This Week In DeFi – November 25

This week, the FTX drainer dumps tens of thousands of ETH for BTC, Curve releases its stablecoin whitepaper, and MetaMask users outrage at IP data collection.

Nov 25, 2022

To the DeFi community,

This week, the FTX drainer account scared the Ether market as it dumped 70,000 ETH for renBTC, also making it apparent that the address was not the Bahamian government – but a hacker instead.

There were two primary wallets holding FTX funds, each holding hundreds of millions of dollars; one controlled by Bahamian authorities, and the other a hacker who stole funds at around the same time. At present, it seems that the much larger of the two wallets belongs to the hacker – contrary to what most assumed.

As a result, it appears that the hacker is laundering their proceeds through renBTC into mainnet Bitcoin, while the Bahamian government only seized a smaller portion of the exchange’s remaining funds.

ZachXBT @zachxbt

1/ I have seen a ton of misinformation being spread on Twitter and in the news about the FTX event so let me debunk the three most common things I’ve seen “Bahamian officials are behind the FTX hack” “Exchanges know who the hacker is” “FTX hacker is trading meme coins”

Curve finally released its stablecoin whitepaper to the public via GitHub, unveiling its new “LLAMMA” mechanism – an automated market-maker designed to smooth-out collateral liquidations in times of volatility.

LLAMMA enables the protocol to handle liquidations gradually with collateral price changes, rather than the large “block” liquidations seen in existing stablecoin models.

Despite the release, several questions still remain about the stablecoin’s supported collateral assets, its deployment date and more.

foobar @0xfoobar

Curve launched their stablecoin whitepaper today, called LLAMMA (lending-liquidating amm algorithm) Been thinking about how lending markets are linked to fickle dex liquidity, LTV params are similar to option pricing Both brilliant and simple, here's a quick explainer: 🧵

Curve’s stablecoin information release coincided perfectly – perhaps on purpose – with some major volatility in the protocol’s CRV token, which was at the center of a “trading strategy” using Aave.

One whale, reported to be Avraham Eisenberg, borrowed tens of millions of dollars’ worth of CRV against USDC on Aave. Eisenberg crashed the price of the token, which later rose dramatically and liquidated the lending position – leaving Aave with $1.6 million in bad debt.

TradingStrategy.ai @TradingProtocol

1/ THE HORSEMAN OF #DEFICALYPSE IS HERE! Yesterday #DeFi markets had an irregular day, as the famous trader @avi_eisen, known for very profitable trades, opened a massive $63M short for $CRV Curve token on @AaveAave. It did not go well. Keep reading. 👇👇👇

DeFi users are scrambling for alternatives after blockchain company Consensys revealed an update to their privacy policy, affecting the highly-popular MetaMask wallet.

ConsenSys disclosed that it is now gathering IP and wallet address data from its users, whenever they make transactions via their Infura remote call procedure service (RPC). Being the default RPC for the Ethereum mainnet, users are highly unhappy with the revelation that they will be involuntarily tracked.

Wu Blockchain @WuBlockchain

ConsenSys announced an update to its privacy policy on November 23 (including metamask infura and more): When you use Infura as your default RPC provider in MetaMask, Infura will collect your IP address and your Ethereum wallet address when you send a transaction.

Centralized finance drama once again overshadows the rest of DeFi, as further threats loom from large entities. This time, Digital Currency Group (DCG) is the at the center of attention, as its subsidiary Genesis seeks urgent funding to keep itself afloat – another victim of FTX contagion.

Due to the vast number of crypto sister companies under the DCG umbrella, there is significant concern that Genesis insolvency could spread across these other businesses. The most significant of these is Grayscale Investments, which some fear could end up having to wind down their gigantic institutional trusts: GBTC, ETHE and others.

It may be a stretch to suggest it as a possibility, but dissolving such investment vehicles could potentially result in the market being flooded with an extra supply of the most major cryptocurrencies.

Unlikely? Maybe. But if FTX has taught us anything, it’s that nothing is impossible in the crypto space.

The other key topic at hand this week is privacy, as MetaMask and Uniswap – two of the most popular tools in DeFi – reveal new privacy policies which harvest user data. Users are not happy with the news, which may begin an exodus from the once-favorite platforms.

We can expect an increase in DeFi user priority for security and privacy, based on alternative Web3 wallets, RPCs and decentralized exchanges.

Also look out for: WBTC drifting from its Bitcoin peg.