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🤖 Ethereum's Value Extracting Bots: Explainer and Project Map
Hello Defiers! Here’s what we’re covering today,
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Kraken, consistently rated the best and most secure cryptocurrency exchange, which can get you from fiat to DeFi
Aave, an open-source and non-custodial liquidity protocol where users can earn interest on deposits and borrow assets.
The DeFi Pulse Index, a capitalization-weighted index that tracks the performance of selected DeFi assets across the market.
Dapper Labs is now being sued for allegedly selling their non-fungible tokens as unregistered securities. Dapper is rumoured to be raising money with the company valued at more than $7.5B.
QUICK DEFINITION Blockchain miners can extract value by excluding, including or re-ordering the transactions on the block they produce. This is known as MEV (miner extractable value) and it’s only bound to increase in the future as DeFi volume and complexity increases.
HERE’S AN EXAMPLE To understand MEV, let’s consider a simple example: in AMM’s like Uniswap, a large trade will often leave the pools unbalanced, thus creating an arbitrage opportunity. Suppose you notice this opportunity imbalance and make a transaction to profit from this and keep the gas price as 80 Gwei. An arbitrage bot in this situation will notice this and resend the transaction with a higher gas of 120 Gwei, essentially getting its transaction to execute before yours. So in the end you’ll either end up buying high and missing out on the arbitrage altogether. This kind of MEV is very common and is called Frontrunning.
The cumulative MEV has reached $559 million, according to Flashbots’ dashboard, which tracks the data. This will likely become one of the biggest narratives going forward as the volume on DeFi increases, and will create a huge problem if it’s not dealt with. In this article, we’ll be covering a few of the projects working on solving this problem.
Secret Network ($SCRT)
Not included this time, but noteworthy:
Gnosis Protocol V2 and Balancer-Gnosis-Protocol —a DEX to offer traders the best prices and MEV protection
CowSwap — Meta-DEX Aggregator with MEV protection
TLDR The Chia network and its XCH cryptocurrency got a boost from Elon Musk’s recent lambasting of Bitcoin’s energy consumption.
TRENDING Last week, Chia was trending on Twitter and in the five days since May 12 ̶ when Musk tweeted that he would no longer be accepting Bitcoin as a payment mechanism for Teslas because of Bitcoin’s “insane” energy usage ̶ XCH’s price has risen more than 30%. With Musk’s tweet, investors have been aping into proof of stake coins and other supposedly eco-friendly alternatives, such as Chia.
OUTPERFORMING XCH just earlier this month began trading on exchanges like OkEx and LBank. It is now trading at $1,278, up more than 18% in the past seven days, while both ETH and BTC have slid more than 10% in that time.
BITTORRENT CONNECTION Founded by Bram Cohen, the inventor of BitTorrent, Chia touts itself as a green cryptocurrency, its consensus mechanism utilizing unused disk space in computers to mine. The consensus algorithm, called proof of space and time, and is more energy-efficient than proof of work consensus, which utilizes massive amounts of electricity through the use of custom-purpose ASIC hardware.
Coinbase is now directly competing with MetaMask and will bridge its 56M users directly to DeFi dapps with a browser wallet, a trend some are already calling CeDeFi: “We’re excited to announce a new downloadable Coinbase Wallet extension to more easily and securely connect to decentralized apps (dapps) and decentralized finance (DeFi) on your desktop (…) You can also link your Coinbase account to Wallet and buy or transfer crypto to use in DeFi, without leaving Wallet. All activity conducted on desktop via the Wallet extension will stay in sync with the Coinbase Wallet mobile app.”
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🧑💻 ✍️ Stories in this newsletter were written by Eugenio Croitoru and Sydney Lay, and edited by Bailey Reutzel and Camila Russo. Videos were produced by Robin Schmidt and Alp Gasimov. Podcast was led by Camila, edited by Alp.
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 above ($15/mo, $150/yr).