🦄 Recap: DeFi Week of June 5
Hello Defiers! Happy weekend!
They say the wheels of legislation turn slowly. Well, true, but they do turn and this week the most important and sweeping proposal to regulate the cryptocurrency industry dropped in the U.S. Senate. It’s a bipartisan bill, sponsored by Sen. Cynthia Lummis (R-Wy) and Sen. Kirsten Gillibrand (D-NY), and it sets out to define what’s what in the world of digital assets in an unprecedented way.
Aleks Gilbert delved deeply into the bill to learn how it would change DeFi if it becomes law. After talking to a number of influential cryptocurrency lawyers Aleks reported how the legislation appears to strike a middle ground between regulation and support for innovation, but is also “technologically infeasible,” in the words of one source. This is the type of thoughtful, analytical journalism we prize at The Defiant.
In the same vein, Owen Fernau wrote a fascinating and insightful analysis of “quantitative tightening,” or QT, a new policy directed by the Federal Reserve to reverse years of loose money in the economy. Why is this relevant to DeFi? As Owen explains, the Fed’s moves to take debt securities out of the marketplace (and its interest rate moves) are directly impacting the valuations of digital assets. Owen then turned his attention to a dive on the burgeoning rise of DeFi credit protocols such as Masa Finance and Goldfinch. Good stuff.
It isn’t just lawmakers that are focusing on crypto. So, too are law enforcement agencies. Jason Levin produced a nice take on the fallout from the indictment of Nate Chastain, the former head of product at OpenSea. In addition to capturing the fear running through the space, Jason reported that the pursuit of an insider trading case in the NFT market marks a new application of federal securities laws in crypto. Yikes.
The Ethereum network made major strides this week, as it completed The Merge on a public testnet for the first time, Samuel Haig reported.
Meanwhile, on the sunnier side of NFT land our chiefess Cami Russo conducted a wonderful podcast about fashion with Adriana Hoppenbrouwer-Pereira, the co-founder of The Fabricant. And Robin Schmidt and his crew produced an invaluable video on how now to get rekt on OpenSea. (Make sure you check out Robin’s segment on a16Z, too!)
Sticking with NFTs, we debuted a column on the good, the bad, and the zany in the market. In our first installment, yyctrader takes a wry look at the flurry of mints this month, a grab bag of McGoblin burgers, mystery NFTs, and, gulp, nothingness.
Enjoy!
The open economy is taking over the old one. Subscribe to keep up with this revolution. Click here to pay with DAI (for $100/yr) or sub with fiat by clicking on the button below ($15/mo, $150/yr).
🙌 Together with:
Eden Rocket RPC, providing the fastest private transactions on Ethereum (90%+ hashrate). Trade better anywhere on Ethereum with Eden Rocket RPC.
ZetaChain is the first public L1 blockchain that natively connects with any chain and layer including Bitcoin and Dogecoin without wrapping or bridging assets. Dive into the docs to start building the future of multichain.
dYdX Grants is powering the future of dYdX through community grants. Join us to build on top of the largest decentralized perpetuals exchange!
Bancor, the only DeFi trading and yield protocol with Single-Sided Liquidity & 100% Impermanent Loss Protection. A safer, more sustainable way to earn DeFi yields on your favorite tokens - start earning now!
⍺ DeFi Alpha Newsletter
Check out and subscribe to DeFi Alpha, a weekly newsletter by The Defiant and DeFi Dad, packed with tutorials and tips on how to earn yield in DeFi.
This week:
Create Your Own NFT Contract With Manifold + 32% APR on Stablecoins
Podcast
🎙 The Fabricant Co-Founder: NFT Fashion Blurs Lines Between Creators and Consumers While Both Share the Upside
Adriana Hoppenbrouwer-Pereira is the co-founder and CMO of The Fabricant, a digital fashion house for the metaverse founded in 2018. Their belief is that fashion is identity, and digital fashion is simply an extension of the digital identity we’re building in web 3. The Fabricant is one of the most prolific digital garment creators today and we discuss how (and if) these pieces are being used and whether the market slump has affected adoption.
Adriana discussed The Fabricant’s collaboration with World of Women and how these two communities are seeking to make sure women feel represented and welcome in web3. We also talk about whether our digital wardrobes will be compatible with all the different competing chains and virtual worlds emerging. Finally, we talk about the bigger vision for the metaverse and digital identity and what to expect from The Fabricant in the coming months.
The Tube
ç📺 The Open Metaverse Show: The Fluf World Futureverse explained w/ Bruno Skvorc (RMRK)
📺 Hot Stuff: Three Metaverse Stories - Merit Circle, Grit, and We Are All Going to Die
📺 Tuesday Tutorial: New scam on OpenSea: How to not get REKT
📺Quick Take: Binance under the spotlight
DC Dispatch
🙇🏻♂️ Crypto Lawyers Unpack Contradictions and Challenges in Senate Mega-Bill
In which Aleksandar Gilbert makes the rounds to fathom what this landmark bill means for DeFi…
When Sen.Cynthia Lummis (R-Wy.) and Sen. Kirsten Gillibrand (D-NY) dropped their crypto mega-bill earlier this week, crypto natives breathed a sigh of relief. There were no sweeping prohibitions or bans embedded in its 69-pages of legislation, nor draconian measures that would further damage confidence in a sector struggling to weather a grinding bear market.
