Week in Review | #43 | 2020
DeFi received a number of catalysts over the past few days. With PayPal news generating buzz across the industry, there is a growing expectation that more traditional industry players will seriously consider entering the crypto space. Established companies are starting to catch up and realize the possibilities of this space.
Furthermore, money has been pouring into the industry as it attracted nearly $900M in investments in Q3. No surprise, there continues to be a lot of activity in the DeFi and NFTs realms. It is natural to expect them to stay at the forefront for the foreseeable future.
News that PayPal will let users buy and sell cryptocurrency has invigorated the industry. The company is one of the biggest payment service players with a massive user base. Given that cryptocurrencies are a payment instrument the synergy there seems obvious. As such, this appears to be the dream adoption gateway to help bring more retail users into the crypto ecosystem.
However, similar to projects like Robinhood, PayPal will not (at least initially) allow users to withdraw their crypto assets to their own wallets. As cryptocurrencies on PayPal will be under centralized control and isolated from the rest of the crypto ecosystem.
So, on one hand, PayPal’s adoption of cryptocurrency should increase awareness, on the other hand, users are pushed towards speculation rather than utility use cases. While participants will get certain exposure to crypto assets, they will not be able to use dapps.
There is already talk of the possibility for PayPal to launch its own cryptocurrency. This may put the company in competition with Facebook’s Libra. It will be curious to see how the regulators respond to this development.
The Filecoin conundrum
After years of anticipation, the Filecoin mainnet launch seemed to have more controversy than joy. Soon after launch, the projects token economics were called into question spilling over into what was labeled a “miners strike”.
Fuel was added to the fire by the accusations from Justin Sun, which Juan Benet of Protocol Labs has responded to.
Filecoin is one of the biggest projects working in the decentralized storage and file-sharing space. With the growth of the dapp space and more commercial usage appearing on the horizon data storage should become a major topic in the future.
As such it will be important to see if Filecoin is really fine, or if its token economics will undermine all of the development work.
The great merge
BTC tokens on Ethereum proved to be incredibly popular and a number of custodial and non-custodial solutions have been launched to satisfy the demand for the asset. Given the yields available in Ethereum’s DeFi ecosystem, users of large-cap projects should be interested to take advantage.
Now Dash and Zcash will be coming to Ethereum in the form of tokenized assets.
Dash will be coming on board via StakedDASH tokens, and that should open Ethereum DeFi to a sizable crypto community. At over $740M, Dash is a top 35 project by market capitalization according to CoinGecko.
Zcash is similarly ranked at over $675M and will be coming to Ethereum via wrapped Zcash or WZEC.
While the capitalization is nowhere near that of Bitcoin, the projects have been around for a (relative to the industry) long time, and have established communities. As such, this is a chance for Ethereum to absorb more value into its network further increasing its network effects.
This may also incentivize some of the other projects without smart contract functionality to seek integration with the Ethereum DeFi ecosystem.
DEXs continue to multiply
Ethereum has provided a blueprint for developing a DeFi ecosystem. There needs to be a DEX, a stablecoin project, a loan project, and derivatives. Most ecosystems start with a DEX or stablecoin concept similar to MakerDAO. So it is not surprising that we see new DEXs appear on a weekly basis.
However, the launch of a new DEX on Decred is noteworthy. Decred is one of the older layer one protocols that has been focused on decentralized governance before it became a DeFi-driven trend. Moreover, the exchange offers a few key features: interoperability, no trading fees, and “no gatekeepers”. Interoperability is becoming an evolving theme in the industry, and no trading fee platforms can become appealing to traders if there is enough liquidity.
Finally, projects only need to have atomic swap functionality to be supported by the DCRDEX. Uniswap became one of the primary DEXs in the industry because it has such an open listing policy. It will be interesting to see if DCRDEX can become an important player in the DEX space.
NFTs keep making headlines
So far, NFTs have been, for the most part, limited to the gaming and collectibles sector. This has catalyzed the growth of NFT marketplaces. While this space currently does not show the impressive figure shown by DeFi applications, NFTs impress with their single sale figures.
Mimicking the traditional arts and collectibles sectors, these NFTs tend to be less liquid than fungible assets but can attract impressive investment amounts from collectors.
Recently a collection of Batman digital art was sold for over $200K in ETH. The most expensive piece in the collection went for around $113K in ETH. Art can be seen as an alternative investment asset. If NFT art continues to attract such impressive numbers, and liquidity continues to grow, it will not be surprising to see art investors start to pay attention to this space.
Furthermore, the virtual worlds, where this art can often be found on display are also growing. While Decentraland and Crypto Voxells may be seen as the leaders for now Somnium Space has continued to develop. The announced Somnium Space Web and Somnium Space Worlds should make the project more accessible and more exciting for users.
NB: The information provided here is for reference and informational purposes only. This is not investment advice and should not be treated as such.