DeFi Update | Week #9, 2021 | by Ilya Abugov
The DeFi sector keeps pushing forward, but now without a fair share of hurdles. The substantial amount of capital locked in the smart contracts attracts malicious actors resulting in hacks and rug pulls. This week Furucombo suffered from a $14M exploit, while Meerkat Finance provided an example of a BSC rug pull to the tune of around $31M.
The community is waiting to see if and what Binance will do to rectify the situation. Given the more centralized nature of BSC, disappearing with funds may be more complicated than on Ethereum. But if Binance takes too active of a role it may also play into the hands of critics, who are suggesting that its centralization is not suited for long-term development.
You can read about the growing rivalry between Ethereum and BSC in DappRadar’s Dapp Industry Report.
On a more positive note, Badger DAO conducted a “Treasury Diversification” sale, attracting $21M from VC investors. Given Badger’s fair launch distribution approach and the fact that there is a working product, this could provide a blueprint for other community-based projects to attract VC funding, while staying community oriented.
Not surprisingly, traditional players are looking more and more at the crypto space. Now there is talk of PayPal acquiring a custody solution company Curv. Such a deal would allow PayPal to expand its crypto offerings and potentially become a more serious player in the industry. Given the size of its user base, this could bring a significant boost in terms of adoption.
The subjects of interoperability and cross-chain liquidity are becoming more important in the DeFi space.The recent announcement of Gateway, from Compound, may be a sign that the market is about to see a growth in their practical applications.
Source: Compound Finance
Compound is one of the oldest DeFi dapps in the market, and has been a sort of a trailblazer. It was founded in 2017, launched in September of 2018 and so had to survive the brutal Crypto Winter.
It could also be credited with being one of the catalysts for the DeFi Summer of 2020. After completing Seed and Series A rounds in a more traditional style, the team behind Compound pursued the decentralization route and introduced a governance token COMP. What followed was the distribution of the token, which catalyzed the growth of yield farming.
Tokens were distributed for lending and borrowing on the protocol, and at first this happened in relation to the size of the interest rates. There was a point where it was profitable to borrow. Users began to utilize multiple protocols to optimize farming operations, leading to the growth of composability.
As one of the first projects to take this route, Compound had to deal with certain issues. For instance the original COMP distribution spiked interest rates for non-stablecoin assets creating a dangerous situation for the protocol. Compound’s community voted to change the distribution of COMP, giving the industry a successful case of the community being able to react to market conditions and vote to amend the protocol accordingly.
Source: Compound Governance
The protocol and the community also experienced an oracle issue. Oracles were and perhaps remain one of the big concerns for the DeFi sector. Compound suffered an $88.4M liquidation event due to a spike in Dai prices.
The protocol has experienced the good and the bad that the industry has to offer, and has remained one of the top projects by TVL in DeFi.
Now Compound using substrate to develop cross-chain interest rate markets could be the beginning of a new multi-chain stage of the industry’s development.
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 article holds a position in BTC, ETH, YFI, UMB, COMP.