Alternatives to Wrapped Bitcoin (WBTC) including tBTC have witnessed a recent surge in interest, following a weekend announcement that WBTC custodian BitGo will be forming a joint venture involving controversial figure Justin Sun.

MakerDAO is already testing the waters for a removal of WBTC as a collateral asset for its DAI stablecoin, while tBTC provider Threshold Network has seen its native token “T” rally as much as 50% since the news.

What’s Going On With WBTC?

BitGo, the custodian and administrator of WBTC, recently announced a joint venture with BiT Global to enhance the security of WBTC, by diversifying its custody operations across multiple jurisdictions, including Hong Kong and Singapore. 

The move aims to improve trust through multi-jurisdictional custody while maintaining the quality service that WBTC users have experienced for the past five years. The partnership involves Justin Sun and the Tron ecosystem, which will continue to offer real-time proof-of-reserves.

However, the announcement has sparked concerns within the crypto community, particularly regarding the involvement of Justin Sun. Sun has faced criticism for past issues with projects like TUSD, which some claim has experienced operational and transparency problems since his involvement.

MakerDAO Proposal Looks To Drop WBTC As Collateral 

BA Labs has wasted no time in formally proposing a reduction of WBTC exposure in Maker and SparkLend, to mitigate potential risks associated with the new control structure. 

MakerDAO proposal seeking WBTC removal | Source: forum.makerdao.com

Notably, WBTC makes up around 10% of DAI’s backing, highlighting its significance in the DeFi ecosystem.

Addressing Concerns

In response to widespread concerns, Justin Sun assured the community via social media that “no changes will be made to WBTC.” 

Meanwhile, “Meow,” founder of Solana’s Jupiter and a co-founder of WBTC, has emphasized the need for transparency and clarity regarding multisig control and the benefits of multi-jurisdictional operations. 

Meow has called for open communication and reassurance to maintain trust in WBTC, stressing that any mishaps could significantly impact the entire DeFi ecosystem.

BitGo CEO Mike Belshe has acknowledged the concerns and agreed to discuss logistics for a meeting with stakeholders, including Meow and Justin Sun, to address these issues later this week.

tBTC As A WBTC Alternative

As the community evaluates the potential risks of this new arrangement, alternative options are being considered. 

tBTC, in particular, is a decentralized system that allows Bitcoin holders to use their Bitcoin on Ethereum without relying on a central authority, instead using a group of operators to secure Bitcoin deposits.

While some believe that WBTC was preferred because of possible bridge risks on tBTC, the recent changes have highlighted counterparty risks on WBTC. This has led to discussions about whether it might be time to consider a move to more decentralized BTC tokens. 

However, some voices, like that of @hasufl, have argued against tBTC being ready for use in MakerDAO/DAI:

It’s worth noting that only $181 million worth of tBTC is currently utilized within the DeFi ecosystem across all supported chains – more than 50 times less than WBTC, which has cemented itself in position across the industry.

Conclusion

WBTC’s recent structural changes have left the DeFi community with several unanswered questions, particularly regarding BiT Global’s ownership and company details, as well as a clear rationale for partnering with Justin Sun and Tron. 

With a market cap exceeding $9 billion, WBTC is a major asset within the DeFi space, and finding a replacement will not be easy. Although tBTC is a technically viable competitor to WBTC, it is currently only one-fiftieth of its size and lacks the necessary ecosystem integrations to take its place.

About The Author

Alex Miguel

Alex is a writer and DeFi enthusiast who has been in the space since 2016. He has written whitepapers, press releases, and social media content for several projects in the space.

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On September 5, 2020, Chef Nomi, the pseudonymous creator of SushiSwap, shocked the community by removing his significant share of SUSHI/ETH liquidity and converting it to ETH. 

The action, commonly referred to as a “rug pull,” resulted in Chef Nomi gaining approximately $14 million worth of ETH – leaving the SushiSwap community disappointed and feeling betrayed.

Dashed Potential

At the time, SushiSwap was positioned to become a strong decentralized competitor to Uniswap. It had successfully executed a “vampire attack” by attracting liquidity providers and migrating their funds from Uniswap to SushiSwap. 

Users had moved around $1 billion in Uniswap liquidity tokens to SushiSwap, signaling a significant shift in the DeFi landscape.

