Week in Review | #37 | 2020
The past week was high on drama. The circus surrounding the SushiSwap was TV-series worthy. There was excitement, shock, betrayal, forgiveness, and hope for a bright future. There was even some star power presence, as big names in the DeFi space started to get pulled in.
The rest of the industry did not stand still though, with a host of projects taking steps forward. Ethereum remained the king of DeFi, but there are more and more whispers around the kingdom that its throne may be wobbling.
After a couple of weeks of talk, speculation, and a lot of liquidity the community looks to have finally gotten the meal it was waiting for. While the full recap can someday become the basis of a screenplay, the short version runs like this.
A pseudo-anonymous founder forks Unsiwap adding a governance token with some additional incentives. The project uses Uniswap as a launch base, with the intention of migrating the liquidity away to its own platform. Capital pours into the pools.
Then the founder sells off the dev share tokens, the community panics, only to be saved by a transfer of ownership to the CEO of FTX. There is a vote to elect nine owners of the multi-sig wallet and the migration successfully occurs on September 9.
Whether this is a happy or a tragic story will depend on how Uniswap weathers in the coming days and weeks. However, with the appearance of Swerve, we can see that a trend is forming, where new projects are forking established products. Even SushiSwap, having just launched, already has a competitor in SashimiSwap. Given that from a core function perspective these projects are clones, this will likely fracture liquidity.
Innovation continues in DeFi
While it may seem like the focus has shifted from core functionality development to devising incentives, there are many interesting projects being worked on. Hegic has launched its Initial Bonding Curve Offering. Hegic offers users the ability to buy and sell puts and calls in a decentralized manner.
Perpetual Protocol has announced that it will use Balancer’s Liquidity Bootstrapping Pools for token distribution. This is interesting for two reasons: the use of vAMM by Perpetual Protocol, and the use of Balancer (as opposed to Uniswap) for the distribution. Balancer may be looking to replicate Uniswap’s success in the IDO space.
Bitfinex in LN Network, a derivatives exchange that utilizes the Lightning Network. While the hype on this scalability solution has subsided, there is still work being done in that area.
The Tron community also tries to keep up. The recent announcement of the $SUN token marks the ecosystem’s attempt to bring liquidity mining of governance tokens onto its platform. Details of the project‘s functionality are limited, but the whitepaper lists “docking to numerous DeFi projects” as one of the phases in the roadmap.
Binance looks to be ready to launch its own Uniswap alternative, Binance Liquid Swap. The industry powerhouse continues to expand its reach in the decentralized space and may look to become a serious competitor to Ethereum.
Linear Finance raised $1.8M for a synthetic assets exchange, with interoperability capabilities. Mainnet is expected in November, and the first integration will be with the recently launched Binance Smart Chain.
Problems with Ethereum
While high gas prices continue to be a problem, questions are being raised as to how much help Ethereum 2.0 will offer. Some in the DeFi community are questioning whether it will be able to provide the necessary scalability.
Also, as Hugo Philion points out, proof of stake may create capital-based constraints. However, this issue may not be unique to just Ethereum 2.0.
Given the inefficiencies, some see DeFi moving towards more centralized platforms. With whale activity raising questions about the true nature of decentralization, such a move may be detrimental to the industry’s thesis.
If that wasn’t enough, the possibility of a “George Soros Scenario” is potentially a serious fundamental vulnerability that threatens the platform.
While Ethereum struggles developers and users will continue to consider alternative options. While Tendermint and Polkadot may emerge as the primary competing ecosystem, others are also growing.
Projects like Near Protocol, Cardano, and Flow will certainly attract some attention from developers who are dealing with the current limitations on Ethereum. What plays into Ethereum’s hands is the number of developers it has attracted to its ecosystem.
That’s why hackathons and community programs are so important to the development of the ecosystem. One example would be Horizon’s Early Adopter’s Program. For a project without the same brand awareness as some of the names above, getting the attention of developers is critical.
NFTs are getting more buzz
DeFi remains the number one topic of conversation, but the NFT space is growing. Moreover, often it can be closer to the retail user. DeFi applications require a deep understanding of the protocol and often significant capital allocation. Applications utilizing NFTs are often games, collectibles, and/or art. Thus they are much easier to grasp and may not require that much capital to get involved with.
Recently Rarible received an investment from CoinFund, that correlated with a significant spike in the price of its token. Binance (it feels a bit like it is everywhere nowadays doesn’t it) is one of the biggest holders of the LAND token of project Sandbox.
Now there is news that NFT tokens will be developed for Minecraft. Game titles like these can help onboard retail users into the decentralized ecosystem as they bring more immediate and understandable use cases for them.
NB: The information provided here is for reference and informational purposes only. This is not investment advice and should not be treated as such.