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🦄 Recap: DeFi Week of Aug. 8
Ain’t it grand to see the market defy a fusillade of bearish signals? This week, crypto writ large was inundated with bummers… There was the U.S. Senate saying: By all means… tax crypto transactions out the wazoo to fund the construction of bridges, highways, and other IRL infrastructure projects! Makes total sense! There was a $600M hack (not a typo) of Poly Network showing, yet again, how vulnerable DeFi is to exploits. And we had another Jack Dorsey-really-dislikes-Ethereum tweet. Ugh… Really?
And yet, and yet… the numbers tell the story: Investors didn’t care. In Friday trading, ETH was on course to record a 14% surge over the last seven days, and other crypto faves like Polygon and Cardano were downright frothy with 30 to 45% seven-day gains. (Bitcoin didn’t do too bad either ;). Owen Fernau tracked both the markets and the action in D.C. this week to report on the strange juxtaposition of bearish noise and bullish performance. And Camila Russo hosted a must-watch Defiant Jam Session on the state of crypto regulation with Jake Chervinsky, Kirstin Smith, and Rebecca Rettig.
At the same time, Brady Dale, who joined The Defiant this week, hit the ground running with a swell piece reporting how Axie Infinty, the Metaverse gaming venture, is scoring where it counts — protocol revenue. Mark Zuckerberg, take note! On the other side of the DeFi universe, Dan Kahan penned his swan song for The Defiant with a deeply reported dispatch on how a controversial Monet NFT auction is raising questions about the future, and value, of digital artworks. (We’re going to miss you, Dan!) On the topic of NFTs, Camila spoke with OpenSea’s Nate Chastain in this week’s podcast.
On the heist front, there was the Poly hack, of course, which yyctrader followed closely. And there was a weird one where the perps made off with a bunch of tokens and minted hundreds of illicit NFTs. It wouldn’t be surprising if Immunefi, a new outfit that offers rich rewards to hackers to unearth vulnerabilities in DeFi protocols, got a boatload of queries. In an especially timely feature, Bailey Reutzel delved into the badlands of bug bounties to learn how Immunefi is driving their payoffs past $1M apiece.
It’s safe to say that the tension between security and opportunity is going to gather more potency in the weeks to come, and we’ll be all over the story.
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🙌 Together with:
Balancer, one of the leading DeFi automated market makers (AMM) for multiple tokens. Dive into their pools at https://balancer.finance/
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, by Index Coop - DPI is the easiest way to capture the upside of DeFi with the benefit of diversification. Buy DPI today on your favorite DEX.
In this week’s episode we interview Nate Chastain, head of product at OpenSea. Opensea got its start back in 2017 when CryptoKitties launched on Ethereum. After those digital cats, the NFT space was pretty dead for the next couple of years. Now OpenSea is reaping the rewards of hanging through that NFT winter, as NFT summer explodes with punks, apes, penguins and more cats.
Nate was openSea’s first product hire and now he’s making sure that what started out as a platform for essentially CryptoKitties and a couple of other projects, can deal with millions of digital assets. He talks about the scaling challenges OpenSea is facing and what’s next on the roadmap after raising $100M dollars in a round led by a16z. The daily records in volume and users, are proving the founders right in thinking maybe it’s not finance that will take crypto to mainstream, but something that looks like a cute game.
Inbox Dump #21
For paid subscribers only — The Inbox Dump is where we include the updates and announcements that flood our DMs each week and didn’t make it to The Defiant’s content platforms. We also include a compilation of DeFi and crypto funding rounds in the past week so you have these in one handy place.
In this week’s feature, Bailey Reutzel delves into the wild world of bug bounties and the push by a new player, Immunefi, to help protocols defend themselves from exploits.
THE SCENE: Should I just steal the money?
There’s a vulnerability in the code… Of a DeFi protocol with $3B in TVL. I was just looking at the open-source code for fun. But now, it’s serious. There’s a bug bounty, a reward that pays out $10K to anyone who finds a major weakness. But exploiting this vulnerability would let me siphon off $2M in user funds. Seems pretty critical. $10K? Over $2M? It’s either rob or get robbed, right?
SO WHAT That’s the temptation hackers must wrestle with when they find vulnerabilities in crypto code. While there are bug bounty programs that recognize and compensate hackers who report bugs in project’s code, they typically don’t offer rewards that seem appropriate for the potential damage if the bugs were exploited. Plus, hackers, even white hats, can be treated like a nuisance or a threat, and some are outright dismissed.
BADLAND Immunefi is a nine-month old platform that’s jumped right into the middle of this dilemma. It connects crypto protocols with hackers and is aiming to professionalize a lawless badland in cybersecurity — DeFi. The reason is obvious: There’s a lot of money at risk right now. Sensational exploits like this week’s $600M hack of Poly Network — and the perpetrator’s decision to return much of the loot — are making headlines all the time.
In this week’s Research piece, Kieran Smith examines how automated market makers are turning into “financial zombies” chomping on liquidity to stay active, and how that’s paving the way for a new powerful entrant in DeFi — Middleware providers. Often overlooked as basic infrastructure plays, middleware software makers play a vital role in tech ecosystems.
