One of France’s leading banks has turned to decentralized finance pioneer MakerDAO to propose the submission of bond tokens as collateral for a loan of the DAI stablecoin.
The historic proposal called “Security Tokens Refinancing” was submitted to Maker’s governance forums by the international bank on Oct. 1. It would be the first major collaboration between a traditional bank and a DeFi protocol and could open the door for closer integration between the two sectors.
Societe Generale (SG) labeled it as the “first experiment at the crossroads between regulated and open source initiatives.”
The bank has proposed that it provides “OFH” security tokens (obligations de financement de l’habitat) which are characterized as covered bonds under French law, and backed by home loans.
These would be used to collateralize a $20 million loan in Maker’s DAI stablecoin which would be mediated by a number of legal entities and mature in six to nine months.
The Ethereum-based security tokens were issued in May 2020 with a nominal amount of 40 million Euro ($46.3M) and a fixed rate of 0%. They mature in May 2025 and have the top credit rating of AAA by rating agencies Moody’s and Fitch.
MakerDAO founder Rune Christensen said he had “no clue” about this proposal, adding that “this is one of multiple recent examples in Maker Governance of how the post-foundation model of organization is proving to be more scalable.”
Société Générale, the third largest bank in France, just made a collateral onboarding application to Maker for 20 million USD.
Backed by EUR bonds, proposed by their blockchain subsidiary.https://t.co/hxGEMOIWjy
— Rune Christensen (@RuneKek) September 30, 2021
Industry observer “DCInvestor” commented on the potential impact of deals such as this on Ethereum and its position as a global settlement layer:
“Societe Generale with their attempt to get their on-chain assets usable in Maker and you’re wondering if Ethereum will become a global settlement layer it’s happening, now.”
SG stated that the loan would be a “pilot use case,” with the goal of helping to “shape and promote an experiment under the French legal framework,” and “enhance a profitable service and foster liquidity for digital bonds.”
SG Forge, a regulated subsidiary of the bank that deals with crypto assets, is managing the proposal which is based on the open-source framework CAST (Compliant Architecture for Security Tokens).
The legal framework for the deal is complex as it needs to integrate an institutional financial organization with a decentralized governance-based network. A flowchart provided by the bank details six separate entities involved in the process. These include the registrar Societe Generale Forge, the bank itself SG, MakerDAO, a legal representative for the DeFi protocol, security agent DIIS Group, and a third-party exchange agent.
Source: forum.makerdao.com
Related:Senator Warren’s office confuses MakerDAO for failed 2016 project The DAO
Pseudonymous MakerDAO community member ‘PaperImperium’ commented on the proposal in the forum:
“Maker and SocGen-Forge are standing at the precipice of financial history. What a time to be alive.”
The proposal is currently being discussed and will move to a formal governance vote in the weeks to come.
It is not the first time Societe Generale has dabbled with Ethereum-based security tokens. In April 2019, the bank’s SG Forge unit issued a 100 million Euro bond as an OFH security token on Ethereum.
A sharp sell-off across the cryptocurrency market Tuesday—that saw top tokens like Bitcoin (BTC), Ether (ETH), Cardano (ADA), and Solana (SOL) fall by double-digital percentages—created a venue for stablecoins to prove their worth.
The fixed-price cryptocurrencies offered interim protection to traders from the notorious crypto price volatility. They did so by almost maintaining their one dollar-peg and offering sufficient liquidity to traders that looked for a safety net during the market decline.
Blockchain analytics service CryptoQuant reported dramatic spikes in the stablecoin transfers as the cryptocurrency market cap fell from $2.38 trillion to $2.103 trillion on Tuesday.
For instance, Tether, the leading stablecoin by volume, processed $10.51 billion worth of transactions on Tuesday compared to $4.02 billion on Monday.
The mean of all stablecoins transfer. Source: CryptoQuant
Similarly, the second-largest stablecoin USDC, backed by Circle, reported $5.728 billion worth of transfers on Tuesday versus $3.27 billion in the previous session, logging a 74% spike.
At the same time, the net stablecoin supply in circulation remained relatively idle, around $67 billion, showcasing adequate liquidity against demand even in the face of a brutal crypto market decline. As a result, many top stablecoins maintained their 1:1 dollar peg despite logging minor price drifts.
Centralized stablecoin more dependable
Among the top-10 stablecoins that showed minimal average deviation from their one dollar peg included six centralized, two mixed, and two algorithmic projects.
USDC demand pushed its average valuation by about $0.00196 above a dollar, closely followed by Paxos (PAX), which traded $0.00203 above the same peg.
Top 10 stablecoins ranked according to their average deviation from the US dollar. Source: Larry Engineer’s stablecoin tracker
Similarly, Binance exchange’s native stablecoin BUSD and MakerDAO’s DAI maintain their stability via a dynamic system of Collateralized Debt Positions (CDPs), autonomous feedback mechanisms, and a variety of user incentive structures, was up $0.00244 from its dollar peg.
Tether’s wider demand across the cryptocurrency spectrum also pushed its average deviation up by $0.00244.
