To Our DeFi Community,
Bang bang. Another awesome week in DeFi in the books!
This Week in #DeFi
🚀 @renprotocol launches RenVM
👻 @AaveAave integrates Uniswap LP tokens
💣 @mstable_ unleashes mUSD
— DeFi Rate (@DefiRate) May 29, 2020
One of the most notable announcements this week was the launch of the RenVM on Ethereum mainnet. For those unfamiliar, the RenVM allows users to seamlessly mint BTC, BCH, and ZEC on Ethereum. The most important part? It’s trustless (or trust-minimized).
Ren Protocol provides a novel interoperable solution for DeFi as you don’t have to rely on a centralized institution to hold your cross-chain assets (like WBTC and BitGo). Instead, it relies on code (the RenVM) to custody the assets between different networks. It’s a trustless solution for bringing new assets into DeFi. It brings more economic bandwidth. The combination of BTC, BCH, and ZEC potentially fuels DeFi with nearly another $178B in economic bandwidth. Obviously a majority of this is coming from BTC, but BCH and ZEC each provide an additional $4.4B and $433M in total economic bandwidth, respectively. This is a drastic increase in the potential capacity for DeFi to conduct economic activity. Who doesn’t want to earn passive income on their BTC via Compound or Aave? Once protocols integrate BTC and other cross-chain assets, we may begin to see Ethereum realize its potential as a credibly neutral settlement layer for global financial assets. Who will be the first? Will it be Maker? Compound? Aave? Who knows.
Another major piece of news this week was Compound – one of the sector-leading money market protocols – releasing details on the public distribution for its native governance token. The key takeaways: Roughly ~2,880 COMP distributed per day allocated proportionally to the interest accrued by each money market, split 50/50 between borrowers and suppliers. Looking at today’s landscape, USDC and DAI would dominate the distribution. USDC comprises 70% of the daily interest accrued on Compound while DAI represents another 21%. If the distribution started today, the USDC money market would receive 2,016 COMP per day while the DAI market would receive 619 per day. The rest of the lending markets (ZRX, REP, BAT, ETH, USDT, WBTC) would accumulate the remaining 245 COMP split between all the markets. Once the distribution is live, it’ll be really interesting to see how COMP will drive an incentive to deposit or borrow from each respective money market. Keep an eye out. Public distribution is set to begin next month.
The other rising money market protocol – Aave – also saw an interesting new development this week. The lending protocol went live with supporting UNI V1 Liquidity Provider (LP) tokens. Now users can contribute liquidity to major Uniswap pools, earn trading fees, and use the LP tokens as collateral to borrow assets on Aave. This is a new degree of composability for Ethereum as the advent of “superfluid” collateral is happening in real-time. Expect this idea to become more prominent in the future, especially with the introduction of ETH Staking Pools and the tokenization of staked ETH.
Despite the fact that Dai’s peg is now relatively stable at $1.00, MakerDAO still has the Dai Savings Rate (DSR) at 0%. Worse, the most recent governance poll surrounding a DSR spread adjustment earlier this week resulted in 79% of voters signaling for no adjustment while 20% voted for a 0.25% adjustment. There seems to be no end in sight. It’s a depressing time for Dai as DeFi users bare the pain with interest rates continuing to sit around 1-2% APY, substantially lower than the ~8% APY offered prior to Black Thursday. At this point we can only hope to see the DSR come back online, offering attractive rates for the DeFi ecosystem and giving a boost to the broader lending market.
While the DSR sits at 0%, USDC rates are still offering marginally higher returns than its decentralized counterpart. As a quick example, Compound is offering nearly 2.5x higher APY on USDC deposit relative to DAI. Meanwhile, Nuo and BlockFi continue to play in a league of their own, offering 8.21% and 8.6% APY on USDC deposits, respectively. Margin trading protocol, dYdX, has seen a fair uptick in lending rates for USDC. The protocol has increased deposit APYs by nearly 2x as rates spiked upwards to 2.52%, up from its 30D average of 1.31%. If you’re interested in making a deposit on BlockFi to earn a juicy 8.6% on USDC deposits (or even 6% on BTC and 4% on ETH), you can sign up here. There are risks involved so please do your own research!
The mainnet launch brings a novel, trustless solution for users to mint BTC, BCH, and ZEC on Ethereum
The leading money market protocol announced the details surrounding the public distribution of its native governance token – COMP.
The growing lending protocol now allows users to borrow a range of assets with UNI LP tokens.
mStable goes live with a new protocol for stablecoin aggregation, including a native stablecoin mUSD and a governance token MTA.
In Other News…
- [Research] 0x V3 upgrade serves as a critical catalyst behind recent growth
- [Stablecoins] DeFiDollar Demo: HackMoney Interest-Earning Stablecoin Index
- [Insurance] Nexus Mutual set to scale into ‘Super Efficient Lloyds of London’
- [Asset Management] Zapper.Fi debuts Pool Pipes for DeFi Liquidity Management
- [Ecosystem] Gitcoin Announces KERNEL Fellowship
- 10 signs we’re headed for a new ETH bull market
- MKR surges following Coinbase Pro listing
- Paraswap purchases two $200k+ cover from Nexus Mutual
- PoolTogether reaches nearly 8,300 unique users
- Opyn 5x’d notional volume in the past month
- [Cooper Turley – The Defiant] Aragon Drama Pushes On-Chain Governance Idealists to the MeatSpace
- [Spencer Noon – Our Network] Issue #23: Nexus Mutual, ChainLink, Opyn, PoolTogether
- [Osho Jha – CoinDesk] Staking will turn Ethereum into a functional store of value
- [Ryan Sean Adams – Bankless] ETH is doubly undervalued
- [Jason Jones – Bankless] How Dai gets to $300B
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Analyst at Bankless – one of the leading resources for open finance. Lucas is an active contributor to the DeFi ecosystem with appearances in other notable DeFi outlets including The Defiant and Our Network. He has years of experience working with dozens blockchain and token startups where he focused on token economics, marketing, and growth.