Tag: Total Value Locked

Ethereum’s Layer 2s Break New Ground in Scalability

by Blockchain News

Ethereum has marked a commendable 22% upsurge in its value as of September 2023, surpassing many substantial smart contract blockchains, according to Will Ogden Moore‘s article on Grayscale blog. The escalation is significantly credited to the advent of Layer 2 solutions (L2s) which have been instrumental in bolstering Ethereum’s scalability, rendering the network 100 times more cost-effective for its users. The endorsement of this paradigm came with the launch of BASE, a Layer 2 blockchain on Ethereum by Coinbase in August 2023. This development not only accentuates the growing credence in the Ethereum ecosystem but also extends the dissemination of decentralized applications to over 100 million Coinbase users. Concurrently, leading Layer 2 blockchains on Ethereum, namely Optimism and Arbitrum, have overstepped large Layer 1 blockchains like Solana in Total Value Locked (TVL), inching Ethereum closer to becoming the predominant Layer 1 blockchain if this trajectory persists.

The essence of Layer 2s emanates from the burgeoning need to augment Ethereum’s scalability. The analogy of a congested highway necessitating express lanes mirrors Ethereum’s scenario that propelled the genesis of Layer 2s. As transaction volumes swell, the network grapples with the scarcity of block space and surging gas fees, which peaked at an average of $196 per transaction by May 2022. This surge not only impinged on the user experience due to high costs and time inefficiency but also positioned Ethereum (~14 transactions per second) far behind competitors like Solana, capable of handling up to eight thousand transactions per second.

Layer 2 solutions ameliorate Ethereum’s inherent issues by processing transactions from decentralized applications, batching them, and transmitting a condensed version back to the main network for settlement. This mechanism drastically trims fees, up to 100x less than on the main chain, enhancing the usability and transaction capacity of the Ethereum ecosystem while buttressing its network security. Additionally, the incremental activity on Layer 2s reciprocates value to Ethereum with every transaction fee shared between the L2 and Ethereum network, alongside a minuscule burn of the total ETH supply, enriching the ETH value.

August witnessed a pivotal development with Coinbase launching its Layer 2 scaling solution, BASE, on Ethereum, extending the reach of dApps built on BASE Layer 2 to over 110 million users in the Coinbase ecosystem. BASE’s launch has already shown a notable upturn, surpassing Ethereum and other Layer 2 competitors in daily transactions within a month, and further propelled by the viral growth of decentralized application friend.tech. While presently centralized, BASE has expressed a progressive decentralization roadmap, aligning with the broader vision of Ethereum’s Layer 2 scalability agenda.

The previous months have seen a consistent rise in the usage of Layer 2 scaling solutions, with the aggregate daily active addresses on Layer 2 outpacing leading Layer 1s. The TVL metric also reflects a burgeoning trust in Layer 2s like Arbitrum and Optimism, which have surpassed Ethereum’s Layer 1 competitors Solana and Avalanche. The launch of the ARB token in March 2023 further entrenched Arbitrum as a leading Layer 2, boasting a TVL of $1.69 billion, only behind Tron and Ethereum.

While Layer 2s are pioneering in scaling Ethereum, they are at nascent stages of decentralization, posing certain risks. The predominant model involves a single entity running a “sequencer” for processing and batching transactions on Layer 2s, which could potentially lead to adverse outcomes such as outage risks. However, the progressive decentralization plans shared by most Layer 2s aim to mitigate such risks over time.

Despite the general consensus of a crypto market downturn since 2022, Ethereum’s ecosystem is burgeoning, courtesy of the Layer 2 solutions. The Layer 2 paradigm not only validates Ethereum’s model but also propels value to ETH, attracting more users and developers. With BASE, Coinbase is potentially paving the path towards mainstream adoption of Ethereum-based decentralized applications. The collective advancements in Layer 2s, despite the inherent centralization risks, are deemed to foster competition and innovation, positioning Ethereum to further cement its dominance in the smart contract blockchain realm.

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Friend.Tech Boosts Security with CoolWallet on Base Chain

by Blockchain News

Friend.tech, a decentralized social media platform operating on Base’s Ethereum layer-2 chain, has been a significant contributor to Base’s recent growth. Base is a secure, low-cost, builder-friendly Ethereum layer-2 chain designed by Coinbase to bring the next billion users on chain. It has become a favorite for DApp developers and early investors due to its outstanding performance and the innovative projects it attracts.

According to the latest data, the platform has surpassed one million daily active users and has a total value locked (TVL) exceeding $35 million. The platform allows users to buy “shares” of other users to chat with them, emphasizing the concept that “Your network is your net worth.”

However, this rapid growth has also attracted cybersecurity threats, notably phishing attacks. These social engineering tactics have been a significant concern in the Web3 sector, with losses already amounting to $650 million as of June 2023. High-profile individuals like Mark Cuban and Vitalik Buterin have also fallen victim to such attacks. To mitigate these risks, Friend.tech strongly recommends its users to employ hardware wallets for enhanced asset security.