Related: Tether promises an audit in ‘months’ as Paxos claims USDT is not a real stablecoin
Meanwhile, TrustToken’s TUSD, Stable Universal’s HUSD, and Terra’s UST drifted $0.00249-0.00385 from their dollar valuation. FRAX and FEI posted decoupled from their dollar peg by jumping $0.00404 and $0.00474 above it, respectively.
The data snapshot was taken 24 hours after the Sept. 7 crypto market crash.
Stablecoin collapse good for Bitcoin?
But potential stablecoin risks have also attracted the attention of top U.S. officials, including Treasury Secretary Janet Yellen and Boston’s Federal Reserve’s President Eric Rosengren.
In July, Yellen “underscored the need to act quickly to ensure there is an appropriate U.S. regulatory framework in place,” in a meeting with the heads of the Federal Reserve, the Securities and Exchange Commission, the Commodity Futures Trading Commission, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation.
Related: Stablecoin growth could affect credit markets, rating agency warns
Meanwhile, Rosengren called Tether a potential challenge to financial stability.
In July, a paper released by Fitch Ratings also noted that collateralized stablecoins could trigger short-term credit market contagion. Excerpts:
“A sudden mass redemption of [tether] could affect the stability of short-term credit markets […] particularly if associated with wider redemptions of other stablecoins that hold reserves in similar assets.”
But what does a stablecoin market collapse could mean for Bitcoin and similar digital assets? Mike McGlone, the senior commodity strategist at Bloomberg Intelligence, said it would benefit Bitcoin, in particular.
“If the whole market collapse, there is only one safe store of value left: Bitcoin.”
For more about the potential risk of stablecoins, check out Cointelegraph’s latest video report.
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The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
Pioneering decentralized finance protocol, MakerDAO, has announced its foundation will formally dissolve in the coming months, marking one of the final milestones in the protocol’s roadmap to decentralized governance.
A July 20 blog post describes Maker’s decentralized autonomous organization, or DAO, as now being “fully self-sufficient” — with its globally distributed community “now responsible for every aspect of the Maker protocol.”
“Complete decentralization of Maker means that future development and operation of the Protocol and the DAO will be determined by thousands or perhaps millions of engaged, enthusiastic community members, all determined to extend the benefits of digital currency to people across the globe.”
The post’s author, Maker Foundation CEO, Rune Christensen recounts highlights from the project’s six-year journey, with Christensen having first revealed his plans in a Reddit post detailing his vision for an Ethereum-back stable token dubbed “eDollar” during March 2015.
The Maker Foundation was created as a non-profit tasked with overseeing the project’s development and funding in September 2018, reportedly at the behest of its early investors. While Christensen created the Foundation with the intention of dissolving it within two to three years, the move catalyzed internal tensions between supporters of the Foundation and those who saw the legal entity as at odds with crypto’s fundamentally anarchic ethos.
He describes Maker as having “come a long way in a relatively short period,” transitioning from a pioneering fledgling DAO, into a Foundation, and back to a DAO again.
“While the Foundation played a specific and important role in the further development of the Maker Protocol and the growth of a global team, it was designed to exist only temporarily,” emphasized Christensen.
In May 2017, more than two years after Christensen revealed Maker on Reddit, the protocol conducted a limited release of ProtoSai — the precursor to Maker’s first stablecoin, SAI, or Single-Collateral Dai.
SAI would enjoy a wholesale release in December of 2017 and circulate for nearly two years, with Maker introducing Multi-Collateral Dai (DAI) during November of 2019 — allowing DAI to be minted against a variety of digital assets approved by Maker governance.
Related:Australian digital finance industry wants to legally recognize DAOs
While Maker would emerge as a pioneering DeFi protocol perched at the top of the sector’s rankings by total value locked, 2020 was not all smooth sailing for Maker, with users launching a class-action lawsuit against the foundation in the aftermath of “Black Thursday” in March. The incident saw Maker lose roughly $6.64 million DAI to cascading liquidations after the price of Ether crashed 50% over roughly 24 hours.
March 2020 would also see the Maker Foundation transfer the MKR token contract to community governance, marking the beginnings of the project’s journey to reinstating decentralizing governance — with Christensen characterizing the foundation as “completely pointless.”
The protocol would also add support for Circle’s centralized stablecoin USDC that month, inflaming controversy regarding Maker’s support for centralized crypto assets as collateral for its purported decentralized stable token.
In March of this year, “Core Units” were established to coordinate management across the protocol’s various teams and activities. The foundation would also return development funds of 84,000 MKR to the Maker DAO in May, worth nearly $500 million at the time.
According to DeFi Llama, MakerDAO is currently the sixth-ranked decentralized finance protocol with a total value locked of $5.62 billion.
Polygon has announced the integration of yield optimization vaults on the Maker Network. The blockchain-enabled protocol, formerly referred to as the Matic Chain, tweeted on Wednesday that it “will be opening a vault on Maker” and investing $50M of MATIC tokens as agreed liquidity from the treasury.
With the recent integration, it means the protocol has now broadened in scope, vision, and transformation to become an Ethereum scaling aggregator.
