Week in Review | Week #48, 2020
Happy Thanksgiving to those of you who are celebrating! The holiday season is here, but the industry does not look to be slowing down. BTC price has crossed $19,000 and ETH topped $600 before retreating.
The week another major hack, a new crypto art milestone, and a new focus on teamwork. The crypto community is one of the things that allows the industry to make it through the ups and downs and makes it truly special.
A crack in the jar
Pickle Finance suffered from a complex exploit that saw the attacker come away with over 19.7M Dai. It appears that the vulnerabilities were not easy to detect and fix, making this more than just a flash loan-driven attack.
The past few weeks saw a number of projects fall victim to an exploit undermining the confidence in the sector’s security. Some of the projects have even been audited.
This has made insurance a more important topic in the space. While it may lack the excitement of some of the DeFi applications, insurance may become a critical component necessary to allow the sector to scale in a healthy manner.
Both centrally and decentrally driven initiatives are emerging. Earlier, yInsure NFT tokens made a bit of a splash as a novelty item, but it appears as if the industry is ready to delve further into insurance.
For instance, one of the prominent auditing firms, CertiK, has developed a membership service that enables participants to have assets be reimbursed in the event of an exploit. Also, InsurAce attracted $1M in its seed round to develop a decentralized insurance platform. It would not be surprising to see more players emerge in this developing field.
Decentralized teams are coming together
This week saw several projects announce that they are joining forces with Yearn. First, the merger with the recovering Pickle Finance was revealed. Among other things, it will see the merger of vaults and the creation of the DILL token as well as the CORNICHON token, the latter to help deal with the losses stemming from the recent exploit.
Most recently, the merger with Cream v2 was announced. It will enable vault shares to become collateral in Cream, as well as see Stable Credit launch on the lending platform. The two also intend to launch a zero-collateral lending protocol, among other things.
Interestingly, both mergers will see the teams join forces with Yearn developers. It may have appeared as if some of the centrally launched and developed DeFi projects like Compound and Aave had an advantage in terms of development resources. However, if decentralized teams will join together they may be able to offer a completing alternative to centrally managed development.
Also, it will be interesting to see if the recent mergers become a sign of consolidation at dapp level. If so, the sector may start to see ecosystem hubs emerge and eventually start to compete with one another for users, capital, and developers.
The question of bridges – where will the assets go?
It looks like Filecoin will be the latest network to have its assets enter the Ethereum ecosystem in the form of wrapped tokens.
Filecoin has become a top 30 project by market capitalization according to CoinGecko, and has been one of the most anticipated projects before its mainnet launch in October. As such, the potential integration of its community into the Ethereum DeFi ecosystem may be an important step towards Ethereum further increasing its network effects.
Competing networks continue to make the news. 1inch and NEAR Protocol have announced that the team behind the DEX aggregator will be putting Mooniswap on the network. Also, Avalanche, another scalability focused layer 1 alternative, will be launching an “Avalanche-Ethereum Bridge”.
While competitors are hoping that bridges will stimulate capital flow towards their networks, they may actually simplify capital outflow. For now, scalability and cost-efficiency are the main competitive advantages being advertised by Ethereum’s competitors.
However, with Ethereum 2.0’s Beacon Chain stated to launch on December 1, the window of opportunity for rival blockchains may start to close.
DeFi is starting to look for options
To this point, the DeFi space has been mostly focused on spot market trading, loans, and liquidity provision. As those tools are getting solidified and find more awareness and adoption, some are starting to look to the next frontier: options.
While centralized crypto options like Deribit have been around for some time, decentralized options are only starting to gain momentum. Hegic and Opyn have gained some awareness, with Hegic climbing up the TVL rankings, but others have begun to emerge as well.
With Andre Cronje announcing Deriswap, the spotlight may soon find the options sub-sector. The Yearn ecosystem has aggregated a significant amount of liquidity and has a prominent space in the DeFi sector. Options enable the implementation of various hedging strategies and may significantly expand the product offerings available in the market. If demand for decentralized options continues to grow the competition for the market may intensify.
Crypto art and collectibles continue to make headlines
NFT marketplaces don’t command the same volume as DeFi exchanges, but the crypto art auctions are registering totals that are hard to ignore.
Recently, “EthBoy”, made on Async Art by Trevor Jones and Alotta Money, was sold for 260 ETH or over $140K. The auction may be an important milestone for the Async Art project, which enables the creation of programmable art using layers.
This is not the first major sale for Trevor Jones. He previously made the headlines when his piece “Picasso’s Bull” was sold for over $55K. The crypto art segment is still young, but it appears that there is interest and demand, and just as in the traditional art collection world, crypto art is starting to find its sought-after artists.
Furthermore, the sector continues to experiment with blending and connecting real and virtual worlds. For instance, Metagrail will be auctioning off AI stylized physical sneakers, which will come with an avatar for The Sandbox. It also appears possible that the sneakers will appear in multiple virtual worlds, although that remains unclear.
If and when virtual worlds gain more awareness and adoption the link between the physical and virtual worlds may be much more important.
The information provided here is for informational purposes only. This is not investment advice and should not be treated as such. Strategic Round Capital and/or the author of this report holds a position in BTC, ETH, HEGIC, YFI.