Hello Defiers! Here’s what’s going on in decentralized finance:
ETHGlobal’s DeFi-focused hackathon wrapped up over the weekend yielding over a 100 projects
RenVM launches Bitcoi-to-Ethereum bridge
Centrifuge wants to bring trillions of dollars in real world assets to DeFi
and more 🙂
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Developers Built More than 100 DeFi Apps in Past Month
There was probably more innovation in DeFi this month than in traditional finance this decade.
Developers built more than 100 projects in ETHGlobal’s DeFi-focused hackathon in the past 30-days. From stablecoins, to automated investments, and fractional digital ownership, Ethereum builders pushed the envelope on what’s possible in open finance even further.
This is the first event of its kind for ETHGlobal, which has held over a dozen weekend-long, in-person hackathons for the past three years, but had never organized a month-long, virtual event, under a common theme. The goal is for developers to build an entirely new project within the span of the event, with the best projects winning prizes offered by sponsors. For HackMoney, there were $30k in prizes offered across leading projects like Compound, Uniswap and Aave.
We’ll touch on a few of submissions along with these projects’ wider implications on the DeFi landscape.
While Dai has taken the lead as DeFi’s defacto stablecoin, it should come as no surprise that it frequently varies from its peg. To this end, we’ve seen a number of solutions aiming to create the “perfect stablecoin” – i.e. one which is both stable and trustless with manageable collateralization ratios.
DeFiDollar – a basket-backed stablecoin project – aims to do just that. By leveraging Aave’s interest earning aTokens and Balancer’s liquidity tools, DeFiDollar accepts existing stablecoins like Dai and sUSD to mint new Dtokens. To mint tokens, users lock collateral via Aave. The interest earned on the tokens are directed to an earnings pool which is used to supplement and stabilize the peg in the event DUSD collateral falls below their $1 pegs.
Zapper Pool Pipes
Zapper, a DeFi asset management dashboard that resulted from the merger of DeFiZap and DeFiSnap, unveiled Pool Pipes – a way for users to seamlessly transfer liquidity between various capital pools in the click of a button.
Pool Pipes are geared at solving liquidity fragmentation, ultimately creating channels to bridge capital between leading projects like Uniswap, Curve and Balancer. Best exemplified by Synthetix and their recent SNX incentive adjustments, Pool Pipes helps people migrate sETH Uniswap liquidity to sUSD Curve liquidity all in one transaction for a fraction of the cost.
What the Frac
Building off NFTs playing an ever-growing role in the Ethereum landscape comes a hack called What The Frac. As the name suggests, users can leverage the platform to create fractional claims on a given NFT – all of which are backed by DAI using a Balancer pool.
Auction creators commit to locking their NFTs in exchange for the right to create fractional shares. What The Frac allows creators to issue a fixed amount of “Fracs” which are claimable by those who contribute to the Balancer Pool. At the end of an auction, the winning bidder deposits Dai to the Balancer pool to unlock the NFT.
With the core premise of allowing users to redirect interest to open-source developers, YieldHero created a novel solution for users to swap to and from different Aave aTokens using an iEarn-like interface. By leveraging an Aave-specific Balancer pool, users can contribute and manage liquidity in a permissionless fashion, with top donors being signalled via a leaderboard for their Yield philanthropy.
While the idea of redirected interest is something we’ve seen before, the practice of using that interest to empower open-source development in a Gitcoin Grant-like fashion has some great implications. Plus, an easier tool to swap aTokens is a sure win for Aave!
As a privacy preserving tool for stealth payments on Ethereum, Umbra allows any two parties to transact with one another without revealing their identity to the wider Ethereum network. Built with a simple password-based login system, users can generate ENS names to receive payments from a sender to a newly deployed stealth address.
The receiver then withdraws the payment from the stealth address, leveraging the Gas Station Network to use part of that withdrawal as the funds to cover the transaction fee. This means someone can get started and withdraw payment without having any ETH in their wallet, and withdraw across dozens of newly created stealth addresses all from one common end-point.
Across all the HackMoney submissions, it seemed like Balancer pools were being used quite frequently for their ability to customize and compose different asset pools to meet specific liquidity needs. Redirecting interest was also a common theme, along with the general trend to capture arbitrage opportunities using flash loans and pool bridging.
Overall, it will be interesting to see if any new building blocks come out of HackMoney and it was pretty evident that giving teams 30 days to build resulted in far better products and submissions than what generally came out of the 48 hour sessions.
To learn more about HackMoney and the winning submissions, be sure to tune into the live stream which will showcase all submissions with a 3-minute Q&A session.
RenVM Launches as Bitcoin on Ethereum Surges
RenVM, which aims to allow interoperability between blockchains, launched on mainnet today. It’s the latest in a long list of projects which users hope will be able to trustlessly bridge Bitcoin and Ethereum.
