Vampires, forks and a food platter

Week in Review | #36 | 2020

As summer turned to fall, DeFi remained the hot topic in crypto. Uniswap made headlines as its volume surpassed that of Coinbase Pro, but the market appears fully engrossed in the chase for the next big thing.

The excitement seems to exacerbate the flood of information noise, as it becomes harder for users and onlookers to sift through the barrage of new projects and updates that come their way. FOMO looks to be in full effect, but as always, there are meaningful developments and lessons to be learned.

The fan-favorite of the past week has been SushiSwap. This particular fork of Uniswap offers additional incentives to liquidity providers in the form of SUSHI tokens. SUSHI is only one of the many projects in the gastronomical DeFi buffet, but it has gathered attention because it has quickly been able to reach $1B TVL.

A few weeks back Uniswap’s $11M funding round was publicized. While all of its DeFi peers were launching governance tokens, Uniswap opted for a more traditional approach and may now be paying the price.

SushiSwap is not only the new exciting project, it is a competitor going after Uniswap’s liquidity. In what is being described as a “vampire attack”, the project is incentivizing liquidity migration to its dapp.

A security review by Quantstamp has already identified some issues with the project (although nothing critical), and some have raised questions over the  $27M devshare. However, the market does not appear to care much.

So the question becomes will this start a wave of Liquidity Wars, and will that force developers to reconsider the open-source stance in the industry.

The steady flow of BTC

It is only natural that as the DeFi ecosystem expands, BTC holders would want to take part. After all, it is the biggest asset in the market by capitalization. So there is no surprise that the amount of tokenized BTC has been growing.

The recent proposal on to increase the share of sBTC, may have a further positive impact on that dynamic.

The two key assets have been wBTC and renBTC, but the list is bigger than that. With other blockchain looking to create bridges, we may see BTC appear on other networks.

Real Estate as the next frontier

Tokenizing real estate has been talked about for some time in the industry. However, without much liquidity and limited market reach, the efforts made little noise. Now that DeFi is growing at a rapid pace that may be changing.

For example, Aave is working with RealT to enable real estate tokens to be used as collateral on Aave. This opens up an enormous opportunity for DeFi. News like Telos looking to tokenize $35M worth of real estate suddenly becomes more important.

While it is important to not underestimate the implications this will have in terms of risk, this could become a meaningful bridge between the blockchain and non-blockchain economies.

Oracles as a force in DeFi

While oracles may be considered infrastructure components, they have become an important part of the DeFi world. In fact, Binance has allocated two spots in its DEFI Composite Index to oracles, Chainlink and Band Protocol.

Chainlink has a much higher market capitalization and is often the subject of partnership announcement headlines. It has a very strong community, and it looks like the brand may be branching beyond the oracle service. YFLink came about as a fork of yearn, and now LINKSWAP will be an AMM catering to LINK holders’ needs. This is an interesting example of how community dynamics can merge with DeFi.

Source: CoinGecko

Still, some, like Loopring, choose Band Protocol, as it has emerged as a viable alternative to Chainlink.

Oracles are vital to a healthy DeFi ecosystem, as they provide key data points, so as DeFi grows so should the oracle space.

Improving UX to increase adoption

Poor UX is one of the key entry barriers into the crypto industry. So, it is encouraging to see that tools are evolving to improve the situation. A key development in this area is the Metamask launching a mobile version for Android on iOS.

Wallets are a basic necessity for interacting with dapps, and improving the mobile experience should reduce friction for new users.

Torus has also launched the Torus Chrome Extension beta. More focus on UX will enable more users to interact with dapps and further increase adoption.

The shadow of Binance

While Ethereum continues to struggle with exuberant transaction costs, competitors are trying to gain ground on the dapp leader.

Polkadot has been receiving a lot of attention, but the Tendermint ecosystem should not be discounted. While it will likely remain disjointed until the arrival of IBC (Inter-Blockchain Communication) protocol, it still shows promise.

For instance, Binance has launched Binance Smart Chain, with smart contact capability. The chain is also EVM compatible and as such may become an alternative for dapp developers. Binance has created one of the biggest platforms in the industry and it would not be surprising to see it become a more serious player in the decentralized space.

The crypto art world continues to take steps forward

This corner of the crypto universe continues to evolve. The latest step in development is NFT Collector Royalties. MetaFactory has enabled owners of crypto art to earn revenue on merchandise sales.

This makes the NFT token not just an art object, but also a financial instrument. As such, experiments like this may expedite the integration of crypto art with the DeFi stack.

However, the fact that the ownership token will have an attached revenue stream, may also make it a security. It will be interesting to see if and how regulators respond to this.

NB: The information provided here is for reference and informational purposes only. This is not investment advice and should not be treated as such.

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