This Week In DeFi – June 24
This week, dYdX decides to ditch Ethereum scaling for its own chain on Cosmos, Solend stirs up governance drama and Uniswap steps into NFTs.
To the DeFi community,
This week decentralized derivatives platform dYdX decided to create its own applicaiton-specific standalone chain, as part of the Cosmos ecosystem. The move will also complete the decentralization of the platform – marking an important milestone for dYdX once the transition is complete. dYdX developers reasoned that no L1 or L2 solution they found could handle the throughput required to run a competitive trading engine, leaving Cosmos chain customizability as the best option for its needs.
Solana DeFi protocol Solend sparked controversy within the wider community after an attempt to take over a whales funds – an effort to avoid major issues from a large potential liquidation. The Solend team argued that the $108 million loan would be better liquidated over-the-counter, rather than via the on-chain mechanism with insufficient liquidity.
The team received a ton of backlash on the move, particularly after a single address made up 88% of the voting power to pass the proposal. In response to the community’s reaction, the protocol ran a second proposal to undo the initial vote, with 99% support for reversing the granted “emergency powers”.
Uniswap has decided to venture further into the NFT space with an acquisition of Genie, an NFT marketplace aggregator. Genie provides users with the ability to browse and transact with NFTs across multiple different NFT platforms, as well as batch-buy multiple NFTs within a single transaction. The acquisition also comes along with a surprise airdrop of USDC to previous Genie users.
Decentralized exchange Bancor has moved to pause impermanent loss (IL) protection within its protocol, after identifying large-scale sales of its native BNT token. The protocol had a mechanism in place to subsidize IL through newly-minted BNT token rewards, however it appears to have caused an acceleration in the fall of BNT price during the latest leg down in the market.
Hasu⚡️🤖 @hasufl@DeFi_Dad except Bancor doesn't *actually* reduce IL in any way. Like SUSHI, they just throw more incentives at the problem to compensate LPs. this strategy will always collapse at scale.
We've completed yet another week of turbulent market activity, beginning with a steep market drop over the weekend (and subsequent recovery!). Continued selling pressure and panic has provided an extended stress-test of platforms and protocols, both centralized and decentralized. Lending platforms in particular continue to bear the brunt of the market tension, suffering further from the contagion of the demise of TerraUSD and Three Arrows Capital.
Lending platforms Celsius and Babel Finance continue to face liquidity issues, while Voyager Digital has placed limits on customer withdrawals to prevent a run on accessible liquidity. On the decentralized side, Solana DeFi lending platform Solend almost went as far as throwing decentralization out of the window to manage the potential liquidation of its largest whale. Bancor was forced to turned off its impermanent loss mitigation mechanism, in an effort to save its native BNT token from catering in price.
As expected, the market is poking holes in the feasibility of all areas in the sector – exposing what is truly economically viable, and what is not. It is also revealing the true extent of decentralization (or lack of it) within many major projects in the ecosystem. Although painful for many stakeholders and developers alike, the lessons being learnt are extremely valuable, and they will effect the success and durability of our protocols moving into the future.
Thanks to our partner:
Highest Yields: Nexo Lend at 10% APY, BlockFi at 6.83% 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, Gemini at 7.99% APY
Total Value Locked: $39.52B (up 2.7% since last week)
DeFi Market Cap: $38.4B (up 9.1%)
DEX Weekly Volume: $19B (down 37%)
[Andrew Rummer and Adam Morgan McCarthy – The Block] – BlockFi secures $250 million bailout from FTX
[Michael McSweeney – The Block] – Harmony's cross-chain bridge hit by ETH theft worth nearly $100 million
[Aleksandar Gilbert – The Defiant] – Tether To Issue Sterling-Denominated Stablecoin
[Yogita Khatri – The Block] – Crypto lender Babel Finance announces steps to improve its liquidity situation