Community Outrage

Chef Nomi defended his decision to cash out on Twitter, claiming he wanted to concentrate on the development of the protocol. He compared his actions to those of Charlie Lee, who sold his Litecoin at the peak of the 2017 bull market.

However, the move had already enraged the community, leading many to declare the project dead due to a loss of trust. The timing of Nomi’s actions raised doubts about whether he truly intended to follow through on plans to hand over the developer-owned contracts to a community-owned multisig wallet. 

From the beginning, many industry leaders were skeptical about the Uniswap clone. With the SUSHI token halving in value within a single day, it seemed like a dramatic end for a project that had quickly accumulated over $1 billion in liquidity. 

Despite these doubts, discussions about transferring control to the community continued, though with less enthusiasm.

Nomi Returns Funds, Apologizes

Chef Nomi ultimately responded to the continued accusations of an exit scam by returning over $14 million worth of Ethereum taken from the developer allocation. 

In a series of tweets, he apologized to the DeFi community, acknowledged his mistake, and relinquished control of the project to other developers, including FTX CEO Sam Bankman-Fried.

What Has Happened To SushiSwap Since? 

Despite a somewhat successful recovery following the community takeover from Chef Nomi, SushiSwap has continued to have its share of ups and downs.

After a long period of internal conflict, SushiSwap implemented a major governance overhaul at the end of 2021. This introduced a hierarchical structure to improve management and address past issues.

In October 2022, the community elected Jared Gray as the new “head chef” (CEO) and the Sushi DAO community approved a reorganization proposal to create three legal entities to interface the management of the project with its real-world processes.

The project cut dead weight in the form of its Kashi Lending and Miso Launch Pad, looking to focus on its DEX to regain some market traction.

Sushi Total Value Locked (TVL) | Source: Defillama.com

Sushi peaked with a TVL of over $8 billion on Ethereum, however today it only holds around $258 million in user funds on the network. 

The protocol is widely deployed, however, currently operating on 30+ blockchains.

2024 Rebrand To Sushi Labs

In 2024, SushiSwap rebranded to Sushi Labs. It now aims to introduce cross-chain features along with a more agile governance model, using a council for day-to-day decisions while retaining Sushi DAO for more significant decisions. 

Sushi Announces its Rebrand to Sushi Labs | Source: Sushi.com Blog

This rebranding has included the launch of Susa, a new derivatives exchange for US-based traders and efforts to regain market volume and inflows.

About The Author

Alex Miguel

Alex is a writer and DeFi enthusiast who has been in the space since 2016. He has written whitepapers, press releases, and social media content for several projects in the space.

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Yield aggregator Yearn launched its new YFI governance token on July 17, 2020, along with several new liquidity pools.

Excerpt from the YFI token blog post | Source: Medium.com/iearn/

Best-known at the time for its Y Curvepool, Yearn provided (and continues to provide) users with multiple ways to earn interest by contributing their capital to different pools. 

At the time, Yearn’s pools offered some of the highest lending rates in DeFi. Its flagship pool managed $8 million in assets and a return of over 10% APY between its inception and the YFI token launch.

Yearn’s suite of products created a comprehensive system for lending and arbitrage, moving liquidity across various different DeFi platforms to get the best returns. 

This included everything from Curve to Compound, Aave, Uniswap and several more.

How to Earn YFI Governance Tokens

Earning YFI at its launch was straightforward: Provide liquidity to one of Yearn’s products below and stake the liquidity provision tokens.

The products included:

• yTrade: Allowing trading of top stablecoins (DAI, USDC, USDT, TUSD, and sUSD) with leverage up to 1000x using an initiation fee, or 250x without.
• yLiquidate: An automated system for handling defaults on Aave loans.
• yLeverage: Allowing users to open a 5x leveraged Dai Vault using USDC as collateral.
• ySwap: A stable Automated Market Maker (AMM) allowing for single-sided liquidity provision while earning interest and rewards.
• *.finance: A new credit delegation platform for smart contract to smart contract credit delegation lending (details TBA).

Whereas other DeFi protocols had portions set aside for their teams or sold in initial offerings, Yearn made it clear that YFI tokens were designed to have no financial value beyond their use in governance.

Burning YFI For Rewards

A new staking interface would enable YFI holders to burn their earnt YFI, in exchange for aDAI. 