The yield farming revolution has been one of the biggest stories in DeFi over the last year, thanks largely to automated market makers (AMM). Operating behind the scenes, these protocols attracted billions of dollars into smart contracts. Spurred by incentives in the form of newly minted tokens, investors dove into AMM’s liquidity pools and changed the DeFi landscape.
Yet while the trading volume of AMMs almost put them on par with centralized crypto exchanges, they have an inherent flaw: They have to be kept alive artificially like the walking dead.
To navigate fit the bottleneck of blockchain throughput, AMMs reduce the market making mechanism for crypto assets to two liquidity pools and an exchange rate that naturally adjusts based on relative demand. This primitive model is similar to a merchant in an ancient marketplace, swapping grain and beans between two piles on request.
In this week’s installment, the indomitable DeFi Dad shows us how to use a new protocol called Tokemak.
Background on Protocol: A new DeFi protocol called Tokemak recently launched its “DeGenesis” event to distribute the native token TOKE. This token will govern its protocol devoted to single-sided liquidity provisioning.
To understand Tokemak, it helps to familiarize yourself with Bancor’s pioneering single-sided LPs, which launched almost a year ago. Single-sided LPs allow liquidity providers to lend a single asset to be paired with other assets in AMM (automated market-maker) liquidity pools, and hence avoid the dilemma of impermanent loss.
Token Thieves Mint Hundreds of Illicit NFTs in Radical Heist There’s been an art theft of NFTs! An attacker stole tokens from a DAO called Bright Moments and used them to mint the remaining 309 NFTs involved in the organization’s flagship project, CryptoVenetians. The project announced on Discord that one of its members fell victim to a phishing attack which exposed their private key.
Solana DEX Mango Markets Raised $70M in Token Sale Mango Markets, a decentralized exchange (DEX) on Solana, raised $70M from the sale of its governance token $MNGO. Over a two-day sale period ending on August 11, buyers claimed 500M $MNGO tokens, in what the team called a “fair launch.”
Rarible Shakes Up NFT Race with New Protocol Rarible is lowering the barrier to entry for developers looking to launch NFTs projects. On August 12, the NFT platform launched Rarible Protocol, an open-source toolkit for developers to create custom NFT storefronts and marketplaces. The tech stack includes contracts, standards, and APIs for minting, exchanging and indexing NFTs.
There’s Now an App for Bribing Curve Token Holders Curve Finance, the decentralized automated market maker (AMM) focused on stablecoin swaps, continues to cement its position as one of the cornerstones of DeFi and holders of its veCRV governance token continue to reap the rewards.
How Nuts is the NFT Market? New Project Makes $2M in Its First Four Sales A new NFT project that auctions off one digital asset per day made four sales in its debut. The total spent? 764.75 ETH, worth around $2M in Friday trading. The NFTs are called Nouns and their inventor, who goes by 4156 after the numbered CryptoPunk he owns, started the project wondering what the next iteration of Punks would be.
For Its Birthday the Curve DAO Is Dramatically Cutting Daily CRV Rewards For the first time, the circulating supply of the CRV token will grow far less quickly today. The Curve DAO started with the release of the CRV token and the beginning of liquidity mining on Curve Finance, the automated market maker that stands out as one of the best places to trade tokens that have the same value (such as DAI and USDT, or renBTC and wBTC).
Axie Infinity Has Beaten Even Ethereum in Network Fees Thanks to its Sidechain Facebook may be grabbing headlines with its talk about the metaverse as the basis for the company’s future, but blockchain game Axie Infinity already has a metaverse up and running and it’s grabbing something longer-lasting: revenue.
Something Fishy is Happening on OpenSea as Bots Upset NFT Auctions The NFT marketplace OpenSea has been a tear — at 14.61%, its primary smart contract has consumed more gas than any other on Ethereum in the last 24 hours, according to block explorer Etherscan.
The Bulls are Back Despite Crypto’s Washington Woes The crypto rally is raging even as regulation that has the potential to clampdown on the industry looms in the U.S.
Sushi Won’t Launch on L2 Optimism, Citing Preferential Treatment of Uniswap Sushi is drawing back from plans to deploy on Optimism after a dispute over the Ethereum L2 solution’s launch process.
Poly Network Hacked For Over $600M In Biggest DeFi Exploit Ever At 6am ET on August 10, over half a billion dollars worth of crypto assets were stolen from Poly Network, a cross-chain protocol that facilitates token swaps across multiple blockchains including Ethereum, Binance Smart Chain and Polygon.
Auction of Monet NFT Spurs Questions About Authenticity and the Future of Art Michelangelo drew inspiration from the Greco-Roman statues of Classical antiquity to sculpt his masterpiece David. Van Gogh paid homage to the vibrant colors in the woodblock prints of Hokusai and Hiroshige. Great artworks of the past live beyond their creators to inspire great artworks of the future. Digital art and NFTs are no exception.
Crypto Community Turns to House to Counter ‘Impossible’ Tax Requirements Following a major setback yesterday, there is still hope that onerous new tax requirements for the cryptocurrency industry can be addressed before they become law.
EXCLUSIVE: An Interview with the Anon Who Bought 88 Punks for $5.5M Last month, one anonymous user spent more than $5M on CryptoPunks in a buy that kicked off a frenzy of NFT sales.
Thanking all the amazing Defiers for the support and love this week (and always)!
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