details on its own “SHI” stablecoin, a reward token (TREAT) and a new collectible card game. All three elements are intertwined on some level, with TREAT being tied to the card game, as well as “providing balance” to SHI.
Plans don’t stop there, with a Layer-2 protocol also in the works, dubbed “Shibarium”. The platform will have its own gas token (BONE) and will support native app creation and deployment.
MakerDAO governance has approved a proposal to allow US-based Huntingdon Valley Bank to borrow $100 million worth of DAI stablecoins, secured against off-chain loan assets.
HV Bank will eventually be permitted to borrow up to $1 billion DAI, with MakerDAO setting up a Delaware Trust to manage the collateral. The move is intended to bridge DAI to traditional finance, normalizing the connection of DeFi to the legacy system.
CeFi lending platform Nexo is moving to acquire its competitor, Vauld, who has become the latest crypto lending company to run into liquidity issues.
Vauld was forced to suspend customer withdrawals earlier this week and sought to restructure its company to weather losses. Nexo has signed a term sheet with the Singapore-based firm, which will provide Nexo with up to 12 months to perform due diligence before deciding to purchase Vauld.
Two important trends appear to be forming over the last few months:
Almost every project and platform appears to be launching and growing its own decentralized stablecoin
Almost every government appears to be attempting to regulate the creation and use of stablecoins.
The combination of these two trend is resulting in an interesting divergence, one that I have alluded to previously: An emerging "split" between DeFi and regulated crypto.
Whereas crypto was previously somewhat unregulated and flew under-the-radar, the space has finally become too large for governments and regulators to ignore. This is especially true of stablecoins, which now capture tremendous trading volumes and large-scale utilization – also proving to be much more useful for a variety of uses than regular fiat currency.
The jig may be up for centralized stablecoins, whose traditional banking components will now begin to be more ruthlessly restricted by regulators. The UK, EU and US central banks have all made stablecoins a primary focus in recent discussions, looking to contain a clear threat to their financial control, as well as investor safety (i.e. Terra USD). China has also ruled stablecoin payments for salaries illegal, as they continue to roll out their digital yuan.
As lawmakers scramble to put clamps on centralized stablecoin issuers, decentralized stablecoins continue to gain popularity as an alternative. Aave is the latest major platform to propose its own stablecoin, with a strong chance of success. Shiba Inu has released more details for a stablecoin too, also with some decent firepower behind their project. Add this to the likes of every other up-and-coming chain having its own stablecoin project, and its clear we have an entire new world of these tokens and mechanisms being tested in real-time.
The most major question on most people's minds may be, what will become of the centralized stablecoin giants, Tether and USDC? The likely answer is more regulation, more know-your-customer/anti money-laundering rules, and more surveillance. A garden-walled area of DeFi may be on its way, cut away from the truly-decentralized side of crypto.
How long will it all take? We might find out sooner than we realize...
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DAI Savings Rate: 0.01%
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Federal Reserve conference casts doubt on CBDC and dollar digitization
Genesis Trading CEO confirms 3AC exposure, parent company helps plug losses
Crypto owners banned from working on US Government crypto policies
Salary payments in USDT stablecoin ruled as illegal in the Chinese court
Total Value Locked: $41.37B (up 3.1% since last week)
DeFi Market Cap: $39.8B (up 11%)
DEX Weekly Volume: $12B (unchanged)
[Yashiu Gola – Cointelegraph] – Circle's USDC on track to topple Tether USDT as the top stablecoin in 2022
[Tom Carreras – Crypto Briefing] – Celsius Fully Repays MakerDAO Debt
[Brandy Betz – CoinDesk] – Aztec Launches DeFi Privacy Bridge Aztec Connect
[Timothy Craig – Crypto Briefing] – Ethereum Layer 2 Immutable X Launches ETH-to-Dollar Withdrawals