The pool of aDAI was to be generated by fees from several sources and mechanisms across the protocol including:

• Interest, system, and leverage fees
• Liquidation bonuses
• Proceeds from liquidity mining on other DeFi protocols. 

This provided YFI with some clear inherent value, despite the team’s claims stating otherwise.

Where Is Yearn Now?

Yearn has steadily continued development, despite an $11 million hack in 2021 and the departure of its founder, Andre Cronje in March 2022.

The protocol currently has a total value locked (TVL) of $260.8 million, according to DeFiLlama.com. 

The current Yearn homepage | Source: Yearn.fi

Yearn continues to provide a suite of various useful products and portals. Those available today include:

• V3 Vaults: Choose between single or multiple strategies for their assets, providing more control and accommodating various risk appetites.
• Juiced Vaults: Invest in Ajna, a new protocol. These strategies are new and exciting, but have limited liquidity.
• V2 Vaults: Earn returns from a wide range of existing DeFi strategies. Increased flexibility over V1, but less customizable than V3. 
• veYFI: Lock YFI tokens to receive boosted vault rewards, participate in governance, and earn from early exit penalties and non-distributed gauge rewards.
• yCRV: Earn revenue from protocol fees and vote-maximized bribes, which is converted to crvUSD stablecoin and distributed to yCRV stakers.
• yETH: Deposit liquid staking tokens (LSTs) to receive yETH, or deposit and stake to receive st-yETH and start earning liquid staking yield.
• yPrisma: Earn revenue from protocol fees and vote-maximized bribes, which is converted to mkUSD stablecoin and distributed to yPRISMA stakers.

Although it’s relatively easy to deposit into a Yearn vault, it remains a platform for the more DeFi-savvy users. 

With a relatively complex and mixed combination of yield-generating strategies, users will need to know the ins and outs of DeFi to understand what their deposits are really doing.

About The Author

Alex Miguel

Alex is a writer and DeFi enthusiast who has been in the space since 2016. He has written whitepapers, press releases, and social media content for several projects in the space.

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As seen with Maker and the surrounding liquidity crunch, liquidity is everything. Without it, systems crumble. As a result, we’ve seen the realized potential for permissionless DEXs like Kyber and Uniswap. The ability for anyone to tap into their respective liquidity pools has allowed for both exchanges to experience unparalleled growth in recent months as they both break new record volume amid the coronavirus outbreak. 

Kyber’s success may largely be due to its high potential for composability and ability for dApps and users to easily access liquidity with far lower slippage than on automated platforms. Regardless, despite the massive volatility in crypto markets, Kyber Network was able to handle the recent liquidity crunch while successfully reaching record highs in daily volume. 

The growth in Kyber Network should not go unnoticed. Volumes in both USD and ETH terms, unique addresses, and other metrics have all reached new all-time highs. As such, we’ve decided to take some time to dive into the recent growth of one of DeFi’s leading liquidity protocols. 

Fundamental Growth

Looking at the numbers, Kyber has experienced significant growth across the board in almost every fundamental metric. In January 2019, monthly DEX volume reached around ~44,000 ETH. By February of 2020, the protocol processed over ~577,000 ETH in monthly volume, resulting in a 1,201% increase over 13 months. Despite the relatively stagnant price of ETH over the same time period, the volume has increased steadily in ETH terms. 

As reported in the last ecosystem report, many Kyber integrations have seen equally strong growth as Fulcrum and MyEtherWallet (MEW) reach 277% and 238% month-over-month volume growth, respectively. Another notable integration seeing a fair amount of growth was Argent.

The DeFi smart wallet reached over 54% month-over-month growth through its wallet application despite having restricted access. We can expect that as Argent continues to scale its user base, we should see a high uptick in overall volume as more users on-board the wallet and leverage its capabilities.

Table via Kyber Ecosystem Report #11

Looking at USD volumes, it’s apparent that the liquidity protocol continues to grow exponentially as we progress into the new year. While the protocol reached new ATHs in ETH volume, the near-parabolic spike in USD volume must also be attributed to Ether’s strong price performance in 2020.

With that in mind, Kyber’s monthly USD volume has seen the highest growth out of every other metric on the board – hitting 2,668% volume growth since January 2019. In the past three months, Kyber on average experienced over $82M in monthly volume compared to $11.3M in the first three months of 2019. As a result, the liquidity protocol has seen a 626% increase in average monthly volume between January – March 2019 and January – March 2020. 