Related Reading | Scaramucci’s Skybridge Capital Launches Ethereum Fund
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Such feet, among others, would see the protocol network providing developers with L2 solutions. This will be in addition to the POS/Plasma chain – mainnet, launched in April 2020.
Key Terms Explained
About The Polygon
Polygon provides the core components and tools to join the new, borderless economy and society. Two key platforms materialize it: The polygon framework and the Polygon protocol.
With these technologies, any project can quickly spin up a dedicated blockchain network that combines the best features of “stand-alone blockchains (sovereignty, scalability, and flexibility) and Ethereum (security, interoperability and developer experience).”
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Plus, these blockchains are friendly with all the existing Ethereum tools such as Metamask, MyCrypto, Remix, etc. So again, the exchange of information among themselves and with Ethereum is facilitated.
Related Reading | Why Terra (LUNA) Will Reward Users With New Community Bounty Program
Summary: Polygon is a blockchain protocol and a framework for creating and connecting Ethereum-compatible blockchain networks.
One is collapsing together scalable solutions on Ethereum and supporting multiple chains in the Ethereum ecosystem.
What Is Matic Token?
MATIC, the native token of Polygon, is an ERC-20 token running on the Ethereum blockchain. The tokens are used for payment services on Polygon and as a settlement currency between users who operate within the Polygon ecosystem.
MATIC set to follow an upward trend in the daily chart. Source: MATICUSD Tradingview
This has turned out to be quite positive for the MATIC community as the token as hovering in the green-zone marking 1% of growth at the time of writing this article.
As an integral part of the announcement, $50M of MATIC tokens have been committed by Polygon on the newly opened vault on Maker.
About MakerDAO
MakerDAO is an organization developing technology for borrowing, savings, and a stable cryptocurrency on the Ethereum blockchain.
It has created a protocol permitting anyone with ETH and a MetaMask wallet to loan themselves money in the form of a stable coin referred to as “DAI.”
Related Reading | Ethereum Upgrades Could Jumpstart $40 Billion Staking Industry, JP Morgan
By integrating loans with a stable currency, MakerDAO typically allows anyone to borrow money and reliably predict how much they had to pay back. This alleviates the fear that used to come in the era of crypto to crypto borrowing.
Polygon Is Elated
Polygon board, opening a vault on Maker and committing $50M of MATIC tokens as seed liquidity from the treasury, sincerely thanks the MakerDAO community and team.
They appreciate the effort to quickly process the entire governance activities/polls and their feedback to onboard MATIC as collateral.
“This is a crucial development in Polygon’s long-term vision and commitment to develop the Ethereum scaling landscape and entice the gifted builders and engaged community members,” the board reveals.
Following this, Polygon will be minting DAI, which will invest in the Ethereum ecosystem.
Vault Projects On Polygon
Similarly, there are few other networks opening vaults on polygon technology. Beefy Finance, for instance, launched its first Beefy yield optimizing vault In Polygon on the 28th of April, 2021.
The finance tech is a Decentralized, Multi-Chain Yield Optimizer platform that allows its users to earn compound interest on their crypto holdings. In addition, it has launched a new Ape Swap vault deployed on Polygon.
Quarries On The Project
Despite the attractiveness, there have been some skeptical postures on the project.
Many keen crypto lovers and observers are quarrying that, If approved, would Polygon utilize this class of vault themselves?
Are there any specifically identified users – individual or entity – who have expressed an intention to use this class of vault if MakerDAO onboarded this collateral? Well, for now the MATIC community seems to be appreciating the latest development.
Featured image from Pixabay, chart from TradingView.com
Decentralized finance lending and stablecoin protocol MakerDAO has adjusted stability fees across a wide range of crypto assets used as collateral on the platform.
The move comes as the demand for DAI and other stablecoins has cooled amid the recent crypto market retracement, with Maker hoping to drive up demand for DAI minting through the reduction in fees.
⚠️Maker Protocol Changes ⚠️ (1/5)
ETH-A Stability Fee: 5.5% → 3.5%
ETH-B Stability Fee: 10% → 9%
ETH-C Stability Fee: 3% → 1%
WBTC-A Stability Fee: 4.5% → 3.5%
LINK-A Stability Fee: 5% → 4%
YFI-A Stability Fee: 5.5% → 4%
— Maker DAI Bot (@MakerDaiBot) June 21, 2021
When users deposit crypto assets to mint the protocol’s stablecoin, DAI, the debt incurs a stability fee which is effectively a continuously accruing interest that is due upon repayment of the borrowed tokens.
Maker’s fluctuating stability fees are designed to maintain DAI’s dollar peg, as when collateralized debt position (CDP) holders mint more DAI than the market demands, the stable token’s price could fall below $1.
Increasing the stability fee pushes up the cost of borrowing DAI, reducing demand for minting the token. Conversely, reducing the fees, as MakerDAO has just done, drops the cost of borrowing DAI to stimulate demand.
DAI’s circulating supply spiked to an all-time high of $5.1 billion on June 16 but has fallen 6% since then to current levels of around $4.8 billion. Demand for the stablecoin has slowed amid an accelerating downtrend in crypto asset prices and falling activity in the DeFi sector.
