DeFi Frontier August 14, 2023

Welcome to this week's edition of the DeFi Frontier. When we first conceptualized this newsletter, a bi-weekly update seemed sufficient. However, witnessing the rapid evolution of the crypto landscape, we're happy we chose a weekly cadence to keep you on the forefront of the Web3 & DeFi space. Without further ado, let's dive in!

General Crypto News

Paypal launches a Stablecoin.

PayPal has introduced a new stablecoin, PayPal USD, which is redeemable at a 1:1 ratio for US dollars and supervised by the Paxos Trust Company. This stablecoin offers a range of features for US PayPal users operating on the Ethereum blockchain. Paypal has millions of users that can onboard them to crypto. Some Crypto natives are writing this off as a positive milestone for crypto. Only time will tell.[Read full article]

Base Network is live!

Coinbase has rolled out its Base network for general users after its initial "builders only" phase. Since its beta launch on February 23, the L2 platform has sparked interest, especially given Coinbase's expansive user base, which could drive the adoption of Web3 protocols. On the Base network, users can bridge tokens, swap tokens, provide liquidity, make payments, register usernames, launch Decentralized Autonomous Organizations (DAOs), and mint exclusive non-fungible tokens (NFTs) from various brands. However, Base's phased launch could have been smoother, as some early-bird users faced issues that led to significant financial losses. [Read full article]

U.S. Spot Bitcoin ETF Approval Looms: Galaxy Digital CEO Cites Insiders at BlackRock and Invesco.

Galaxy Digital's CEO, Mike Novogratz, predicts that the U.S. may approve its inaugural spot Bitcoin ETF within the next four to six months, referencing insider information from both BlackRock and Invesco. Announcing this during Galaxy’s Q2 earnings call, Novogratz highlighted the significance of this potential approval, with Galaxy Digital and Invesco jointly reapplying for a Bitcoin ETF spot in June. While he did not specify a definitive timeline, Novogratz believes that once the green light is given, major entities like BlackRock and Invesco will fiercely compete for market dominance. Galaxy Digital's president, Chris Ferraro, suggests that the Securities and Exchange Commission (SEC) might endorse a Bitcoin ETF to dispel notions of being anti-crypto. Interestingly, some analysts are even more optimistic, believing that approvals might be expedited, contingent on the outcome of Grayscale's ongoing lawsuit against the SEC. [Read full article].

Binance's Strategic Shift Stirs Stablecoin Market

In a shocking announcement during Coinbase’s Q2 earnings call, CEO Brian Armstrong disclosed that Binance, the foremost global cryptocurrency exchange, has offloaded its complete USDC stablecoin holdings. This move has been received with a mix of astonishment and speculation about Binance's intentions and possible repercussions for the stablecoin domain. Despite USDC's market cap decline from $44.5 billion at the year's onset to $26.06 billion presently, Armstrong hinted at an increased safety net for USDC without Binance as a stakeholder. The crypto sector is rife with theories, with Binance's introducing these new trading pairs. As the implications of this dramatic pivot continue to unfold, the crypto community is watching Binance's moves and the broader stablecoin landscape's reaction. [Read full article]

Tweet of the week

This week’s tweet of the week, we're zipping our lips on commentary, but here's a fun tidbit: it raked in 1.6 million impressions on X formerly known as Twitter! 🤯 Digest that as you wish. Tweet

DeFi News

Curve Finance Extends Public Bounty After Hacker Deadline Passes: Stolen CRV Funds Valued at Over $18.5 Million

Following the significant Curve Finance exploit of $73 million worth of tokens last week, the deadline given to the perpetrator to return the stolen funds has expired. The Curve team, in collaboration with MetronomeDAO and Alchemix Finance, has now publicly offered a 10% reward (currently valued at over $18.5 million) of the unrecovered amount to anyone who can identify the hacker leading to a successful court conviction. Despite the initial efforts to negotiate a voluntary return of funds, legal action is now underway, and there's speculation regarding potential connections to the North Korean hacker cell, Lazarus group. [Read full article]

Aave DAO Proposal to minimize CRV exposure

On August 10, the Aave community opened two voting proposals aiming to minimize the protocol's exposure to the Curve DAO (CRV) token, following concerns over risks tied to Curve Finance founder Michael Egorov's substantial borrowing position. Egorov had used over 30% of CRV’s market cap as collateral to secure nearly $60 million in loans from Aave v2. However, a hack on Curve on July 30 negatively affected its token value, risking Egorov’s position to potential liquidation. Aave members can vote to either cut the liquidation threshold for CRV on Aave v2 by 6% or to halt CRV borrowing on specific platforms. Another proposal, ending on August 11, suggests Aave’s Treasury buy $2 million of CRV tokens as a gesture of support for the DeFi ecosystem. This move comes in the wake of a recent hack on Curve due to a vulnerability in the Vyper programming language, which incited concerns about broader implications for the DeFi sector. [Read full article]

Binance Labs Invests in Curve Following Hack

Binance Labs has invested $5 million in CRV. This move comes after Curve lost $73.5 million to a vulnerability, though the hacker later returned around 73% of the stolen assets. In light of this partnership, Curve will extend its operations to Binance's BNB Smart Chain. Despite the recent setback, Curve continues to be a major player in the decentralized finance space, and this investment reinforces Binance's confidence in its potential. [Read More]

The Learning Den

1. Tokenization: 

The process of converting rights to an asset into a digital token on a blockchain. In DeFi, this can refer to turning assets like real estate, stocks, or commodities into tradeable tokens on a blockchain platform, making them accessible for trading, borrowing, and lending in decentralized markets.

2. Optimistic Rollups:

Optimistic Rollups are a layer 2 solution enhancing Ethereum's scalability. They process transactions off-chain but store data on-chain, boosting transaction speed. Transactions are assumed to be correct, with a challenge window available for detecting and reversing fraudulent ones. This approach increases throughput and reduces fees while preserving Ethereum's security.

3. Collateralized Debt Position (CDP): 

A smart contract on platforms like MakerDAO that allows users to deposit collateral (e.g., ETH) to borrow a stablecoin (e.g., DAI). The CDP ensures that the borrowed amount always remains over-collateralized to minimize the risk of defaults.

4. Oracles:

These are third-party services that feed external information into blockchain networks. In DeFi, they play a crucial role in providing real-time data like price feeds for tokens, which decentralized applications require for functions such as setting loan-to-value ratios or triggering liquidations.

5. Zk-SNARKs (Zero-Knowledge Succinct Non-Interactive Argument of Knowledge): 

A cryptographic method that allows one party to prove to another party that a statement is true, without revealing any specific information beyond the statement itself. In the context of DeFi, zk-SNARKs can be used for privacy-enhancing solutions and scaling purposes, allowing for faster, more private transactions.

Closing Note

Wrapping up this week's DeFi Frontier, the crypto and DeFi realms continue to evolve rapidly. From PayPal's entry, CRV relentless quest to track down the hacker, to Binance's bold moves, staying updated is vital. We're here to ensure you're in the loop every week. See you next week!

Best,

Tribal Team