This Week in DeFi – May 29th


To Our DeFi Community,

Bang bang. Another awesome week in DeFi in the books!

One of the most notable announcements this week was the launch of the RenVM on Ethereum mainnet. For those unfamiliar, the RenVM allows users seamlessly mint BTC, BCH, and ZEC on Ethereum. The most important part? It’s trustless (or trust-minimized).

Ren Protocol provides a novel solution as you’re not relying on a centralized institution to hold your assets cross-chain (like WBTC and BitGo) but instead a piece of code that interoperates between different networks. 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 capacity for DeFi to conduct economic activity. With another trustless solution for bringing BTC over to Ethereum, we may see the smart contract network continue to act as a gravity well for financial assets – both traditional and crypto. Who doesn’t want to earn passive income on their BTC via Compound or Aave. Once protocols integrate renBTC and other Ren-based assets, we may begin to see the potential of Ethereum as a settlement layer for global financial assets. 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. That in mind, looking at today’s landscape, USDC and DAI would dominate the distribution. USDC comprises 70% of the daily interest rate 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 DAI would receive 619 COMP per day. The rest of the money markets (ZRX, REP, BAT, ETH, USDT, WBTC) would aggregate the remaining 245 COMP split between all the markets. Once the distribution is live, it’ll be really interesting to see how COMP distributions drive an incentive to make deposits or borrow from the underlying money market. The 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 make 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. The advent of “superfluid” collateral is happening in real-time. This idea may become more prominent with the introduction of ETH Staking Pools and the tokenization of staked ETH.


Interest Rates

Dai

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 a 0% 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 as interest rates continue 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.

 

USDC

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), you can sign up here!


 

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.

The Ethereum Venture studio announced the acquisition of Fluidity, the developer team behind AirSwap and the Tokenized Asset Portfolio (TAP).

mStable goes live with a new protocol for stablecoin aggregation, including a native stablecoin mUSD and a governance token MTA.

 





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