Related:Analyst says DeFi and stablecoins held up well as crypto markets imploded
MakerDAO token holders are currently in the process of voting on whether to implement flash loan functionality. If passed, the proposal will allow a maximum of 500 million Dai to be minted by individuals for flash loans, removing existing constraints that limit the value of loans based on the volume of liquidity available in lending pools.
⚡️ Flash minting is here. ⚡️
DeFi position management / arbitrage is about to get a big UX improvement. Maker is providing 500M in ERC3156-compliant flash mints once the weekly spell passes.https://t.co/JJvHoSGENH
— Sam MacPherson (@sgmacpherson) June 18, 2021
At the time of writing, 3,184 MKR governance tokens had been mobilized to support the proposal.
MKR is currently down 20% over the past 24 hours — falling from $2,600 to an intraday low of $2,060 before a minor recovery to $2,200 at the time of writing.
Coinsilium Group Limited is an open and crypto finance venture builder that creates and implements services and products based on blockchain technology. It was the very first blockchain organization that went public back in 2015. Over time it has invested in the leading and popular blockchain projects such as Blox, Indorse, and RSK/IOV Labs by using its expertise and broad network. Now the shares of Coinsilium are traded on New York-Based OTCQB Venture Market and London-based AQSE Growth Market under the ticker symbol “CINGF” and “COIN,” respectively.
Development of RSK-Powered NFT on Bitcoin Marketplace
On 11thMay 2021, Coinsilium announced that one of its subsidiaries, Nifty Labs, has begun the development of the “NFT on Bitcoin” marketplace. This marketplace is powered by RSK blockchain, andNifty Labs has partnered up with Indorse for the development of the above-mentioned NFT (Non-Fungible Token) project, which is secured by the Bitcoin network.
Highlights of the Project
It was announced on 2ndMarch 2021 that Nifty Labs Limited has entered into an MoU (Memorandum of Understanding) with Indorse. It’s yet another company based in Singapore in which Coinsilium holds 10 percent of equity interest. It was done to form a partnership between the two companies to launch a studio in Gibraltar for the NFT technology development.
Coinsilium, on 22ndMarch 2021, announced that it had provided the Nifty Labs with 250,000 GBP of initial working capital. A part of this initial capital was reserved for the fast track development and commissioning work for the very first NFT platform solution by Nifty Labs. Moreover, it was also announced that Indorse, under the supervision of Indorse CEO (Gaurang Torvekar) and Nifty Labs tech lead, will be managing the project’s technical aspects.
It’s important to bear in mind that because of the prevailing commercial sensitivities, all the details regarding the project were first kept confidential. However, now according to the officials of Coinsilium, they’re more than happy to publicly announce the project’s initial details.
The Development of NFT Marketplace
The initial development specifications that are announced for the new project suggest that it will be a general-purpose, all-encompassing NFT on the Bitcoin marketplace. Moreover,it’ll be powered by RSK blockchainbecause it offers a more cost-effective transacting and minting experience to crypto users. A team has already been deployed for the project that consists of a project manager, a designer, and three developers, and they will be working on the initial build and commissioning phase.
Various modules are planned to be developed for the newly announced platform, such as a gallery, an NFT minter, etcetera. One of the most important development plans is the capability of the system to trade NFTs for the alternative tokens based on the RSK technology, such as:
RBTCD (RSK Bitcoin), which is pegged to bitcoin utilizing a two-way peg which is known as Powpeg
RIF
MOC (Money on Chain) governance tokens
RDOC (Rif Dollar on Chain)
DOC (Dollar on Chain)
It has also been announced that the initial developments of the project will include the most popular categories of NFT, such as gaming, music, sports, digital art, 3D avatars, virtual land parcels, etcetera. In simple words, the capabilities of the New Coinsilium project “NFT on Bitcoin” will have pretty much the same functionalities that many other popular NFT marketplaces offer. The future development may also include the functionality that will allow users to interoperate between different blockchain protocols of layer one and layer two.
Development Duration
As a complement to its current fungible token bridge, the RSK team has told Coinsilium that it will prioritize development work on an NFT token bridge. It’ll make it possible to migrate RSK blockchain standard NFTs to other blockchain standard NFTs, such as the Ethereum ERC721 standard.
The development and implementation of the marketplace’s technological aspects are estimated to take up to six months. The completion and delivery of complete technological functionality are often subject to a number of external factors. One of the most important ones is undoubtedly the completion and activation of the NFT Token bridge. More information will be made available to the market as soon as possible.
Comments of Eddy Travia on the Initial Development Plans
Eddy Travia, who is the CEO of Coinsilium, said that releasing the initial development details of the NFT on the Bitcoin marketplace is a big step for the organization. Moreover, Coinsilium has accelerated its commercial activities in order to grow NFTs rapidly. He also said that the crypto world is taking another big turn, and Coinsilium is confident that the NFT on Bitcoin development by the Nifty Labs and Indorse will go in the right direction and will play a big role to define the success of the NFT.