As volumes continue to trend upwards, it’s also important to look at how many unique addresses are interacting with the liquidity protocol. While this isn’t a perfect measure for active users (as the same user can have multiple addresses), it does give us a basic framework for how the protocol’s user base is growing over time.

In the month of January 2019, Kyber Network saw around 2,600 unique addresses interact with the protocol. Fast forward a year later and the liquidity protocol saw nearly 7,500 unique addresses leverage the liquidity protocol. Most recently in the month of February, Kyber Network’s user base reached new all-time-highs with over 11,500 unique addresses in the month alone.

More broadly speaking, between the time of January 2019 and February 2020, Kyber saw a 322.95% increase in unique addresses.

The question now becomes – how many times is each address using Kyber on a monthly basis?

Generally speaking, this statistic has stayed relatively steady over the past year as users continue to use the liquidity protocol. In January 2019, the average address interacted with Kyber 6.27 times per month. Traders per unique address saw a slight uptick to 7.33 over a year later – showing strong user retention for one of DeFi’s leading liquidity protocols. 

Tokens & Fees with PE Ratios 

While all of this fundamental growth is exciting, it’s equally important to see if the fundamentals translate to value accrual for the protocol’s native token, KNC. 

In 2020, KNC has been one of the best performing tokens on the market, increasing by 171% as of writing while reaching 358% increase YTD from its peak in early March. In addition, KNC’s trading volume has also surged in the past year. The average volume for KNC in the month of March reached ~$70M compared to ~$2M back in January 2019, resulting in a 3,518% increase in average daily trading volume. 

According to Token Terminal, Kyber Network is expected to generate around $3.2M in annualized revenues for its tokenholders. With that, the KNC token currently boasts a moderate PE ratio of 26.98 (Liquid Market Cap / Annualized Earnings).  This is line with fair value for most traditional equities, a notable feat for Ethereum’s nascent money protocols. Compared to the rest of the DEX field, Kyber is expected to generate the most in annualized revenues. Naturally, the second-highest in forecasted annualized revenues is Uniswap. 

However, unlike Kyber, Uniswap is untokenized and therefore does not have a mechanism in place to distribute the value across all ecosystem participants. This is one of the benefits to Kyber – anyone can capitalize on the potential value accrual for the liquidity protocol at large.

Other notable players in the DEX space include 0x and dYdX. The margin trading platform – dYdX – is beginning to see notable growth in volumes as is shown in the protocol’s earnings. Lastly, despite 0x being a rather prominent liquidity protocol (and the only other tokenized protocol), it’s struggling to garner any significant earnings for tokenholders. 

Looking Forward – Katalyst 

The recent growth in Kyber should not go unnoticed. The liquidity protocol is continuing to gain more and more traction within the rapidly growing DeFi space as all fundamental metrics show massive increases across the board. 

One of the more notable things in the pipeline for Kyber is the new token economic rework, Katalyst. Kyber is implementing a new, dynamic token model where protocol earnings will be distributed through three main mechanisms: 

1. Burns
2. Distribute to active token holders
3. Accumulate profit in Liquidity Provider pool

Following the upgrade, KNC holders will be able to vote on how profits will be allocated across the ecosystem participants. Ultimately, this is a well-designed token model as tokens give the holders both economic and governance rights – an important dynamic found in traditional equities. 

Given Kyber Network is one of the few tokenized DeFi protocols generating substantial earnings for its token holders, the Katalyst upgrade should provide the ecosystem with a clear-cut design for value capture in order to properly capitalize on the fundamental growth within the protocol at large. 

Ultimately, the coming year is extremely exciting for one of DeFi’s leading DEXs. It will be interesting to see how Katalyst changes the dynamic for tokenholders and whether or not the protocol will continue on its path to “hockey stick growth” as seen with most successful, traditional start ups. 

Where is Kyber Network Now?

Kyber Network has gone on to become a multi-chain crypto liquidity aggregator, combining liquidity from various DeFi exchanges and aggregators to provide the best trade rates. 

Kyber Network homepage | Source: Kyber.network

The network continues to support 17+ chains and integrations with over 200 DeFi protocols, and has facilitated over $20 billion in trading volume to date.

Security Incidents and Financial Impact

Unfortunately, following a pair of unfortunate events in 2023, the protocol’s total value locked (TVL) has dwindled to just $2.2 million at the time of writing. 