In response to these security challenges, CoolWallet, a hardware wallet maker that natively supports the Base ecosystem, has initiated a Web3 Guardian competition. This campaign aims to raise awareness about its Web3 SmartScan feature, which proactively screens all Web3 transactions and flags any malicious behavior or smart contract vulnerabilities. The SmartScan feature is available on the CoolWallet App and offers an added layer of protection against phishing attempts.

To further promote Web3 asset protection, CoolWallet is launching a global competition with generous rewards for participating users. The competition aims to enhance user security awareness and encourage the use of SmartScan for safer transactions. This move is particularly timely, given the increasing number of phishing attacks targeting not just individual users but also high-profile personalities in the crypto space.

The Web3 Guardian competition is expected to draw significant attention, especially among Friend.tech users who are already concerned about asset security. The competition will not only offer rewards but also educate users on the importance of transaction screening, a feature that is often overlooked but crucial in the current landscape of frequent cyber attacks.

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Arbitrum Foundation and Fracton Ventures Ally to Boost Arbitrum Adoption in Japan

by Blockchain News

On September 29, 2023, the Arbitrum Foundation unveiled a significant strategic partnership with Fracton Ventures Co., Ltd., to broaden the horizons of Arbitrum scaling solutions in Japan. This joint venture, christened Arbitrum Japan, is geared towards enhancing blockchain technology adoption and spearheading the growth of the Arbitrum ecosystem within the Japanese domain.

The primary objective behind this strategic alliance is to expedite the expansion of the Arbitrum ecosystem in Japan and to proliferate the adoption of blockchain technology in the region. Arbitrum, acclaimed as a prominent Layer 2 scaling solution on the Ethereum blockchain, currently holds a commendable position with nearly 55% of the Total Value Locked (TVL) across Layer 2 chains.

Fracton Ventures, with its established reputation in Ethereum protocol development, will helm the inception of Arbitrum Japan. This endeavor is anticipated to galvanize consumer interest and developer involvement in the Arbitrum ecosystem. Moreover, the partnership aims to unlock new business prospects by capitalizing on Arbitrum’s superior scalability and security features, particularly in the realms of finance and entertainment.

In addition to business development, a significant focus of the alliance is to augment technical education and fortify the developer community within the region. A suite of activities including Ask Me Anything (AMA) sessions, hackathons, and other community-centric initiatives are slated to fast-track the comprehension and adoption of Arbitrum technology.

Established in March 2023, the Arbitrum Foundation has been steadfast in its mission to propel the Arbitrum network and its community forward, while cementing its position at the vanguard of blockchain adoption. The cornerstone of the foundation, Arbitrum One, conceived by Offchain Labs, emerges as a leading Layer-2 scaling solution for Ethereum, boasting over 54% TVL in the Layer 2 segment. With an extensive repertoire of more than 2000 DeFi and NFT projects thriving within its ecosystem, the Arbitrum Foundation continues its endeavor to provide robust scaling solutions for the Ethereum blockchain.

Nina Rong, Head of Ecosystem Development at The Arbitrum Foundation, articulated the immense untapped potential within the Japanese region. Through the collaboration with Fracton Ventures, she envisages a unique positioning to connect with a new demographic of developers, innovators, and blockchain-curious consumers who have not yet explored the advantages of blockchain technology and how Arbitrum has harnessed it to emerge as the leading Layer 2 scaling platform across the industry.

Siddharth Pillai, Head of Partnerships at Fracton Ventures, echoed similar sentiments. He emphasized that the partnership embodies an opportune moment to extend Arbitrum’s footprint in Japan, as the region is primed for innovation within the blockchain sector.

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60k BTC and 60k ETH on Justin Sun’s Tron Seem Unbacked

by Blockchain News

Crypto analyst ErgoBTC has raised serious questions about the backing of TRC20 BTC tokens on the Tron network in a series of tweets. The analyst suggests that 60,000 of these tokens, currently parked in the JustLend protocol, appear to have never been backed. This implies an unbacked (non-existent) Total Value Locked (TVL) of $1.8 billion, which is roughly 50% of the current TVL in the JustLend protocol.

ErgoBTC’s tweets were in response to another tweet by a user named “alto | dollar.eth” who claimed to have found the wallet that backs the 60k ETH on Tron, but its current balance is zero. This raises further questions about the backing of TRC20 tokens on the Tron network.

In a typical centralized peg scheme, the custodian advertises their reserve holdings for transparency and trust, as seen with wBTC. However, information on the custodian for the TRC-20 BTC backing is practically non-existent.

The analyst conducted a thorough investigation into the existence of the total 114k BTC on the BTC blockchain. The findings suggest that if these coins exist, they are not sitting in a dedicated address. Furthermore, a deeper dive into the 60k “mint” done on August 21, 2022, revealed no signs of this activity on the BTC blockchain.