NFT on Bitcoin is in its early stages. According to Coinsilium, the reason for Indorse partnership is its experience and expertise in designing complicated smart contracts.
Comments of Diego Gutierrez Zaldivar
Diego Gutierrez Zaldivar, who is the CEO of IOV Labs (RSK’s parent company), said that there is no other technology that’s supporting the digital asset landscape and blockchain as NFTs are doing. Moreover, the use cases like virtual property ownership, music, art, etcetera that NFT offers are growing at an exponential speed. He also said that the current landscape of NFT is just a warmup to open endless new opportunities and possibilities. Coinsilium’s decision to choose RSK to develop NFT on Bitcoin is purely thrilling and exciting. It will undoubtedly enable RSK to become one of the strongest players of the future’s NFT dominated economy.
NFT on Bitcoin: Powered by RSK
RSK (Rootstock) network (secured by Bitcoin Network) is the world’s safest smart contract platform. It now stands at1,445 BTCs in TVL (Total Value Locked), which means it has surpassed LN (Lightning Network). This milestone represents the commitment of users in the realm of De-Fi (Decentralized Finance). It’s important to bear in mind that the launch of Sovryn DEX (Decentralized Exchange) is partly responsible for the recent rise in RSK. The Sovryn DEX platform was launched in April 2021, and it had 9 million US dollars in funding to help Bitcoin layer two platforms.
According to the recent stats, the RSK network flaunts more than 50,000 active accounts and over 259,000 transactions. Moreover, the platform reached its all-time high hashing power of more than 72 percent during the month of April. The number of integrations and solutions has also grown significantly in the RSK De-Fi network over the course of the last two months.
rDai on RSK: Opportunity for DAI Fans
As mentioned, the rise in the TVL BTC on RSK is one of the biggest reasons for the RSK RIF (Rootstock Infrastructure Framework) economic growth. RIF is a chamber of decentralized protocols that allows developers to build scalable, easier, and faster DApps. Moreover, it’s also cheaper than Ethereum thatprovides DAI users with a window of opportunity.
What is DAI?
DAI is a stable coin that ties up its value with the dollar price. Being a stable coin, it becomes much more desirable for users in the big world of highly volatile digital currencies. DAI operates via smart contracts that keep its value as close to one dollar as possible, and it’s based on Ethereum. MakerDAO is the organization that manages DAI, and it offers an MKR token that is completely governed by the users. It’s important to note that both MakerDAO and DAI are two of the very first DApps to undergo the mass adoption stage.
As mentioned, DAI is based on Ethereum, but the cost of transactions of Ethereum is not feasible. Many users have even reported that they are being charged up to 1,000 US dollars for a single transaction as well. Moreover, the transaction charges in the range of hundreds of dollars are more frequent. That’s why countless developers are switching or planning to switch to layer two blockchains to achieve lower transaction costs and faster transaction time.
Advantages of rDAi on RSK
Currently, there are more than 76 million DAI in circulation which means the DAI community is very strong. Most of the users of the community want to continue using DAI because of its stability. That’s where rDAi (Redeemable DAI) comes into place, which sits on the RSK protocol instead of Ethereum and yet is always pegged to the DAI. As compared to the transaction costs of Ethereum, the RSK transaction costs aren’t even fractional (more than 100 times cheaper sometimes). Usually, the single transaction rate of rDAI is 0.15c which means that it’s 80 times cheaper as compared to the transition taking place on Ethereum.
There are also some other perks of using rDAI as it enables the users to earn a yield on their holdings by investing in the collateralized loans in a pool. In simple words, the DAI amount of the users while entering the pool will remain the same.
Another great factor about rDAI is that it’s an ERC-20 fungible token. It means that users can use any crypto wallet they want to make transactions. Being a fungible token, rDAI allows the users to send any amount to any crypto wallet at any time, and they’ll always be able to perform withdrawal operations at a 1:1 ratio.
Welcome to Cointelegraph Market’s Altcoin Roundup, an in-depth newsletter that focuses on investing from the perspective of fundamental analysis and seeks to identify emerging blockchain projects and tokens that fill niche demands within the growing cryptocurrency market.
The concept of multi-sector investing has long been advocated in traditional finance as the conventional approach to building a balanced portfolio. Typical allocations include representation of stocks, government and corporate bonds, commodities and real estate.
Now that the cryptocurrency market has grown to a multitrillion-dollar ecosystem with numerous emerging assets, clear sectors are beginning to emerge. Savvy crypto investors looking to apply portfolio diversification practices to their holdings should begin to pay attention.
Total cryptocurrency market capitalization. Source:CoinMarketCap
The previous Altcoin Roundup discussed some of the top layer-one solutions and coins like Polkadot/DOT, Cosmos/ATOM and Solana/SOL that have been gaining prominence over the past year, but these projects could also fall under the large-cap investment umbrella alongside high-profile assets like Bitcoin (BTC), Ether (ETH) and Cardano’s ADA.
Once an investor has an adequate representation of blue-chip projects, other emerging sectors like decentralized finance (DeFi), oracles and stablecoins can be considered.