It had peaked at a significant $530 million in August 2021, as shown below:

KyberSwap Total Value Locked (TVL) | Source: Defillama.com

April 2023 Vulnerability

Bear markets aside, the first artificial impact came in April 2023 when a vulnerability was found in KyberSwap Elastic’s contracts. 

The project advised liquidity providers to withdraw their funds immediately as a precaution. No funds were lost, but farming rewards were temporarily suspended until a new smart contract was deployed.

November 2023 Exploit ($48M)

The drama didn’t stop there, however, as the protocol suffered a major hack on November 23, 2023. 

An attacker used an “infinite money glitch” to drain nearly $49 million in digital assets. The hacker initially demanded negotiations, which included a $4.6 million bounty offer for returning 90% of the stolen funds. 

However, negotiations went sour, and the hacker escalated demands to total control over KyberSwap and KyberDAO. 

Part of the attacker’s message to KyberSwap. | Source: Etherscan

Following these demands, KyberSwap decided to launch treasury grants for victims of the hack and was forced to cut half of its workforce in response to the incident.

Does Kyber Network Have a Future?

Despite the implosion, Kyber Network has outlined an ambitious product roadmap for 2024-2025.

The project is focusing on enhancing user experience, expanding the ecosystem, and increasing utility for KNC holders, with key developments including: 

• Improvements to KyberSwap API, KyberSwap.com, and KyberDAO: Refining user experience, functionality, and governance.
• Smart Liquidity Pool Governance: Using statistical models to manage liquidity pools efficiently and save operational costs.
• Zap Technology: Introducing APIs and widgets to simplify adding liquidity and earning yield with a single transaction.
• Off-chain liquidity protocols: Developing systems to provide liquidity on an off-chain layer, reducing smart contract risks while maintaining user experience.

The roadmap highlights Kyber’s aim to match the user experience of centralized exchanges while maintaining decentralized security. 

The team encourages community participation and feedback to refine and achieve these goals.

Kyber’s success may largely be due to its high potential for composability and ability for dApps and users to easily access liquidity with far lower slippage than on automated platforms. Regardless, despite the massive volatility in crypto markets, Kyber Network was able to handle the recent liquidity crunch while successfully reaching record highs in daily volume. 

The growth in Kyber Network should not go unnoticed. Volumes in both USD and ETH terms, unique addresses, and other metrics have all reached new all-time highs. As such, we’ve decided to take some time to dive into the recent growth of one of DeFi’s leading liquidity protocols. 

Fundamental Growth

Looking at the numbers, Kyber has experienced significant growth across the board in almost every fundamental metric. In January 2019, monthly DEX volume reached around ~44,000 ETH. By February of 2020, the protocol processed over ~577,000 ETH in monthly volume, resulting in a 1,201% increase over 13 months. Despite the relatively stagnant price of ETH over the same time period, the volume has increased steadily in ETH terms. 

As reported in the last ecosystem report, many Kyber integrations have seen equally strong growth as Fulcrum and MyEtherWallet (MEW) reach 277% and 238% month-over-month volume growth, respectively. Another notable integration seeing a fair amount of growth was Argent.

The DeFi smart wallet reached over 54% month-over-month growth through its wallet application despite having restricted access. We can expect that as Argent continues to scale its user base, we should see a high uptick in overall volume as more users on-board the wallet and leverage its capabilities.

Table via Kyber Ecosystem Report #11

Looking at USD volumes, it’s apparent that the liquidity protocol continues to grow exponentially as we progress into the new year. While the protocol reached new ATHs in ETH volume, the near-parabolic spike in USD volume must also be attributed to Ether’s strong price performance in 2020.

With that in mind, Kyber’s monthly USD volume has seen the highest growth out of every other metric on the board – hitting 2,668% volume growth since January 2019. In the past three months, Kyber on average experienced over $82M in monthly volume compared to $11.3M in the first three months of 2019. As a result, the liquidity protocol has seen a 626% increase in average monthly volume between January – March 2019 and January – March 2020. 

As volumes continue to trend upwards, it’s also important to look at how many unique addresses are interacting with the liquidity protocol. While this isn’t a perfect measure for active users (as the same user can have multiple addresses), it does give us a basic framework for how the protocol’s user base is growing over time.

