Weekly DeFi Update | Week #4, 2021
This was a busy week for DeFi, full of releases, anticipation, and excitement. Between the launch of Enzyme, Kyber 3.0, and the expectations of Alpha Homora V2 and ESD V2, the industry had plenty to digest.
The industry also saw the airdrop of BadgerDAO’s DIGG and the launch of Klondike finance. While the first appears to be an Ampleforth-inspired attempt to create a synthetic asset pegged to BTC, the second is a Basis-like variant looking to do the same.
The rebase multi-token variant of algorithmic stable coins became incredibly popular towards the end of 2020 and the start of 2021, however, many of these have struggled to keep the peg.
It will be interesting to see if DIGG and or KBTC are able to maintain their pegs and are able to find a use case within DeFi.
Projects continue to chase the stablecoin concept. Recently, Emurgo announced AgeUSD, which is based on the ergo blockchain and is expected to deploy on Cardano once the Pluto development stage delivers smart contract capabilities.
Interestingly, while many projects are experimenting with various forms of stabilization mechanisms, few outside of MakerDAO appear to be thinking about adoption for the resultant stablecoins. Without economic use, these experiments, even if they are successful at maintaining the intended peg, will struggle to keep the market’s interest beyond the initial liquidity mining phase.
The week also provided a quick reminder, that even successful DeFi projects are a work in progress. SushiSwap, which has flourished in the Yearn ecosystem, was exploited for 81 ETH. This appears to have been a known vulnerability, with a fix that wasn’t applied to a particular pool, enabling a user to claim fees that should have gone to XSUSHI holders.
In other news: Balancer will start a four-week gas reimbursement program, to help incentivize users to try their new UI. The gas costs issue continues to be a major pain point for the Ethereum ecosystem, and something that may help its competitors attract new users.
Opium has conducted its retroactive airdrop, using its DR.OPIUM approach that makes it so allocated tokens that withdrawals that are made earlier receive less value than later withdrawals.
Projects continue to experiment with incentive models and game theory in order to try to stimulate long term user engagement. This is encouraging, as it is important for teams to learn from past industry lessons, and iterate quickly.
If 2020 was about bootstrapping liquidity, 2021 may be more about sustainability and long term usage.
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, KBTC.