The investigation extended to major exchanges such as Poloniex, Huobi, and Binance, but none showed signs of the 60k BTC transactions. The TronDAO, which is not explicitly used for backing TRC20 BTC, also showed no signs of related non-exchange addresses.

The analyst concludes that these findings are signs that the TRC20 BTC on Tron was at best temporarily and partially unbacked, and at worst, still partially backed (-60k of the reported 114k BTC). The biggest impact seems to be a completely fake JustLend TVL, approximately 50% of which is apparently unbacked.

The tweets also trace the path of the 60k BTC minted on August 21, 2022, which was sent to JustLend for a 600m USDC loan. Half of this loan was repaid within two hours of creation, funded by an address attributed to Justin Sun. The remaining loan was funneled through another wallet, which also received from J-Sun and deposited over $1 billion to Circle in late September and early October.

The blockchain story ends here, but ErgoBTC notes that Huobi changed hands on OCT 10, 2022, one week after the >1B USDC deposits to Circle . The analyst emphasizes that the absence of evidence is not evidence of absence, but none of this would be necessary if the TRC20 BTC custodian was transparent.

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DeFi TVL Rebounds to the $54 Billion Mark, Eth-based MakerDAO Remains Dominant Lender

by Blockchain News

Fresh data from tracking service DeFi Llama shows that the total value locked (TVL) in decentralized finance (DeFi) protocols has rebounded to the $54 billion mark.

According to the data, the total TVL was down — between $53.7 and $53.29 billion — since October 12. In September, the TVL was down to $52.22 billion, the lowest since March 2022. 

Source: DefiLlama

As per the data, the largest DeFi lending platform across all chains remains the Ethereum-based MakerDAO, with a market dominance of 14.48% and $7.83 billion TVL. Lido is the second most dominant DeFi lender with a market cap of $6.11 billion, while the third is Curve Finance with $5.92 billion, Aave comes fourth with $5.19 billion, and Uniswap is fifth with $4.97 billion.

As it can be seen in the data, the value locked in Ethereum remains the largest, with around $31.2 billion, or just over 57% of the aggregate value locked today. Ethereum is followed by Tron’s $5.54 billion, Binance Smart Chain (BSC)’s $5.33 billion, and Avalanche’s $1.41 billion, among other DeFi protocols.

In simple terms, TVL measures the total value of all assets locked into DeFi protocols. TVL includes all the tokens deposited in all the functions that DeFi protocols offer, including staking, lending, and liquidity pools. In other words, the TVL is a measure of the funds deposited in smart contracts, and this figure is closely monitored by analysts as an indicator of investor confidence in the market.

Over the last two years, the cryptocurrency sector recorded a dramatic increase in the total value locked (TVL) across all DeFi platforms because of the boom associated with the bull market that attracted massive capital during that time. But all that changed in 2022.

As of March this year, the value locked in DeFi traded above the $200 billion mark. But things started turning worse in May amid a wider sell-off in global markets and waning interest in risky assets, such as cryptocurrencies. The total value locked in the crypto market declined from $160 billion in mid-April 2022 to $52.2 billion in September 2022, the lowest level since March 2022.

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DeFi protocol Aave encounters major capital flight

by Cointelegraph

Annual percentage yields, or APY, on crypto borrowing and lending platform Aave have surged to record levels after capital withdrawals sent the decentralized finance, or DeFi, protocol into a liquidity crunch. At the time of writing, variable APY on borrowing stablecoin Dai via Aave has surged to 24.88%, compared to approximately 6.50% the day prior.

According to cryptocurrency researcher Igor Igamberdiev, blockchain personality Justin Sun was responsible for at least billions of dollars in withdrawals in the past few hours. Aave’s total value locked, or TVL, fell to $14.7 billion from $17.89 billion the day prior, based on data from DeFi Pulse.

In a series of tweets, Aave developers revealed that financial modeling platform Gauntlet Network submitted an Aave Improvement Protocol, or AIP, to disable the borrowing function for xSUSHI and DeFi Pulse Index (DPI) tokens as a precautionary measure. In addition, the AIP also called for disabling Automated Market Maker, or AMM, liquidity provider tokens on the Aave AMM Market as an extra safeguard.

Earlier in the week, members of the Aave community voiced concerns regarding vulnerabilities with using xSUSHI tokens as collateral for borrowing on the platform. Aave developers alleged that the Gauntlet Network team ran simulations showing that it would not be economically feasible to exploit xSUSHI tokens on Aave. However, Aave developers claim that the Gauntlet Network still put forth the AIP despite these results. The AIP is currently in the voting phase, with “Yes” votes heavily favored. 

Prior to today’s flight, Aave was the most popular DeFi protocol as ranked by Defi Llama. The platform has a lot of traction among cryptocurrency enthusiasts looking to yield farm or take out a stablecoin loan by pledging their digital currencies as collateral.