Then, as everyone read the fine print, came the head-scratching. Some of its provisions appear to be “technologically infeasible,” in the words of one crypto lawyer.
The Responsible Financial Innovation Act is the most comprehensive and important piece of proposed legislation on crypto to hit Capitol Hill to date. Even as lobbyists, lawyers, and legislators digest and analyze its measures, a bevy of potential changes have already made headlines.
For starters, the bill would classify most cryptocurrencies as commodities, rather than securities, potentially saving the industry from the U.S. Securities and Exchange Commission’s hard line toward the industry and costly reporting and registration requirements.
Market Analysis
🏦 Fed’s Quantitative Tightening Program Poised to Whipsaw Crypto
QT Ends Loose Money Era and Augurs More Pressure For Token Values
In which Owen Fernau spotlights the next major force to exert its influence on token prices…
With crypto’s market cap already down $1T for the year, digital asset holders are hoping the bear market’s worst damage is done. They may be out of luck, however, as the U.S. Federal Reserve began quantitative tightening (QT) on June 1, according to a press release by the central bank.
QT is a monetary policy tool with which the Fed decreases the amount of liquidity in the economy by allowing securities on its balance sheet to reach their maturity date. These securities are primarily Treasury bonds, whose debt is serviced by the U.S. government, and mortgage-backed securities.
The first tranche of debt won’t mature until June 15, according to Alfonso Peccatiello, the former head of fixed income portfolio management at ING Deutschland, so the actual effects of QT have yet to hit the U.S. economy. Further, the rate of balance sheet reduction will double from $47.5B for the next three months, to $95B in September.
NFTales
🍔 Defiant NFTs: McGoblin Burgers, a Mystery Mint, and a Death Cult
A Month of Manic Mints is the Focus of The Defiant's Inaugural Weekly NFT Dispatch
In which yyctrader makes the rounds in NFT land…
Non-fungible tokens, or NFTs, are so hot right now. Still. In the last 18 months Bored Apes and Mutant Apes and Art Blocks wonders and Space Doodles have come out of nowhere and formed a global market with an estimated $40B traded in 2021.
While there’s been a slow down in the grinding bear market of 2022, the space continues to leap forward at breakneck speed, with new trends popping up (and dying off) every other week. If that’s not a cultural-technological phenomenon then what is?
We at The Defiant thought it was high time to chronicle the madness with a weekly column. We want to take aim at all the good, bad, and downright zany developments in NFT land.
Research
🎀 IntoTheBlock: How One DeFi Protocol is Sustaining Growth in the Bear Market
On-Chain Markets Report by Pedro Negron, IntoTheBlock
Bear markets are a prime environment for young startups to adjust and make a statement with bold strategic choices. This phase allows companies to reorganize, in order to achieve efficiency.
Smart decision making is needed to endure a long bear market. It’s a time for startups to focus on the key ingredients in crypto: revenue, total value locked (TVL), and a community that uses the product or service.
We looked at one early-stage protocol that has managed to sustain its growth despite the market downturn: Ribbon Finance. It is a decentralized structured products protocol, which automates option selling strategies for depositors to generate yield on their assets.
Revenue is the total amount of income generated by the protocol. In Ribbon’s case, its revenue comes from the premium gained from selling options. On the graph below Ribbon Finance’s monthly revenue from inception and the fully diluted token value since its launch can be seen.
Opinion
🧐 Starting a DAO in the USA? Steer Clear of DAO Legislation
A Primer on DAO Legislation in Multiple States
Guest writer Jordan Teague provides an invaluable state-by-state primer on DAOs and regulation.
When decentralized autonomous organizations (DAOs) blew up last year, the web3 community quickly realized that forming legal entities around their operations could save them a lot of trouble. Legal entities could limit the liabilities of their participants, increase certainty about tax jurisdiction, and make it easier to transact with the real world.
Before lawmakers wrapped their heads around DAOs, a number of projects used existing U.S. legal structures, such as unincorporated nonprofit associations, cooperatives, and LLCs. However, none of these options were created with blockchain in mind.
Things changed when some U.S. states passed legislation to create new types of legal entities custom-made for DAOs and crypto-native companies, including Vermont’s BBLLC, Wyoming’s DAO LLC, and Tennessee’s DO LLC.1
Friday
News
New Breed of DeFi Credit Protocols Raises Millions at Rapid Clip DeFi is dead — or maybe it just needs another dose of innovation to rejuvenate liquidity.
BREAKING: Optimism Exploiter Returns 90% Of Stolen Tokens Most of the OP tokens stolen in an exploit have been returned, according to the Optimism Foundation.