DeFi: Uniswap, Aave and PancakeSwap
Decentralized finance emerged during the summer of DeFi in 2020, and the sector helped kick off the current bull market by bringing a new level of excitement to the crypto ecosystem, which was in need of the next big innovation.
One of the best metrics used to demonstrate the rising success of DeFi as a whole is the total value locked (TVL) ranking, which collectively reached an all-time high at $157.63 billion on May 14, according to data from Defi Llama, and stands at $116.62 billion at the time of writing.
Total cryptocurrency market capitalization. Source:CoinMarketCap
The release of Uniswap’s decentralized exchange (DEX) interface — which enabled new projects to immediately launch and made tokens available to the general public — helped ignite a wave of growth and innovation across the market that continues to expand to this day.
In less than a year, Uniswap evolved into the top DEX serving the crypto community, seeing an all-time record of $5.74 billion in 24-hour trading volume during the market sell-off on May 19 and $5.37 billion in total volume locked on the platform.
Daily DEX volume. Source:Dune Analytics
The vast array of liquidity pools is the primary allure for investors looking to diversify their crypto portfolio. Through these pools, stakers have the ability to earn a yield by providing liquidity for the exchange in return for a portion of the trading fees. A number of pools offer staking returns ranging from 25% to 2,000%, and traders are able to select pools based on a variety of factors, including their appetite for risk.
While Uniswap has led the way for DEXs, there are other options like Aave’s lending platform that has emerged as the highest-ranking DeFi protocol by total value locked, with more than $14.1 billion in TVL at the time of writing.
Aave’s recent decision to offer layer-two (L2) access on Polygon has brought renewable energy to the AAVE ecosystem, as traders and liquidity gladly migrated to the lower-fee environment offered on Polygon. This resulted in a significant boost in TVL for both AAVE and Polygon’s native token, MATIC, which is now the second-ranked protocol by TVL, with $11.08 billion locked on the protocol.
Every balanced portfolio also has a small 1% to 5% allocation reserved for higher-risk assets, and the crypto market has no shortage of high-risk, high-growth assets.
For tokenholders who are open to a little more risk in return for higher yields, the Binance Smart Chain-based PancakeSwap boasts a TVL of $7.67 billion, and offers annual percentage rates (APR) of up to 482.54%, according to the project’s website, with all rewards paid out in the protocol’s native CAKE token.
Stablecoins are the new “savings accounts”
Though a token that stays pegged to a fixed value may not sound like the most attractive opportunity for investors, stablecoins have evolved to play a crucial role in the functioning of the wider cryptocurrency ecosystem.
Stablecoins often serve as the backbone of trading pairs on centralized and decentralized exchanges, as well as offering traders a simple way to lock in gains.
The two most prominent stablecoins are Tether (USDT) and USD Coin (USDC), which have circulating supplies of $60.9 billion and $21.6 billion tokens, respectively. Tether is currently the most traded crypto token, boasting 24-hour trading volumes that range from $100 billion to $290 billion.
Tether (USDT) vs. USD Coin (USDC) vs. DAI circulating supply. Source:CoinGecko
Other popular stablecoins include Binance USD (BUSD), the stablecoin created for use within the Binance Smart Chain ecosystem, as well as the algorithmically controlled stablecoin DAI, which is minted via pledging collateral on the Maker protocol.
For those looking to earn a little extra yield while in the safety of stablecoins, there are multiple options available such as depositing tokens into a lending protocol like AAVE to earn up to 5% on deposits or the decentralized stablecoin exchange Curve, which offers yields of up to 50% for some stablecoins pools offered.
Other popular options include supplying liquidity for the various decentralized exchanges like PancakeSwap, which offers 8.64% for its DAI-BUSD liquidity pool, or QuickSwap, which offers a reward plus fee of the annual percent yield of 15.01% for its USDT-USDC pool and 26.75% for its DAI-USDC pool.
Oracles
In a world that is becoming increasingly dominated by digital data, no cryptocurrency portfolio would be complete without access to an oracle provider. These entities are the industry’s heavyweights that facilitate the secure exchange of data and information within the cryptocurrency ecosystem, as well as wider financial markets.
Currently, Chainlink is one of the most dominant oracle projects and a key player that comprises a thriving open-source community of data providers, node operators, smart contract developers, researchers and security auditors.
We’re half way through May and $LINK already boasts 35 integrations!
I see an integrations all time high being smashed with ease this month.
With #Chainlink you just win, in every possible aspect.
View all Chainlink integrations at: https://t.co/vb2t14UStM pic.twitter.com/ERd2xgeDdc
— TheLinkMarine 2.0 (@TheLinkMarine1) May 18, 2021
While the Chainlink network doesn’t currently offer a direct way to earn a yield through a simplified staking or governance mechanism, it is easy for tokenholders to put their stash to work in DEX liquidity pools and DeFi protocols like Aave.
For investors who are not ready to trust decentralized exchanges and DeFi platforms, centralized yield-bearing companies like Nexo, Celsius and BlockFi are also available for crypto investors looking to earn a return on their holdings.