In the month of January 2019, Kyber Network saw around 2,600 unique addresses interact with the protocol. Fast forward a year later and the liquidity protocol saw nearly 7,500 unique addresses leverage the liquidity protocol. Most recently in the month of February, Kyber Network’s user base reached new all-time-highs with over 11,500 unique addresses in the month alone.

More broadly speaking, between the time of January 2019 and February 2020, Kyber saw a 322.95% increase in unique addresses.

The question now becomes – how many times is each address using Kyber on a monthly basis?

Generally speaking, this statistic has stayed relatively steady over the past year as users continue to use the liquidity protocol. In January 2019, the average address interacted with Kyber 6.27 times per month. Traders per unique address saw a slight uptick to 7.33 over a year later – showing strong user retention for one of DeFi’s leading liquidity protocols. 

Tokens & Fees with PE Ratios 

While all of this fundamental growth is exciting, it’s equally important to see if the fundamentals translate to value accrual for the protocol’s native token, KNC. 

In 2020, KNC has been one of the best performing tokens on the market, increasing by 171% as of writing while reaching 358% increase YTD from its peak in early March. In addition, KNC’s trading volume has also surged in the past year. The average volume for KNC in the month of March reached ~$70M compared to ~$2M back in January 2019, resulting in a 3,518% increase in average daily trading volume. 

According to Token Terminal, Kyber Network is expected to generate around $3.2M in annualized revenues for its tokenholders. With that, the KNC token currently boasts a moderate PE ratio of 26.98 (Liquid Market Cap / Annualized Earnings).  This is line with fair value for most traditional equities, a notable feat for Ethereum’s nascent money protocols. Compared to the rest of the DEX field, Kyber is expected to generate the most in annualized revenues. Naturally, the second-highest in forecasted annualized revenues is Uniswap. 

However, unlike Kyber, Uniswap is untokenized and therefore does not have a mechanism in place to distribute the value across all ecosystem participants. This is one of the benefits to Kyber – anyone can capitalize on the potential value accrual for the liquidity protocol at large.

Other notable players in the DEX space include 0x and dYdX. The margin trading platform – dYdX – is beginning to see notable growth in volumes as is shown in the protocol’s earnings. Lastly, despite 0x being a rather prominent liquidity protocol (and the only other tokenized protocol), it’s struggling to garner any significant earnings for tokenholders. 

Looking Forward – Katalyst 

The recent growth in Kyber should not go unnoticed. The liquidity protocol is continuing to gain more and more traction within the rapidly growing DeFi space as all fundamental metrics show massive increases across the board. 

One of the more notable things in the pipeline for Kyber is the new token economic rework, Katalyst. Kyber is implementing a new, dynamic token model where protocol earnings will be distributed through three main mechanisms: 

1. Burns
2. Distribute to active token holders
3. Accumulate profit in Liquidity Provider pool

Following the upgrade, KNC holders will be able to vote on how profits will be allocated across the ecosystem participants. Ultimately, this is a well-designed token model as tokens give the holders both economic and governance rights – an important dynamic found in traditional equities. 

Given Kyber Network is one of the few tokenized DeFi protocols generating substantial earnings for its token holders, the Katalyst upgrade should provide the ecosystem with a clear-cut design for value capture in order to properly capitalize on the fundamental growth within the protocol at large. 

Ultimately, the coming year is extremely exciting for one of DeFi’s leading DEXs. It will be interesting to see how Katalyst changes the dynamic for tokenholders and whether or not the protocol will continue on its path to “hockey stick growth” as seen with most successful, traditional start ups. 

Where is Kyber Network Now?

Kyber Network has gone on to become a multi-chain crypto liquidity aggregator, combining liquidity from various DeFi exchanges and aggregators to provide the best trade rates. 

Kyber Network homepage | Source: Kyber.network

The network continues to support 17+ chains and integrations with over 200 DeFi protocols, and has facilitated over $20 billion in trading volume to date.

Security Incidents and Financial Impact

Unfortunately, following a pair of unfortunate events in 2023, the protocol’s total value locked (TVL) has dwindled to just $2.2 million at the time of writing. 

It had peaked at a significant $530 million in August 2021, as shown below:

KyberSwap Total Value Locked (TVL) | Source: Defillama.com

April 2023 Vulnerability

Bear markets aside, the first artificial impact came in April 2023 when a vulnerability was found in KyberSwap Elastic’s contracts. 