Global Markets Dive After Data Shows US Inflation Hit 8.6% in May Crypto markets plunged Friday morning after the release of federal data showing U.S inflation accelerated in May.
Elsewhere
Yuga Labs wants ApeCoin on its own blockchain. ApeCoin owners think otherwise: The Block
Global Bitcoin adoption to hit 10% by 2030: Blockware report: CoinTelegraph
Fidelity’s Abigail Johnson Reaffirms Crypto Commitment in Bear Market: CoinDesk
Ohhh 90s kids, Your childhood is making a comeback on @0xPolygon: Polygon
Thursday
News
ApeCoin Community Commits to Ethereum to ‘Properly Scale’ In a victory for Layer 2 blockchains, the community for ApeCoin, the governance token of the Bored Ape Yacht Club, ecosystem, has narrowly voted to not expand outside of Ethereum.
Crypto-Incentivized Mobile Networks Gain Traction It’s 2022 and your mobile carrier might be going crypto. There is a growing movement around building crypto-incentivized peer-to-peer mobile networks.
Ethereum’s Ropsten Testnet Merge Is Complete Ethereum has completed The Merge on a public testnet for the first time, comprising a major milestone in its roadmap towards Proof-of-Stake.
Exploits
Elsewhere
Anchor dev claims he warned Do Kwon over unsustainable 20% interest rate: CoinTelegraph
Ethereum Merge: Stage 1 - Ropsten Network Upgrade: EthStaker
It’s time to get testing as Aave V3 has officially been deployed on the Ropsten Testnet!: Aave
Wednesday
News
PayPal Enables Crypto Withdrawals to Non-Custodial Wallets Robinhood couldn’t have all the fun. After the financial services company which pioneered commission-free stock trading enabled crypto withdrawals in April, payments giant PayPal has launched the same feature.
Kirobo Launches Crypto-Native Estate Planning Tool Israeli blockchain company Kirobo has launched an inheritance feature that serves as a crypto-native alternative to a Last Will & Testament. ETH and all other ERC-20 tokens are currently supported, with NFTs planned in future updates.
Circle Expands Beyond Ethereum With Support For USDC On Polygon Circle, expanding beyond the Ethereum mainnet for the first time, is launching support for its USDC stablecoin on Polygon’s proof-of-stake (PoS) chain, the company said today. Polygon builds Layer 2 scaling solutions for Ethereum. Its PoS chain currently represents a total value locked (TVL) of $2.43B.
Markets
Liquid Staking Providers Buck Bear Market With Hefty Inflows This has been a rough year for DeFi, with large sums of capital being withdrawn from most of the sector’s top protocols. Even so, liquid staking providers are among the few DeFi projects to post consistent growth.
Podcast
Video
Elsewhere
Citadel Securities Is Building a Crypto Trading Marketplace With Virtu Financial: Sources: CoinDesk
Solana Ventures sets up $100M fund for GameFi and DeFi in South Korea: CoinTelegraph
Tuesday
News
Sweeping Bipartisan Bill Aims For Across-the-Board Regulation of Crypto U.S. lawmakers unveiled bipartisan legislation on Tuesday that could dramatically alter the regulatory landscape for crypto – or in the words of its primary author, Sen. Cynthia Lummis (R-Wy.), “fully integrate digital assets into our financial system.”
Crypto Community Reacts with Fear and Hope to ‘Insane’ NFT Criminal Case No surprise, many in the crypto world are freaking out after a federal grand jury indicted Nat Chastain for allegedly committing insider trading in NFTs sold on the OpenSea marketplace.
Illuvium Raises $72M From Land Sale Despite GameFi Bear Market Illuvium, a web3 play-to-earn monster collector and auto-battler game currently in beta, has closed a virtual land sale worth more than $72M, defying the bearish market sentiment hanging over crypto.
VC Giant Paradigm Taps Legal Heavyweight to Help Deliver ‘Promise of Web3’ Paradigm, the crypto venture capital firm that closed a $2.5B fund last year, has appointed Katie Biber as chief legal officer.
Markets
Spurred by UST’s Collapse Tron Overcollateralizes USDD The implosion of Terra Classic’s algorithmic stablecoin UST has prompted Tron to reinforce the reserves backing its algorithmic stablecoin, USDD.
Ether Short Liquidations Spike To All-Time High The crypto markets are punishing over-eager leverage traders. Margin calls for ETH shorts surged to unprecedented volume on June 6, with $686M worth of positions liquidated in a single day, according to CryptoQuant.
DeFi Guide
Elsewhere
How crypto giant Binance became a hub for hackers, fraudsters and drug traffickers: Reuters
BlockFi is raising a down round at $1 billion valuation: sources: The Block
The data availability problem is what’s keeping chains from scaling: Polygon
💜Community Love💜
Thanking all the amazing Defiers for the support and love this week (and always)!
🧑💻 ✍️ Stories in The Defiant are written by Owen Fernau, Aleksandar Gilbert, Claire Gu, Samuel Haig, Jason Levin, and yyctrader, and edited by Edward Robinson, yyctrader 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.
Cool