Centralized exchanges like Coinbase and Binance also offer direct staking capabilities. For example, investors could stake BAND for up to 11.7% APR on major exchanges.
As a result of the May sell-off, which saw more than $1.2 trillion in value wiped out of the cryptocurrency market, many of the top projects are now well below their all-time high values and trading at what some investors would describe as “bargain bin” prices.
While market participants remain unsure as to which way prices are headed in the short term, it would be wise to investigate these opportunities sooner rather than later, as the notoriously volatile crypto market can make significant moves at the drop of a hat.
Want more information about diversification into the above mentioned projects?
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
The decentralized finance (DeFi) sector faced its first real challenge during last week’s market sell-off that saw more than $1 trillion wiped from the global cryptocurrency market cap as traders feverishly ran for the safety of stablecoins amid tumbling prices.
Despite rapidly declining token prices, the nascent DeFi sector held its own as decentralized exchanges experienced a record $11.7 billion in trading volume on May 19. Uniswap (UNI) led with $5.7 billion in volume, followed by SushiSwap (SUSHI) which saw $2.8 billion in 24-hour trading volume.
Daily DEX volume. Source:Dune Analytics
According to the recent DeFi Uncovered report from Glassnode, blue-chip DeFi tokens including, UNI, SUSHI, Maker (MKR), Aave (AAVE) and Compound (COMP) have largely mirrored the decline of Ether (ETH) over the past two weeks, “showing relatively high beta to ETH but not exceeding the decline from ATH by more than 15% from the decline of ETH.”
New users increase despite declining TVL
The pullback in prices, combined with users removing liquidity and rotating into stablecoins led to a 42% decline in the total value locked on smart contracts, which also closely tracked the falling price of Ether.
Total value locked in smart contracts vs. ETH/USD. Source:Glassnode
TVL is intrinsically tied to the underlying value of the deposited tokens and given that Ether is one of the main tokens locked across DeFi platforms, the falling TVL has less to do with users removing funds and is mostly related to the pullback in prices.
Throughout last week’s downturn, the percentage of the Ethereum supply locked in smart contracts remained above 23% while the supply on exchanges “jumped from 11.13% to 11.75%.”
Despite falling prices, new users continue to enter the DeFi ecosystem and the total number of unique 30-day traders on the top DEXs surpassed the 1 million mark for the first time amid last week’s sell-off.
Unique DEX traders. Source:Glassnode
Uniswap is the clear leader with 815,000 unique users between April 24 to May 23, while 1inch (1INCH) came second with 78,200 users and SUSHI ranked third with 10,900 users.
Stablecoins hold their pegs
Much of the strength seen in DeFi during the sell-off can be attributed to the healthy stablecoin market and the ability for major stablecoins like USD Coin (USDC), Tether (USDT) and Dai (DAI) to maintain their dollar peg “for the majority of the crash with volume-weighted average prices (VWAP) staying at $1.00 the majority of the time.”
DAI price vs. USDT price vs. USDC price. Source:Glassnode
The performance of DAI was seen as “especially positive for DeFi” according to Glassnode, as its circulating supply was able to adjust accordingly in response to collateral requirements and protocol stability. The report also highlighted that reclaimed collateral and DAI were removed from the supply as redemptions were claimed by collateral holders.
Posey said:
“This behavior allows collateral to stay healthy, liquidations remain at a healthy level, and DAI to maintain its peg.”
The one stablecoin that struggled to maintain its peg was TerraUSD (UST), which lost its peg on May 18 as the value of its collateral from LUNA fell below that of the stablecoin it collateralized. This led to “unhealthy behavior in its lending market Anchor (ANC),” causing a higher than average number of liquidations on the protocol’s native lending platform.
Overall, stablecoins performed their intended function and pegs held steady across the ecosystem with the on-chain stablecoin transfer volume reaching a record $52 billion during the height of the sell-off.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
The most popular decentralized stablecoin Dai (DAI) is now live onRSK network.
An Alternative to Escaping High Ethereum Fees
Since the famed DeFi “summer of 2020” a major pain point on the Ethereum network has hindered small and retail investors from enjoying the benefits of DeFi – the exorbitant transaction fees.
The high transaction fees on Ethereum has been a major reason for the rise of competing smart contract platforms such as Binance Smart Chain that offer transactions at a fraction of Ethereum network’s cost. However, these alternatives have one major caveat, i.e., they are relatively more centralized.
Seeing the above mentioned problems facing the cryptocurrency industry, Bitcoin-powered smart contract platform RSK has now launched rDAI which is equivalent to the famed stablecoin called DAI. This facilitates transacting with DAI in a highly cost-effective way: almost 100x cheaper.
But Why RSK?
For the uninitiated, RSK is a smart contract blockchain powered by the Bitcoin network. Being powered by the Bitcoin network makes RSK inarguably the safest smart contract platform in the world. In fact, RSK can be considered a Bitcoin side-chain but with a wide array of extra utilities.
Although it is powered by Bitcoin, RSK network is also EVM (Ethereum Virtual Machine) compatible which means it essentially works in the same capacity as the Ethereum network but with much lower transaction fees. At the time of writing, a transaction on RSK costs less than 15 cents which is, on average, about 80x cheaper than the fees one had to pay on Ethereum.