The project advised liquidity providers to withdraw their funds immediately as a precaution. No funds were lost, but farming rewards were temporarily suspended until a new smart contract was deployed.

November 2023 Exploit ($48M)

The drama didn’t stop there, however, as the protocol suffered a major hack on November 23, 2023. 

An attacker used an “infinite money glitch” to drain nearly $49 million in digital assets. The hacker initially demanded negotiations, which included a $4.6 million bounty offer for returning 90% of the stolen funds. 

However, negotiations went sour, and the hacker escalated demands to total control over KyberSwap and KyberDAO. 

Part of the attacker’s message to KyberSwap. | Source: Etherscan

Following these demands, KyberSwap decided to launch treasury grants for victims of the hack and was forced to cut half of its workforce in response to the incident.

Does Kyber Network Have a Future?

Despite the implosion, Kyber Network has outlined an ambitious product roadmap for 2024-2025.

The project is focusing on enhancing user experience, expanding the ecosystem, and increasing utility for KNC holders, with key developments including: 

• Improvements to KyberSwap API, KyberSwap.com, and KyberDAO: Refining user experience, functionality, and governance.
• Smart Liquidity Pool Governance: Using statistical models to manage liquidity pools efficiently and save operational costs.
• Zap Technology: Introducing APIs and widgets to simplify adding liquidity and earning yield with a single transaction.
• Off-chain liquidity protocols: Developing systems to provide liquidity on an off-chain layer, reducing smart contract risks while maintaining user experience.

The roadmap highlights Kyber’s aim to match the user experience of centralized exchanges while maintaining decentralized security. 

The team encourages community participation and feedback to refine and achieve these goals.

About The Author

Lucas Campbell

Former Analyst at Bankless, one of the leading resources for open finance. Lucas is an active contributor to the DeFi ecosystem, appearing in other notable DeFi outlets, including The Defiant and Our Network. He has years of experience working with dozens of blockchain and token startups, where he focused on token economics, marketing, and growth.

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DeFi lending platform Compound raised $25 million in Series A funding on November 15, 2019, led by Andreessen Horowitz – one of the largest ever DeFi startup raises at the time.

Andreessen Horowitz, also known as a16z, highlighted that they had been working with the Compound team for two years and had a strong belief in their aptitude in the field.

According to Compound co-founder Robert Leshner, Polychain Capital, Paradigm Capital and Bain Capital Ventures also participated in the round, valuing the protocol at around $90 million. 

At the time of the investment, Compound had a little over $100 million in total value locked (TVL) in its protocol.

Funding Decentralization and Accessibility

Leshner claimed that the funding round would assist with the protocol’s plans to decentralize, in addition to putting the platform within the reach of the average person – not just tech-savvy users.

In order to achieve this, he promised the protocol would be integrated into a variety of exchanges, custodians and wallets by the end of 2020. 

Where is Compound Finance Now?

Since the funding round, Compound has successfully surpassed expectations on all fronts.

The protocol became one of the very first projects to decentralize control across the hands of the community, via the launch and distribution of its COMP governance token. 

Compound also secured partnerships with popular exchanges and wallets including Binance, Crypto.com, and Exodus. On the institutional end, it has been integrated into institutional platforms such as Coinbase Custody, Anchorage and BitGo.

Users of these platforms can now directly access the Compound protocol through these partners, rather than having to withdraw their funds and use a separate wallet.

The protocol peaked with an impressive $12.3 billion in TVL in November 2021 and is currently sitting at $2.12 billion TVL, at the time of writing.

It spans 6 different blockchain networks: Arbitrum, Base, Ethereum, Optimism, Polygon, and Scroll.

About Andreessen Horowitz (a16z)

Andreessen Horowitz, also known as a16z, is a prominent private venture capital firm founded in 2009 by Marc Andreessen and Ben Horowitz. 

Headquartered in Menlo Park, California, a16z manages assets totaling $42 billion as of May 2024, making it one of the leading firms in its field. 

It supports both early-stage startups and established companies, providing not only financial backing but also strategic guidance and resources. 

Notable investments include companies like Facebook, Twitter, Airbnb, and Coinbase.

About The Author

Alex Miguel

Alex is a writer and DeFi enthusiast who has been in the space since 2016. He has written whitepapers, press releases, and social media content for several projects in the space.

Read More