Hello Defiers! Today is a historic day for Ethereum, the network supporting most of DeFi:
Eth2 successfully launched, meaning there’s yet another way for DeFi traders to earn yield
Coinbase and Binance announced support for ETH2 staking and their own versions of staked ETH derivatives in a sign of what’s to come
Yearn Finance has merged with three DeFi protocols in four days
Curve distributes protocol fees to token holders
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The first phase, or Phase 0, in the transition to Ethereum 2.0/ aka Eth2.0/ aka Serenity successfully launched today.
In this phase of the process a proo-of-stake chain, known as the Beacon chain, is now running. ETH holders can deposit (or stake) ETH in multiples of 32 and start accumulating staking rewards, thus becoming validators in the chain. Staking yield on Eth2 is at ~17.5%, according to Staking Rewards.
While not much else can be actually done as withdrawals and tranfeers aren’t available, it’s a historical moment for Ethereum. Developers have been planning and working towards a transition to proof-of-stake and sharding since even before the current (proof-of-work) chain was launched.
This is the first step in an upgrade that’s meant to dramatically increase Ethereum’s ability to scale, thanks to shards —where many “mini blockchains” take computation off the main chain— and become more decentralized, as it’s now easier for anyone to participate, without requiring expensive mining equipment.
Ethereum devs and over 3,000 viewers congregated around a livestream earlier today to watch as the first blocks of the new chain were confirmed. The explorer showed more than 80% of participation as the chain finalized for the first time, signaling the chain was off to a healthy start.
“We could not have dreamed of a more successful launch than we have right now,” Superphiz, of the ETHStaker community said.
While Bitcoin’s first block was immortalized with the famous Times headline, Ethereum’s quirkiness shows once more: The graffiti on the first block was simply, “Mr. F Was here.”
The author, Mr. Fahrenheit, goes by that name in reference to the Queen song. “Mr. F” is also how Vitalik signed an autograph for him.
It might not be as inspirational as a newspaper headline in the middle of a financial crisis, but the Ethereum community still likely feels like singing “don’t stop me now.”
And sure enough, after the launch, staked ETH and validators have kept climbing.
Coinbase and Binance plan to enable staking on Ethereum’s just-launched Beacon chain, and trading of their own ETH2 wrappers. The move is a sign that becoming an Ethereum validator is increasingly easy, and that soon many such tokenized versions of staked ETH will start circling the crypto market.
“Coinbase customers will be able to convert ETH in their Coinbase accounts to ETH2 and earn staking rewards,” according to yesterday’s blog post.
Coinbase is one of many centralized exchanges likely to support Eth2 staking, granting users annualized ETH rewards in exchange for locking their tokens for at least the first phase of upgrade, expected to last between 6-12 months. Coinbase will also enable trading of a derivative of ETH locked in ETH2, providing liquidity for those locking up their ether ––this token would be similar to an IOU reporesenting staked ETH.
The same strategy was also announced by Binance, today posting that they will support ETH2 staking through a native wrapper called “BETH”. The leading international exchange is also offering BNB incentives to those who staked through Binance.
Going forward, there will likely be ETH plus many versions of derivatives of staked ETH, Vitalik Buterin said in a tweet.
“There will be N+1 assets: ETH (on the eth1 chain or self-staked); N third-party staking derivatives from all the different providers,” he said.
Under the hood, Coinbase will use customers’ ETH to run validators on the Eth2 network, likely taking a small commission in exchange for running the infrastructure necessary to support staking.
With today’s launch of the Beacon chain, ETH staking is officially live for validators. There are now over 21k active validators who have staked 674k ETH, either by directly depositing their crypto or by using staking-as-a-service firms like Staked.
Other projects like Rocket Pool are choosing to wait to launch until smart contract withdraws are enabled. Unlike solutions offered by Coinbase, Binance and others, Rocket Pool is a non-custodial and trustless, a notion that is well-aligned with the DeFi crowd.
Still, the announcement comes as a major signal that Eth2 is here, and the biggest players in the space are now lining up to support what many are calling Ethereum’s largest upgrade to date.
Yearn Finance has partnered or merged with at least six different DeFi projects, three of which have been announced in just in the past four days.
Rather than all of these projects combining into one single DeFi behemoth, they will continue working separately, each with its own token. The difference is that now, Yearn’s, Akropolis’ and Pickle’s automated investmentig strategies, Sushi’s AMM, Cream’s lending and borrowing, and Cover’s insurance products, are all interconnected and leveraging each other’s offerings.
The combined assets of all the mergers, would leave the conglomerate at $1.3B in TVL, just below Aave, of fifth in DeFi Pulse’s ranking.
Curve passed a unanimous governance vote to distribute $3M worth of protocol fees to CRV holders staked into the CurveDAO over the weekend.
With just under 50% of all staked token holders voting on the proposal, the 100% majority vote signals strong alignment for the stablecoin AMM to distribute the 2.9M yCRV accrued to the Set converter over the past 62 days to veCRV holders.
veCRV is earned by locking CRV into the CurveDAO, giving LPs a boost on their CRV rewards relative to the duration they choose to lock their tokens. Those that lock their tokens for longer periods of time also earn higher governance weight and now, a higher portion of the protocol fees.
The first distribution is scheduled to happen next week, after triggering the ‘red button’ to disperse ~$3M worth of fees across veCRV holders pro-rata based on their time and total amount staked.
Curve is the first AMM after SushiSwap to distribute protocol fees directly to token holders. It’s not a coincidence that the two projects to do this are led by anonymous teams; fee distribution is similar to a dividend payout, which may raise regulatory concerns for US-based projects such as Uniswap.
Facebook’s Libra Association is preparing to launch its first digital coin, which will now be known as Diem Dollar, named for the word “day” in Latin, Bloomberg reported.
An in-depth look at Ethereum’s most critical network upgrade to date and the broader implications for the Ethereum ecosystem, by Messari.
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, while free signups get only part of the content. Click here to pay with DAI (for $100/yr) or sub with fiat by clicking on the button below ($10/mo, $100/yr).
About the founder and editor: Camila Russo is the author of The Infinite Machine, the first book on the history of Ethereum, and was previously a Bloomberg News markets reporter based in New York, Madrid and Buenos Aires. She has extensively covered crypto and finance, and now is diving into DeFi, the intersection of the two.