DeFi Update | Week #6, 2021
Every week DappRadar brings you an overview of the latest new from the world of decentralized finance. This week Yearn.Finance has been at the center of attention, bringing in BadgerDAO as well. While UMA brought some interesting innovation into the field, and Binance Smart Chain showed serious growth.
The Yearn ecosystem continues to grow, and is now bringing BadgerDAO into the fold. Last week’s Dai vault exploit does not appear to have damaged the market’s confidence in the project. Yearn used part of the newly minted YFI to open a Maker vault and make contributors whole again. It might have even provided a bit of advertisement for Cover.
UMA keeps innovating
Meanwhile UMA continues to experiment with incentive models. The project that introduced developer mining now brings KPI options. The idea is to tie distributions to certain milestones, like TVL or volume reaching a certain amount. Risk Labs will mint 100K options to be airdropped, with the first KPI being TVL. This is an interesting concept, but with TVL represented in dollar values, the intended goal of the program may be diluted by the price effect.
Speaking of TVL, DappRadar has recently listed 1inch Exchange, something that DefiPulse has refused to do. It appears that the feud between the founders of 1inch and DefiPulse has led to 1inch being excluded from a number of defi sites. The dynamic is troublesome, as it distorts real figures such as TVL, and hints at the existence of different “camps”.
Federal Reserve and DeFi
The Federal Reserve of St. Louis created a report on DeFi, which seems to have excited the crypto community. While some of the positive language is encouraging, what is also key is that regulators are educating themselves about blockchain and the crypto industry. If the regulators are able to understand the technology and the industry dynamics well, they will be able to craft sensible, useful regulations that will not harm innovation.
Source: St Louis Federal Reserve
Crypto is opening up to more retail audiences, and part of that is simplifying the user interaction with the blockchain. Metamask has been at the forefront of that process, as its wallets, have been one of the more popular ways for users to connect and interact with dapps. Metamask has already tried to get into the swaps business, and it looks like it has been very profitable, bringing in around $170K per day. With the retail audience paying more attention to the crypto industry, retail facing applications and tools may start to see more traction and monetization.
Still, high gas costs remain a concern and a barrier for the Ethereum community, forcing projects to consider alternatives. This gives EVM compatible L1s a bit of an advantage, as they are easier for Ethereum projects to migrate to. Binance Smart Chain is looking to capitalize on that, but has seen more Ethereum replicas than migrations for now.
Polkadot may be able to leverage Ethereum bridges and EVM compatible parachains to this end. As an example, Curve will appear in Polkadot by means of the Equilibrium parachain. Ethereum’s L2 will try to keep projects within the Ethereum ecosystem and with Matic Network broadening its scope as Polygon, it may be able to take the leading role in that.
Things move fast in the crypto industry, so it will be important to closely monitor the progress of these dynamics. Keep an eye on DappRadar for the latest news or tune in to our weekly round-ups in DeFi every Friday.
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 ETH, YFI.