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Ethereum alternatives apply the squeeze

Posted by
Ilya Abugov

Week In Review | Week #6, 2021 | by Ilya Abugov

The crypto market is full of energy. Between watching BTC briefly touch $48,000 and ETH $1,800 and guessing whether Twitter will be next to put BTC on its balance sheet, there has been plenty to be excited about this week.

DeFi continues to lead the industry, but games, arts, and collectibles are also demanding attention. The question of high gas costs on Ethereum is not going away and may have a bigger impact on the L1 competition than initially thought, as more DeFi projects are starting to look elsewhere.

Source: DappRadar

Yearn increases the gravitational pull

Sometimes it feels like all of the major DeFi news revolve around Yearn’s ecosystem. After last week’s vault incident, and the vote to mint additional YFI, Yearn took an interesting step to rectify the situation. The newly minted YFI was used as collateral to take a loan out through Maker to compensate the impacted vault.

Source: Twitter

There are several important components to this. Utilizing a loan to refund exploit losses appears to be a novel concept. Given the TVL and volume on Yearn, it should be able to repay the loan through fees. The second component is that the gesture acts as an advertisement for Cover.

It appears that the refund of a vault will be a one-time thing, and the Twitter posts detailing the Maker vault transaction, suggested that users should utilize Cover for protection. The decentralized insurance project is part of the Yearn ecosystem, and this could lead to an increase in demand for its services.

There was also some controversy around Armor Finance related to a claim from the Yearn exploit. Given the timing of the news, this may also boost Cover’s standing in the community.

To add to the news, Yearn expanded its ecosystem by partnering with Badger DAO. While DIGG has struggled to keep the peg with BTC, the inclusion of a BTC focused team in the Yearn ecosystem may lead to interesting strategies.

Source: BadgerDAO

Gas prices intensify competition

High gas costs on Ethereum force projects to consider alternatives. It appears as if every week a prominent Ethereum DeFi project announces that it will launch a version on another chain. This time it appears that Curve will appear in Polkadot by means of the Equilibrium parachain. While most of the DeFi volume remains on Ethereum, such launches give rival chains a chance to form network effects.

BSC, for instance, has seen a lot of growth over the past month. Its ecosystem now has a TVL of over $4.2B with two projects Venus and PancakeSwap having individual TVL of over $1B. Interestingly, CREAM, a popular Ethereum DeFi project with over $690M TVL there, has less than $26M TVL on BSC right now. It will be important to see if any of the Ethereum DeFi star projects will be able to replicate success on rival chains, as that may catalyze migration.

Source: DeFi Station

On the L2 side, Matic Network has been trying to establish itself as the dominant player. The project will be transforming into Polygon, and try to become an “L2 aggregator”. While Matic Network started out with Plasma, the Ethereum ecosystem has shown a preference towards optimistic and zk rollups. As Polygon, the project will try to offer rollup solutions and cater to all L2 needs.

Matic Network has seen a number of major crypto gaming projects choose it for scalability purposes, it will be interesting to see if Polygon will be able to bring major DeFi brands into the fold.

Virtual Real Estate draws attention

NFT sales have made a lot of noise over the past few months. The virtual real estate segment, in particular, has been getting headlines recently, as both virtual worlds and MMO games utilize the concept. Mirandus continues to draw attention with its deed sales. Its five banks have been sold for almost $229K. The total proceeds from the deed sales may inspire more projects to consider this as a fundraising model.

Even more impressive was the sale of the nine Genesis plots in Axie Infinity’s Lunacia for $1.5M. NFTs have been seeing increasing sales numbers, but most of them involved art, which has now topped $80M in sales, and collectibles such as Crypto Punks. Virtual Real Estate represents a different class of NFTs as they may afford users future opportunities both in terms of functionality and gameplay as well as revenue.

The big 4 virtual worlds: Decentrland, Cryptovoxels, The Sandbox, and Somnium Space, appear to have become more active. With games and various entities starting to appear within them, the ownership structure of lands will become increasingly more important.

Source: PlayToEarn

Based on research by Play to Earn, the top 100 accounts hold 40+ to 70+ percent of lands in these metaverses. While activity remains limited, whale accumulation should have minimal impact on the users, but in the future, these whales could have a significant impact on the development of those ecosystems.

The pitfalls of early success

While most of the crypto gaming world is trying to figure out how to attract users, NBA Top Shot is struggling to deal with its massive inflow. Most recently, the first of the Series 2 drops suffered from technical issues. The mixup with the queue implementation resulted in some users jumping the line. This led to disappointment, as the platform was able to sell 2,300 packs, but left out a number of users.

NBA Top Shot is in beta right now, so some issues are to be expected. Moreover, given that there is no competition at the moment for NBA NFT collectibles, users have no options, but to stick with the platform. Nevertheless, if issues persist, it could impact the growth path for flagship product on Flow.

Hashmasks remain in the spotlight

The project that stormed onto the NFT scene continues to capture headlines. One of the Hashmasks was recently sold for 420 ETH or around $640K, and the collectibles have been number two in terms of sales volume over the past 7 days, topping $7M.

Users continue to study the collectibles in search of hidden meanings, and some easter eggs appear to be in the images.

Source: Twitter

There has not been a lot of information from the creators of Hashmasks, so it is unclear how many easter eggs could be hidden or what their meaning or purpose is.

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, Hashmasks, NCT.

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