There were almost 28 BTC deposited on RenVM after launch, according to btconethereum.com, in exchange for which Ethereum ERC20 tokens were issued. About 23 of those came from the Ren team to bootstrap liquidity. Ren’s launch is fueling a red-hot trend, as Bitcoin on Ethereum more than doubled in just the past two weeks.
Image source: btconethereum.com
“Anyone can now use real Bitcoin (BTC), Bitcoin Cash (BCH), and Zcash (ZEC) in your favorite DeFi application. This allows you to trade, lend, and leverage these assets as you would with any other ERC20,” Ren CEO Taiyang Zhang wrote in a Medium post.
A Trustless Alternative
There are now almost 5.2k BTC on Ethereum (~$47m), according to btconethereum.com, most of which are coming from wBTC, which relies on trusted third parties including BitGo. DeFi users have been hoping for a more decentralized alternative. Keep Network’s tBTC was one, but the project was paused after finding a bug. RenVM has been heralded as another viable, more trustless alternative.
RenVM can hold tokens from one blockchain and mint tokens of another chain in exchange. For example, Bitcoin holders who want to use Ethereum’s DeFi apps can deposit their BTC and get renBTC, an Ethereum token, in exchange at a 1:1 ratio. This ensures renBTC is always backed by the same amount of BTC. RenVM also supports Bitcoin Cash and Zcash.
A network of nodes, called Darknodes make up RenVM. Anyone with 100K REN can run a node, thought some technical skill is needed. Darknodes earn fees (in BTC, BCH, and ZEC) for powering RenVM. There were 44 Darknodes online after launch.
Centrifuge Wants to Bridge Real-World Assets to DeFi
Centrifuge launched Tuesday with the aim to feed DeFi with real-world assets such as invoices and mortgages, and to allow holders of these assets to borrow against them on the Ethereum network.
The system enables users to tokenize real-world assets in the form of non-fungible tokens (NFTs), which they can then use as collateral to take out loans. Meanwhile, investors can buy tokens representing this collateral and expect returns that are less correlated with cryptocurrencies than most or all other assets in DeFi.
Here’s how it works: NFTs representing real-world assets are pooled together. Next, two sets of ERC20 tokens are issued against them, TIN and DROP. TIN takes the risk of default first but also receives higher returns. DROP is protected against defaults by the TIN token and receives stable and usually lower returns. Investors can purchase TIN and DROP tokens with Dai or USDC. The user who put up the collateral takes the stablecoins used to buy TIN and DROP as a loan. TIN and DROP holders receive interest asset holders pay for their loan.
Image source: centrifuge.io
Centrifuge has two parts: Centrifuge Chain and Tinlake. Centrifuge Chain is a proof-of-stake blockchain built with Parity Technologies’ Substrate framework, which is where assets are tokenized. It had 10 validators at launch. Tinlake is an open source Ethereum app which enables the creation of asset pools for users to borrow against and invest in.
Centrifuge submitted two MIP6 applications for MakerDAO to include asset pools as collateral for Dai. MakerDAO opened up Dai to different types of collateral to make sure there’s enough liquidity to back the stablecoin. It has already included trusted assets like USDC and wBCT as collateral, and tokenized real-world could very well come next. Factoring alone is expected to grow to a market of more than $2.8T by 2022, Business Wire data shows.
Beyond adding liquidity to DeFi, tokenizing real-world assets could also be an opportunity for businesses, particularly small businesses or companies in developing nations with little access to credit. This system would allow them to access investors from all over the world, while give those DeFi investors exposure to real-world assets.
Post with assistance from Sebastian Aldasoro
“There is an implicit assumption in Bitcoin that users will pay more to use the base layer or its trustless extensions like the Lightning network. In practice, Bitcoin doesn’t just compete with fiat money or even other cryptocurrencies, but also with custodial Bitcoin banks,” researcher who goes by the name of Hasu writes in Deribit.
“Ethereum’s daily gas used; a metric that signifies demand for the Ethereum blockchain and one that hit a new all time high on May 23rd (…) This growth in gas used follows the issuance of stablecoins on Ethereum (to the tune of ~$4 billion) and the continued growth of decentralized financial applications that are seeing tens of thousands of transactions each day,” Ethereum Price’s Nick Cannon writes.
Data-packed thread by Spencer Noon on why he’s bullish on ETH.
10 signs we’re headed for a new $ETH bull market 👇🏼
May 26th 2020
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The Defiant is a daily newsletter focusing on decentralized finance, a new financial system that’s being built on top of open blockchains. The space is evolving at breakneck speed and revolutionizing tech and money. Sign up to learn more and keep up on the latest, most interesting developments. Subscribers get full access at $10/month or $100/year, while free signups get only part of the content.
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About the author: I’m Camila Russo, a financial journalist writing a book on Ethereum with Harper Collins. (Pre-order The Infinite Machine here). I was previously at Bloomberg News in New York, Madrid and Buenos Aires covering markets. I’ve extensively covered crypto and finance, and now I’m diving into DeFi, the intersection of the two.