DeFi
Industry group releases Ethereum DeFi playbook – DL News
A version of this article appeared in our The decentralized July 23 newsletter. Sign up here.
DG, Alexis here.
Here’s what caught my attention in DeFi recently:
- Why EigenLayer is losing momentum.
- An Ethereum group is trying to get ahead of DeFi regulations.
- A Crack in the $125 Million Multichain Mystery
EigenLayer is cooling down
EigenLayer started the year strong.
The pioneering “resttaking” protocol launched in June 2023. But after people like Ethereum co-founder Vitalik Buterin warned it could destabilize Ethereum, EigenLayer capped its own growth from the start, limiting the amount crypto users could deposit.
Earlier this year, these caps were lifted.
In one month, EigenLayer has become the second-largest protocol on Ethereum. As of February 1, EigenLayer users have deposited just over $2 billion in cryptocurrencies.
As of March 1, that figure was just under $10 billion.
Join the community to receive our latest stories and updates
Venture capitalists have stepped up. Andreessen Horowitz has invested $100 million. Affiliated “liquid resttaking” projects have also raised millions of dollars.
At the time, I wondered: How much of EigenLayer’s value came from users who truly believed the protocol was a “revolutionary evolution“and how much came from the “parachute farmers” who used it as their last cash cow?
We get our answer now.
The total value of EigenLayer’s cryptocurrencies peaked at $20 billion in June. It has since fallen to just under $16 billion.
That’s because airdrop farmers are leaving, according to one analyst. Now that re-staking airdrops are over, investors are looking for greener pastures.
But it’s not all bad.
“Resttaking will continue to be a massive market and a significant influence across the entire Ethereum network,” analyst Ian Unsworth of Kairos Research told me.
A DeFi manual?
While politicians and regulators pass laws that cover stablecoins, centralized exchanges and cryptocurrency-based exchange-traded funds, they have largely avoided DeFi.
But make no mistake: those regulations will come. And one project is trying to get ahead of the next regulatory wave.
The Enterprise Ethereum Alliance, an industry group, has released its DeFi Risk Assessment Guidelines, a detailed playbook detailing the risks of working with DeFi and how to assess, manage, account for, and mitigate them.
These guidelines will enable DeFi protocols to take a proactive approach to compliance, while helping regulators draft regulations that do not stifle innovation.
Regulators in the United Arab Emirates and the European Union are already using the EEA guidelines, according to Dyma Budorin, co-chair of the EEA DRAMA Working Group and CEO of blockchain security firm Hacken.
Budorin said the playbook will be useful for traditional financial institutions considering getting into DeFi.
“They don’t know what the risks are in DeFi, and that’s why they’re not getting into it,” he told us. “DeFi protocols that plan to cooperate with old money can use the DeFi risk assessment guidelines as a benchmark for best practices.”
Multichain Hack
When the Multichain crypto bridge shut down last summer, citing pressure from Chinese police and an apparent $125 million hack, Fantom Foundation CEO Michael Kong dismissed speculation that it was an inside job.
He’s not so sure anymore.
Kong, whose company lost money in the hack, tells me he can’t rule out that someone affiliated with Multichain stole the loot.
The Fantom Foundation has filed a similar accusation in a Singapore court.
“I had a little too much faith in what Multichain was telling us,” Kong said.
The Fantom Foundation has confirmed that Multichain CEO Zhaojun He has been arrested and is awaiting indictment.
She was also able to confirm that other employees were arrested, although they were eventually released.
Although no information is conclusive, some facts have fueled suspicions that last summer’s event was not an ordinary computer hack.
First of all, the movement of stolen cryptocurrencies after the hack was very unusual.
Second, Multichain briefly reopened in November, allowing someone to make a complicated, lightning-fast arbitrage trade for $1 million.
“We believe this is a person (or individuals) from the former Multichain team,” Kong said.
A representative from Multichain could not be reached for comment. The company has not defended itself at any point in the Fantom case. trial in Singapore, which started in 2023.
And a person familiar with the inner workings of Multichain said DL News The company team had not planned any internal work.
“The truth will be known when the police make the case public,” said the person, who spoke on condition of anonymity out of fear for his family in China.
Data of the week
Keep an eye on political memecoins, which have been fluctuating wildly amid political chaos in the United States.
On Sunday, President Joe Biden withdrew from the race and endorsed Vice President Kamala Harris.
Doland Tremp, a memecoin based on Republican candidate Donald Trump, climbed 30% to around 55 cents.
Jeo Boden, a play on the president’s name, fell 59% to about a cent.
A token called Kamala Horris (chart below) has soared 131%.
This Week in DeFi Governance
VOTE: Arbitrum seeks members for Gaming Catalyst Program Board
VOTE: Arbitrum Wants to Oust DeFi Aggregator for ‘Misuse’ of Grant Money
VOTE: Aave Considers Adding Ethena’s USDe as Collateral
Article of the week
Happy birthday to a very special digital asset.
ETH celebrates its 10th anniversary today!
The Ether ICO started on July 22, 2014. At the time, ETH was sold on Bitcoin at a rate of 2,000 ETH for 1 BTC, completely permissionless, no VC, no vested rights.
Today, 1 BTC buys less than 20 ETH. Few assets have outperformed BTC over 10 years; even fewer have…
– Justin Ðrake 🦇🔊 (@drakefjustin) July 22, 2024
What we are looking at
This is an interesting innovation in the KYC space. If you pass Binance’s due diligence process, you can create a token that proves this fact and then export your KYC proof to various DeFi tools, including mixers, which proactively weed out bad actors.https://t.co/qLYgh68Vhb
Thoughts? pic.twitter.com/89p73dCadw
– Jean-Paul Koning (@jp_koning) July 19, 2024
Several proposals have been made to find common ground between crypto and government.
One of the most commonly discussed ideas would be to use zero-knowledge technology to vet customers and create a sort of digital passport that they could use across DeFi protocols. Binance, the world’s largest cryptocurrency exchange, just launched its own crypto passport, which it calls the “Binance Account Bound Token.”
But will this really satisfy legislators and regulators?
Got any DeFi tips? Contact us at aleks@dlnews.com.