Hello Defiers! Here’s what’s going on in decentralized finance:
Synthetix and Optimism launch demo exchange in latest step towards a scalable Ethereum
Synthetix on-chain analysis by IntoTheBlock
Personal token space gains steam with KERMAN offering
PayPal Axes RealT
Another perpetual swaps platform plans to launch
🎙Last Week’s Podcast: Emin Gun Sirer on AVA competing with ETH
🙌 Together with Eidoo, a cryptocurrency-powered debit card and platform for easy access to decentralized finance.
Synthetix Demo is Latest Step To a Scalable Ethereum
Derivatives protocol Synthetix and research group Optimism have teamed up to test the cutting edge technology that “optimists” say will help Ethereum scale.
The projects are launching a demo of the Synthetix Exchange, a platform to issue and trade synthetic assets, that’s powered by the so-called Optimistic Virtual Machine, a Layer 2 scaling solution based on Optimistic Rollups.
Image source: l2.synthetix.exchange/
🛠 Those were all mouthfuls so let’s unpack: Layer 2 scaling solutions are technologies that remove some of the computation that’s on-chain (Layer 1) and take it off-chain, so that the network can be faster. Optimistic Rollups is one of these Layer 2 solutions, and the OVM is at the is what implements this system so that it can execute Ethereum smart contracts and act just like the Ethereum chain, at scale.🛠
With Ethereum’s network utilization rate nearly maxing out at 91%, scalability is increasingly important if it wants a shot at becoming a platform for applications that reach mainstream adoption. Optimistic Rollups are a way for DeFi projects to work around this bottleneck and reach a level of performance usually associated with centralized systems.
Image source: Optimism Medium post
The protocol’s demo will feature a trading competition on L2.synthetix.exchange with over $40,000 worth in SNX prizes. The goal of the trading competition is to get DeFi users to experience the power of the OVM in delivering near-instant, cheap Ethereum transactions. If you’re looking to get more involved with the sX demo and the trading competition, feel free to join the Synthetix Discord to hop into the discussion.
The test comes after the research group created Unipig.exchange, the first end-to-end implementation of Optimistic Rollup. Unlike with Unipig.exchange, where the team built a custom solution for Uniswap, this time Optimism built a system that’s for Ethereum dapps in general, not just for Synthetix. The goal is for the demo to lead to a Layer 2 protocol that any Ethereum dapp can use.
With so many more products on the roadmap for Synthetix this year, the adoption of Optimistic Rollups may act as a critical piece of infrastructure to launch these at scale.
The growing amount of confidence in Optimistic Rollups on Ethereum may also pose a risk to the dozens of venture-backed “Ethereum Killers” set to launch later this year. Notably, NEAR Protocol closed its $21.6M strategic round from a16z while launching its mainnet earlier this week.
These scalability solutions could make it even harder to displace Ethereum from its position as the industry-leading smart contract platform.
On-Chain Markets Update by IntoTheBlock
This Week: Synthetix
The SNX token is used as the collateral powering the Synthetix network in the Ethereum blockchain.
Synthetix follows a common DeFi model where overcollateralized debt is used to support a financial service. In this case, the SNX token supports the issuance of synths such as synthetic USD (sUSD). SNX tokens must be overcollateralized by at least 750% in order to assure that the debt in the system is sustainable. For example in order to mint $10 sUSD, the user would have to stake a minimum of $75 (75/10 x 100 = 750%), though this rate may be changed in the future through community governance mechanism
1 SNX Transactions have grown significantly over the last month
As seen in the graph above, transactions have increased with the rising SNX price. The seven-day high of 854 is 1.42x greater than the transaction volume recorded at the beginning of April. The total number of transactions may seem relatively low compared to large protocols. It is important to take into account, though, that once a user of the Synthetix protocol stakes their SNX tokens for sUSD, there is no need to make more SNX transactions to trade one synth for another. The only transaction recorded for passive SNX stakers would be when they claim their rewards, which occurs on a weekly basis.
2 SNX distribution is highly concentrated
As can be seen in the graph above, nine whales (addresses with more than 1% of circulating supply) own 65% of the total SNX tokens. 47.65% of SNX is in an address used for the Synthetix staking escrow and 6.61% for the Synthetix Foundation, according to data from Etherscan. Investors, addresses holding between 0.1% and 1% of circulating supply, hold almost 19% of SNX in circulation, while retail volume consists of only 15% of the current distribution.
3 Most of SNX tokens are locked as collateral
As per DeFi Pulse, Synthetix is now the second largest decentralized finance protocol in terms of collateral locked. The growth in value locked has surpassed the price growth of the underlying SNX token; value locked has surged 20 times to $114.9M from $5.56M a year ago. This has led to over three quarters of the circulating supply of SNX tokens being locked.
Personal Tokens Space Heats Up With $KERMAN
The DeFi space is allowing for a novel type of fundraising: Something like an Initial Coin Offering, but for individuals. Developer Alex Masmej pioneered the offering one month ago, and yesterday Kerman Kohli said he’s following his steps and doing an Initial $KERMAN Offering.
Kerman, who is using the Roll platform for the sale, is aiming to raise $30,000 with 15% of the total token supply – valuing the tokens at $200,000 fully diluted. Masmej was successfully able to raise $20,000 in five days.
While $ALEX token holders will be entitled to Alex’s future income, $KERMAN tokens can be redeemed for a range of services including coverage in Kohli’s newsletter DeFi Weekly, subscriptions, advisory and others. Token holders can signal their thoughts on Kerman’s life decisions such as future employment and DeFi weekly content selections, and anyone who purchases at least 15,000 $KERMAN – valued at $300 – will receive access to a Telegram group and the ability to participate in early rounds of any of Kerman’s startup ventures.
Kohli plans to use 5% of the revenue earned from his DeFi Weekly newsletter and other services to burn $KERMAN.
PayPal Axes RealT But Crypto Saves the Day
PayPal blocked payments to tokenized real estate platform RealT without warning. The San Jose-based payments processor, which accounted for 62% of RealT purchases, said in an email RealT’s account had been “permanently limited” and that there will be “no appeals to the decision.” The email cited “excessive risk,” without providing further explanation, according to a RealT blog post.
Luckily for the platform, its customers had no problem switching to Coinbase Commerce, with orders via the crypto exchange’s payments service jumping by 238%. The next step will be an integration with Wyre, a fiat-to-crypto gateway. Centralized institutions making arbitrary decisions about the flow of other people’s money is exactly why a censorless financial system matters.
Strike Promises to Launch Perpetual Swaps for All Assets
DeFi project Strike yesterday published documentation for its decentralized perpetual swaps trading protocol. Perpetual swaps are futures contracts with no expiry date, which allow traders to more easily use derivatives to speculate and hedge. The platform’s planned features include trading perpetual swaps with up to 20x leverage and support for on and off-chain synthetic assets, from BTC to gold.
MakerDAO Fundamental Analysis: AlfaBlok
“The current valuation implies very aggressive growth rates, of over 70%+ Dai circulation increase per year reaching Trilions of Dai in circulation, in order for current valuation to make sense,” the report said.
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May 4th 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.