In fact, one of the reasons why several promising DeFi projects are flocking to RSK is its cheaper transaction fees. Further, the fact that more than 70 percent of Bitcoin miners also mine RSK blocks speaks volumes about the trust the Bitcoin-enabled smart contract platform enjoys in the crypto community.
Ethereum Tokens on RSK
If you were having second thoughts about using Ethereum tokens on RSK, worry not. Thanks to the ETH-RSK bridge, users can seamlessly move ERC-20 tokens between the two chains. To learn more about the ETH-RSK bridge, check out the detailed guidehere.
However, if you do not have the bandwidth to go through the detailed guide, the easiest way to move tokens from Ethereum to RSK is by connecting thetoken bridgedApp via Wallet Connect withDefiant walletwhich supports both blockchains.
To do this, simply scan the QR code shown in the website and begin swapping the tokens in the dApp. Next, just sign the incoming transaction on your phone and you are done. After a few seconds, you should see the RSK tokens in your wallet.
Sure, token bridges are nothing new and they involve a one-time onboarding cost that might scare retail investors from moving their tokens across different networks. At current prices, moving $1000 worth of DAI from Ethereum to RSK would involve about $60 just in transaction fees. However, it must also be noted that such cost is a one-time affair and if a user plans to move around rDAI more than 4 times on RSK, it’s economically better to convert DAI into rDAI as from the 5thtransaction onwards, users would be saving around $15.
Even still, if the token bridge cost sounds a little too much for you, there is another roundabout. Using Defiant, a user can perform a similar swap without the need for the token bridge. Thanks to a partnership with Kripton Market, Defiant enables users to swap many pairs of tokens from their own wallets similar to the option of buying and selling crypto with/for fiat via Kripton Market. The market has a pair of DAI <> rDAI which can be tapped to buy rDAI at minimal cost.
So let’s assume you want to swap 1000 DAI for rDAI, use them for several operations and get your DAI back. Costs are as follows:
Swap DAI for rDAI in Defiant via KM: 10 USD (service fees) + 15 USD (DAI transfer)
Make certain number of transactions: N x 0.15 USD
Swap rDAI for DAI back: 10 USD (service fees) + 15 USD (DAI transfer)
In this case, we have a fixed cost of 50 USD, instead of the 64.50 USD of the Token Bridge. In addition to being economically feasible, there are numerous other benefits for swapping tokens using Defiant such as no need to wait for 24 hours for token movement via bridge, no need to connect two different networks and using the same wallet where the user has their funds.
More About Defiant/KM Token Swaps
While the above example deals with the DAI <> rDAI swap, it is worthy of note that Defiant allows users to change among different pairs such as USDT <> rUSDT, DOC <> rDOC, and others. There is also the BTC <> rBTC trading pair available. At present, the service is available to users in Argentina, Uruguay & Venezuela with plans to expand the offering to other countries soon.
The circulating supply of the four-largest stablecoins has spiked to new all-time highs, suggesting buyers could soon spark another leg up for the Bitcoin and crypto markets.
The combined capitalization of Tether (USDT), USD Coin (USDC), Binance USD (BUSD), and Dai (DAI) has surged almost 190% from $27 billion to almost $78 billion since the beginning of this year.
In its May 3 Week on Chain report, on-chain analytics provider, Glassnode, noted that Tether is firmly positioned as the stable token sector’s leader, representing two-thirds of the top four stablecoins’ combined capitalization. USDT’s total minted supply hit an all-time high of $51.78 billion at the end of last week after increasing by $1.48 billion or 3% in just seven days.
USDC supply has also increased by roughly $1 billion over the past week, with its capitalization currently sitting at $14.5 billion, according to CoinGecko. It briefly tapped a peak of $15 billion on April 30.
BUSD’s circulating supply tagged a record of $7.8 billion on May 3, while DAI’s supply is at an all-time high of $3.9 billion as of this writing.
With the surging supply, Glassnode highlights that Bitcoin’s Stablecoin Supply Ratio (SSR), which measures the Bitcoin supply divided by the stablecoin supply, is sitting at a year-to-date low of 13.4, and is approaching its all-time-low of 9.6.
Bitcoin-Stablecoin Supply Ratio: Glassnode
The chart shows that SSR has been persistently low during 2020 and 2021 as stablecoin supplies have largely grown in proportion to Bitcoin’s price appreciation.
According to Glassnode, a decreasing SSR value is a bullish signal that the global stablecoin supply becoming larger relative to the Bitcoin market cap:
“As the total supply of stablecoins increase, it suggests an increased ‘buying power’ of crypto-native capital that can be quickly exchanged and traded into BTC and other crypto-assets.”
Aave’s liquidity mining incentives launched on April 27 would have also given a boost to stablecoin demand as the majority of the rewards were targeted towards staking USDT, USDC, and DAI. DeFi investors have observed that Aave’s yield farming had an immediate impact on stablecoin borrowing volumes which have over doubled since late April.
